M/S. Computer Exchange Private Limited And Anr vs. The Principal Commissioner Of CGST And Cx, Kolkata South Commissionerate And Anr

Held

The High Court allowed the intra-Court appeal. The Court found that it was appropriate for the adjudicating authority to deal with a preliminary objection on jurisdiction as the first issue. The Court noted that the adjudicating authority had adopted a reverse process by deciding the merits first and then dealing with the question of limitation/jurisdiction. The Court acknowledged that the legal issue regarding the invocation of the extended period of limitation could only be decided after the respondents filed their affidavit-in-opposition in the writ petition. In the interim, to prevent prejudice to the appellants, the Court stayed the operation of the order of adjudication dated 27th July, 2022, until the disposal of the writ petition. The respondents were directed to file their affidavit-in-opposition within four weeks, and the writ petition was to be listed before the appropriate Single Bench after five weeks. The Court did not expressly leave any issue undecided but deferred the final determination of the limitation issue pending the filing of the affidavit.

Facts

The appellants, M/s. Computer Exchange Private Limited & Anr., are challenging an order dated 27th July, 2022, passed by the Principal Commissioner of CGST & CX, Kolkata South. This order followed a show cause cum demand notice dated 29th December, 2020, which sought to demand service tax of Rs. 3,78,40,454/- for the financial years 2015-2016 to 2017-2018 (up to June 2017), along with interest, penalty, and late fee. The appellants had raised a preliminary objection regarding the validity of invoking the extended period of limitation, arguing that similar allegations for earlier periods (2011-2012 to 2014-2015) had already been subject to adjudication and were pending before the Tribunal. The adjudicating authority, while passing the order, did not adequately address this preliminary objection, instead dealing with the merits first and then the question of limitation. The appellants had filed a writ petition challenging this order, but the learned Single Bench declined to grant an interim order, leading to the present intra-Court appeal.

Key Issues

1. Whether the adjudicating authority erred in not dealing with the preliminary objection regarding the invocation of the extended period of limitation as a primary issue before deciding on merits, as per Section 11A of the Central Excise Act, 1944 (and analogous provisions under GST law, though not explicitly named in the judgment for the disputed period)? 2. Whether the extended period of limitation could be invoked for the financial years 2015-2016 to 2017-2018, given that similar allegations for the preceding period (2011-2012 to 2014-2015) were already under adjudication and pending before the Tribunal, thereby implying that the facts were within the knowledge of the revenue authorities? Petitioner's arguments: The appellants contended that the adjudicating authority failed to address their preliminary objection concerning the extended period of limitation. They relied on the Supreme Court decision in Nizam Sugar Factory Vs. Collector of Central Excise, A. P. (2006) for the proposition that if all relevant facts were known to the authorities when a prior show cause notice was issued, subsequent notices on similar facts cannot be construed as suppression, thus precluding the invocation of the extended period under Section 11A. They argued that the adjudicating authority adopted a reverse process by deciding merits before jurisdiction. Revenue's arguments: The respondents submitted that the Tribunal had referred to a decision in Noble Detective & Security Service P. Ltd. Vs. C.S.T., Ahmedabad (2014), which in turn referred to Nizam Sugar Factory. However, the judgment notes that it is not clear from the impugned order how Nizam Sugar Factory was dealt with. The respondents also argued that if a show cause notice for an earlier year was issued on the same allegation, the question of suppression for the subsequent period to invoke the extended period of limitation needs to be decided.