Shahaji Bhanudas Bhad vs. Union Of INDIA And Anr

Held

The Court held that the impugned show cause notice dated May 5, 2017, is liable to be quashed and set aside due to the inordinate delay in its adjudication. The Court found the Revenue's explanation for the delay, attributing it to the implementation of GST and departmental reorganization, to be unsatisfactory and lacking evidence. The Court noted that the Petitioner had participated in proceedings and filed extensive submissions post-GST implementation in 2017, contradicting the claim that the department's functioning had come to a standstill. The Court emphasized that such a prolonged delay, without any justification, amounts to arbitrariness and a violation of the principles of natural justice, as enshrined in Article 14 of the Constitution. The Court also acknowledged the Supreme Court's judgment in the Petitioner's own case, which supported the Petitioner's stand on the merits. Therefore, the Court exercised its writ jurisdiction to quash the show cause notice, stating that the Petitioner cannot be made to suffer for seeking a constitutional remedy due to the Revenue's inaction. The Court relied on several precedents, including Bombay Dyeing and Manufacturing Company Limited vs. Deputy Commissioner of CGST and CX, ATA Freight Line (I) Pvt. Ltd., and Parle International Limited, which held that belated hearings of show cause notices violate natural justice and that show cause notices should not be adjudicated after a decade merely because no limitation period is prescribed.

Facts

The Petitioner, Shahaji Bhanudas Bhad, challenged a show cause notice dated May 5, 2017, issued by the Principal Commissioner Central GST, Pune 1 Commissionerate (Respondent No. 2). The notice sought to add the value of bought-out goods, procured and supplied directly to the Petitioner's customers by third-party suppliers, to the assessable value of goods manufactured in the Petitioner's factory. These bought-out goods did not enter the Petitioner's factory, and excise duty was paid by the suppliers, with no duty credit claimed by the Petitioner. The Petitioner filed a detailed reply and attended personal hearings in 2017. However, the show cause notice remained unadjudicated for nearly six years until September 2023, when a new hearing was scheduled. The Petitioner then filed the present writ petition challenging the notice primarily on grounds of delay and a subsequent Supreme Court judgment.

Key Issues

1. Whether the impugned show cause notice dated May 5, 2017, issued by Respondent No. 2, is liable to be quashed and set aside on the ground of inordinate delay in adjudication, thereby violating principles of natural justice and Article 14 of the Constitution of India? Petitioner's arguments: The Petitioner contended that the delay of approximately six years in adjudicating the show cause notice is unreasonable and arbitrary, violating principles of natural justice and Article 14 of the Constitution. They argued that the explanation provided by the Revenue for the delay, citing the implementation of GST and departmental reorganization, is general and unsubstantiated, especially since the Petitioner's own proceedings occurred post-GST implementation. Furthermore, the Petitioner argued that the issue is now covered by the Supreme Court's judgment dated July 7, 2023, in their own case, which held that the value of bought-out items not entering the factory and on which no credit is claimed should not be added to the assessable value. Revenue's arguments: The Respondents, in their affidavit, attributed the delay to the "complete overhaul" of the department due to GST implementation, involving redrawing of jurisdictions and oversight. They stated that the Petitioner cannot use the delay as an excuse for not responding to the show cause notice. The Respondents also touched upon the merits of the case, supporting the issuance of the show cause notice, but did not rebut the Petitioner's contention regarding the Supreme Court's judgment.