Rana Construction vs. Commissioner Of CGST And Central Excise
Original PDF →Facts
The petitioner, Rana Construction, is challenging a demand-cum-show cause notice dated March 28, 2019, issued under the Finance Act, 1994, concerning the period 2013-14 to 2016-17. The petitioner contends that the notice was issued without prior consultation, which was mandated by Master Circular dated March 10, 2017, for demands exceeding Rs. 50 lacs, except for preventive/offence-related notices. The revenue argued that a subsequent circular dated November 11, 2021, clarified that consultation is not required in cases of suppression of facts. The petitioner asserted that suppression is not applicable due to the nature of their work (road and bridge construction) and an exemption notification.
Held
The Court decided to relegate the parties to the consultation stage, adopting a similar approach to an order from the Supreme Court in a Special Leave Petition. The Court noted that the Master Circular of 2017 already excluded preventive/offence cases from mandatory consultation, suggesting the principle of the 2021 clarification might have retrospective application if suppression is indeed present. However, the Court acknowledged the petitioner's claim of total exemption based on a notification, which would make suppression doubtful. The Court explicitly stated it made no observation on the merits of the matter, including the exemption claim. The writ petition was allowed on the terms that if, after consultation, a show cause notice is required, the issue of limitation will not impede its issuance. The Court did not decide the substantive issues of exemption or suppression.
Key Issues
1. Whether the show cause notice dated March 28, 2019, issued to the petitioner for the period 2013-14 to 2016-17, is invalid for non-compliance with the mandatory consultation requirement stipulated in the Master Circular dated March 10, 2017, particularly when the demand exceeds Rs. 50 lacs. 2. Whether the clarification issued by the Central Board of Indirect Taxes and Customs on November 11, 2021, which exempts cases of suppression of facts from prior consultation, has retrospective applicability to the show cause notice issued prior to its date. 3. Whether the petitioner's contention of total exemption based on notification no. 25 of 2012 negates the possibility of alleged suppression of facts. Petitioner's arguments: The petitioner argued that the Master Circular dated March 10, 2017, mandated consultation before issuing the show cause notice, and this was not done. They also argued that suppression of facts cannot be alleged as they were engaged in public utility services (road and bridge construction) which are exempted by notification no. 25 of 2012. They relied on Pushpam Pharmaceuticals Company vs. Collector of Central Excise, Bombay. Revenue's arguments: The revenue contended that the circular dated November 11, 2021, clarified that consultation is not required in cases of suppression of facts, implying this principle should apply. They also suggested that if a fresh show cause notice were to be issued, the department should be given liberty to revive the earlier notice to obviate limitation objections.
Sections Cited
Finance Act, 1994
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL ORDER (Per: HONOURABLE THE CHIEF JUSTICE) 8 29-07-2024 The petitioner is concerned with assessment year 2013-14 to 2016-17 in which a demand-cum-show cause notice was issued under the Finance Act, 1994 as produced at Annexure-3 dated 28.03.2019. The petitioner relies on the Master Circular dated 10.03.2017 produced at Annexure-12 series wherein Clause 5.0 mandated a consultation with the noticee before issue of show cause notice, in cases involving demands of duty above Rs.50 lacs except for preventive/offence 2/4 related show cause notices. Admittedly, no consultation was carried out before the issuance of show cause notice.
The learned ASG however points out that the circular issued by the Central Board of Indirect Taxes and Customs on 11.11.2021 makes it clear that in cases inter alia of suppression of facts, there is no mandate for a consultation prior to the demand-cum-show cause notice.
The learned counsel for the petitioner points out that the clarification came only on 11.11.2021 and the show cause notice was dated 28.03.2019. Further, it is submitted that in the case of the petitioner there cannot be found suppression especially since the petitioner was engaged in the construction of roads and bridges, a public utility service, which is exempted by notification no.25 of 2012 produced as Annexure-6 at page
The learned counsel for the petitioner also relied on of 2017 excluded preventive/offences from the mandatory consultation. Hence, the fact that the clarification issued on 11.11.2021 would have application even prior. If there is suppression of facts, we are of the opinion that there need not be 3/4 any consultation even if the total tax liability exceeds Rs.50 lacs.
However, it is to be noticed that the petitioner’s contention is of a total exemption based on a notification issued by the Central Government. In that circumstances, considering the cited decision even if the return has not been filed, it is doubtful as to whether there could be alleged suppression of facts.
In this context, we notice the order in a Special Leave Petition (Civil) Diary No(s).35886 of 2019 which arose from the judgment of a Division Bench of the Delhi High Court wherein the Hon’ble Supreme Court held so: “Delay condoned. Learned Additional Solicitor General submits that if a fresh show cause notice is to be issued as directed by the High Court after pre-consultation, the Department may be given liberty to revive the earlier show cause notice to obviate any objection in regard to limitation. Issue notice confined to the above issue, returnable in eight weeks.”
The matter is pending before the Hon’ble Supreme Court but however the Hon’ble Supreme Court was also of the opinion that the proceedings should be completed by relegating the parties to the stage at which the consultation has to be carried out. It has also been specified that after consultation, a 4/4 show cause notice could be issued. Any limitation as per the statute will not restrict the Department from issuing such a show cause notice.
We hence adopt the very same method and relegate the parties to the consultation stage. We make it clear that we have not made any observation on the merits of the matter including the issue of exemption prayed for by the petitioner, which will have to be considered on the terms of the notification issued as also the facts coming out insofar as the contracts executed by the petitioner-assessee.
The writ petition stands allowed on the above terms making it clear that if after consultation, a show cause notice is required to be issued, the issue of limitation will not impair such issuance.
Saurabh/- (K. Vinod Chandran, CJ) ( Partha Sarthy, J) U
Reproduced from the public record of the Patna High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.