Amadeus INDIA PVT. LTD. vs. Principal Commissioner, Central Excise

Held

The Court held that the Respondent ought to have conducted a pre-notice consultation with the Petitioner as mandated by para 5.0 of the Master Circular dated March 10, 2017. The Court found that the exceptions carved out in para 5.0, namely 'preventive' or 'offence related' SCNs, were not attracted in this case. The Court reasoned that the SCN pertained to alleged non-payment of service tax over several years and was not preventive. Furthermore, the Court rejected the Respondent's contention that the SCN was 'offence related' simply because it was preceded by a search and involved allegations of evasion. The Court emphasized that the determination of an offence is a consequence of adjudication and cannot retroactively justify the omission of a mandatory pre-SCN consultation. The Court noted that the Respondent had not taken any conscious decision to dispense with the consultation and, in fact, no noting in the file indicated such a decision. The Court also highlighted that the mandatory nature of the Master Circular is traceable to Section 37B of the Central Excise Act, 1944, making CBEC instructions binding on departmental officers. Consequently, the Court set aside the impugned SCN dated September 4, 2018, and relegated the parties to the stage prior to its issuance, directing the Respondent to fix a date for hearing the Petitioner on the issues raised in their submissions.

Facts

Amadeus India Pvt. Ltd. (AIPL), the petitioner, provides computer data processing software. The respondent, Principal Commissioner, Central Excise, Service Tax and Central Tax, issued a Show Cause Notice (SCN) on September 4, 2018, alleging non-payment of service tax on taxable services rendered by AIPL between 2012-2013 and 2016-2017, with a demand of Rs. 99,45,64,411/-. The SCN also proposed penalty and interest. Prior to this, the petitioner's premises were searched in August 2016, and statements were recorded. After nearly two years, fresh summons were issued in August 2018, to which AIPL responded by providing requested documents. AIPL contended that the respondent failed to conduct a mandatory pre-notice consultation as required by paragraph 5.0 of the Master Circular dated March 10, 2017, for demands exceeding Rs. 50 Lakhs.

Key Issues

1. Whether the Respondent ought to have held a pre-notice consultation with the Petitioner in terms of para 5.0 of the Master Circular dated 10th March, 2017, prior to issuing the impugned Show Cause Notice dated 4th September 2018? Petitioner's arguments: The Petitioner argued that the Master Circular mandates a pre-show cause notice consultation for demands above Rs. 50 Lakhs, except in cases of preventive or offence-related SCNs. They contended that the current SCN was not preventive and did not fall under the 'offence related' exception, as the determination of an offence could only be made after adjudication. They relied on the Master Circular and the binding nature of CBEC instructions under Section 37B of the Central Excise Act, 1944, as applied to service tax via Section 83 of the Finance Act, 1994. Respondent's arguments: The Respondent argued that the SCN was 'offence related' because it was preceded by a search and involved allegations of suppression of facts and intent to evade tax, thus falling within the exceptions to the mandatory pre-notice consultation. They also argued that the TARC recommendations, which led to the Master Circular, aimed to resolve disputes collaboratively.