Eastern Associates Contracts vs. Union Of INDIA And Ors.

Held

The Court held that the pre-consultation process, though not statutory, was a procedure evolved by the CBEC to promote compliance and reduce the need for show cause notices. The Court found that the procedure adopted in this case was not meaningful. The appellant was invited for consultation by the Commissioner, Central Excise & Service Tax, Bolpur, but the show cause notice was issued by the Audit Commissionerate, contravening CBEC instructions. Furthermore, the show cause notice failed to mention the pre-consultation process, which was considered incorrect as the department's evolved procedure should be meaningful. The Court quashed the show cause notice dated October 14, 2016. The matter was remanded to the Commissioner, Central Excise & Service Tax, Bolpur Commissionerate, with a direction to issue a fresh show cause notice within 15 days, including a brief discussion of the pre-consultation procedure. The appellant was granted 30 days to reply and an opportunity for a personal hearing. The Court noted that the stay granted since November 29, 2016, would prevent limitation issues.

Facts

The appellant, Eastern Associates Contracts, challenged an order of a learned Single Bench that directed them to respond to a show cause notice dated October 14, 2016, issued by the Commissioner of Central Excise & Service Tax, Audit – II Commissionerate, Kolkata. The appellant's primary contention was that the pre-consultation procedure mandated by the Central Board of Excise and Customs (CBEC) was not followed correctly. Specifically, the authority issuing the show cause notice was different from the one that conducted the pre-consultation. The writ petition was filed in 2016, an interim stay was granted, and affidavits were exchanged. The learned Single Bench deemed the writ petition premature, suggesting the appellant respond to the show cause notice.

Key Issues

1. Whether the show cause notice dated October 14, 2016, issued by the Commissioner, Central Excise & Service Tax Audit – II Commissionerate, is invalid for not being issued by the authority that conducted the pre-consultation, contrary to CBEC instructions? 2. Whether the show cause notice dated October 14, 2016, is invalid for failing to mention the pre-consultation process, thereby prejudicing the appellant? Petitioner's arguments: The appellant argued that the show cause notice was issued by an authority different from the one that invited them for pre-consultation, violating CBEC instructions (specifically referring to a master circular dated March 10, 2017). They also contended that the show cause notice did not mention the pre-consultation, rendering the process meaningless and prejudicial. They relied on the principle that the 'man who hears shall decide' and the purpose of pre-consultation as outlined in the master circular. Revenue's arguments: The revenue argued that the writ petition was premature and the appellant was not prejudiced, as they could submit their reply to the show cause notice, which would be adjudicated on merits. They supported the learned Single Bench's decision to relegate the appellant to the adjudication process.