M/S Jmd Foods vs. Union Of INDIA And Another

WTAX/610/2025HC AllahabadGSTCNR UPHC01086437202507 April 20254 pages

For Petitioner: Ajay Kumar Yadav

AI SummaryAllowed

Facts

The petitioner, M/s JMD Foods, a restaurant service provider, is challenging an order dated 07.11.2024 passed by the Assistant Commissioner (Adjudication) CGST & Central Excise Division-II, Allahabad, under Section 73(2) of the Finance Act, 1994. The challenge is also to a show cause notice dated 19.10.2015. The petitioner had been issued the show cause notice alleging liability for service tax on 'Outdoor Catering' services, with a demand of Rs. 13,44,686/- plus penalty. The petitioner contended that the services provided to IIIT, Jhalwa, Prayagraj and MNNIT, Prayagraj were exempt. Despite submissions and personal hearings, the adjudication proceedings remained pending for over nine years since the show cause notice was issued in 2015. The petitioner alleges that adjournment applications were not considered before the impugned order was passed.

Held

The Court held that the impugned order dated 07.11.2024 and the show cause notice dated 19.10.2015 are liable to be quashed. The Court found that the adjudication proceedings were kept pending for over nine years without any justification. This delay is in direct contravention of the provisions of Section 73(4B) of the Finance Act, 1994, which prescribes time limits for the determination of service tax due. The Court relied on the settled legal proposition, as articulated in the cases of ATA Freight Line (I) Pvt. Ltd., UPL Limited, and M/s L.R. Sharma and Company, that show cause notices must be adjudicated within a reasonable time, even in the absence of explicit periods of limitation. The dismissal of the Special Leave Petition by the Supreme Court against the ATA Freight Line judgment further strengthens this principle. Therefore, the impugned order, being in teeth of the statutory provisions and established legal principles, cannot be sustained. The writ petition is allowed, and the impugned order and show cause notice are quashed and set aside.

Key Issues

1. Whether the adjudication proceedings initiated by the show cause notice dated 19.10.2015, and culminating in the order dated 07.11.2024, are liable to be quashed for non-compliance with the time limits prescribed under Section 73(4B) of the Finance Act, 1994? Petitioner's arguments: The petitioner contended that Section 73(4B)(a) and (b) of the Finance Act, 1994, mandate the completion of adjudication proceedings within six months or one year from the date of the notice, respectively. As the impugned order was passed after approximately nine years, it violates these provisions and should be quashed. Reliance was placed on judgments from the Bombay High Court in ATA Freight Line (I) Pvt. Ltd. and UPL Limited, and the Delhi High Court in M/s L.R. Sharma and Company, noting that a Special Leave Petition against the ATA Freight Line judgment was dismissed by the Supreme Court. Respondent's arguments: The learned counsel for the respondents did not dispute the factual aspect regarding the dates of issuance of the notice and passing of the final order.

Sections Cited

Section 73(2), Section 73(4B)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

Neutral Citation No. - 2025:AHC:54278-DB Chief Justice's Court Case :- WRIT TAX No. - 610 of 2025 Petitioner :- M/s JMD Foods Respondent :- Union of India and another Counsel for Petitioner :- Ajay Kumar Yadav Counsel for Respondent :- A.S.G.I., Gaurav Mahajan Hon'ble Arun Bhansali, Chief Justice Hon'ble Kshitij Shailendra, J. 1. This petition is directed against order dated 07.11.2024 passed by Assistant Commissioner (Adjudication) CGST & Central Excise Division-II, Allahabad passed under Section 73 (2) of the Finance Act, 1994 (for short 'the Act, 1994') and show cause notice dated 19.10.2015. 2. It is, inter alia, indicated that the petitioner firm was registered under the Service Tax regime for providing restaurant services. In the year 2014, inquiry proceedings were initiated by Superintendent (Prevention), Central Excise and Service Tax and certain notices, queries and summons were issued. During the said inquiry, wherein the petitioner participated by complying with the summons, responding to the notices and appearing for personal hearing as and when necessitated by the Department. Pursuant to the inquiry, a show cause notice dated 16.10.2015/19.10.2015 was issued to the petitioner firm alleging that the services provided by the petitioner firm fell under the category 'Outdoor Catering' services and, therefore, amenable to service tax and that the firm was liable to pay demand of Rs. 13,44,686/- as tax along with penalty. 3. A reply dated 19.11.2015 was filed and the petitioner appeared for personal hearing before the Adjudicating Authority, inter alia, clarifying that the catering services provided by the petitioner to IIIT, Jhalwa, Prayagraj and MNNIT, Prayagraj were exempt from the purview of service tax by virtue of Notification No. 25/2012 dated 20.06.2012, as clarified by Circular No. 172/7/2013-ST dated 19.09.2013. 4. Further detailed submissions dated 15.11.2018 in form of written submissions were submitted and personal hearing was conducted whereafter except for fixing dates for personal hearing, no further proceedings took place. A notice of personal hearing dated 29.07.2024 was issued by respondent no.2, however, the same was served late and an adjournment was sought. Again, a fresh date was fixed, wherein also the notice was served late and adjournment was sought. However, it is alleged that without considering the adjournment application, the Adjudicating Authority passed the impugned order dated 07.11.2024 after 9 years since the issuance of show cause notice in the year 2015 without providing any explanation for the delay. 5. Submissions have been made that under provisions of Section 73 (4B) (a) & (b) of the Act, 1994, the adjudication proceedings are required to be completed within six months or one year, as the case may be, however, on failure to comply with the said provision, the order impugned deserves to be quashed and set aside. 6. Reliance has been placed on ATA Freight Line (I) Pvt. Ltd. Vs. Union of India and others : Writ Petition No. 3671 of 2021, decided on 24.03.2022 by the Bombay High Court, UPL Limited Vs. Union of India and another : Writ Petition No. 3063 of 2021, decided on 22.08.2023 by the Bombay High Court and M/s L.R. Sharma and Company Vs. Union of India and others : Writ Petition (C) No.13689 of 2024, decided on 20.12.2024 by the Delhi High Court. 7. Further submissions have been made that Special Leave Petition (Civil) Diary No.828 of 2023 arising out of judgement in the case of ATA Freight Line (I) Pvt. Limited (supra) has been dismissed by Hon'ble Supreme Court on 10.02.2023. 8. Learned counsel for the respondents does not dispute the factual aspect of the matter regarding date of issuance of notice and

passing of the final order.

Provisions of Section 73 of the Act, 1994, which deal with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded under sub-section (4B), inter alia, provides as under:- "(4B) The Central Excise Officer shall determine the amount of service tax due under sub-section (2)- (a) within six months from the date of notice where it is possible to do so, in respect of cases falling under in sub- section (1); (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A)."

10.

The mandate of the provision is very clear wherein the Central Excise Officer is required to determine the amount of service tax within six months from the date of notice where it is possible to do so, in respect of cases falling under sub-section (1) and within one year from the date of notice where it is possible to do so, in respect of cases falling under proviso to sub-section (4A).

11.

The Bombay High Court in the case of ATA Freight Line (supra) referred to several of its previous judgements wherein it was held that a show cause notice issued a decade back should not be allowed to be adjudicated upon by the Revenue merely because there is no period of limitation prescribed under the Statute to complete such proceedings. Larger public interest requires that Revenue should adjudicate show cause notice expeditiously and within the reasonable period and allowed the writ petition by quashing the show cause notice. Against the said judgement, Special Leave Petition has been dismissed by Hon'ble Supreme Court.

12.

Similarly, the Bombay High Court in the case of UPL Limited (supra) observed that even in absence of provisions of sub-section (4B) of Section 73 of the Act, 1994, the Authority could not have acted oblivious to the settled principle of law that a show cause notice would be required to be adjudicated within a reasonable time depending on facts of each case and consequently, quashed the show cause notice. Same is also the ratio in the case of M/s L.R. Sharma (supra).

13.

A perusal of the order impugned (Annexure-1) would reveal that the respondent no.2, while passing the order impugned, without providing for any justification in keeping the show cause notice pending for over 9 years, has passed the order impugned concerning to demand of service tax, which order passed by the respondent no.2 being in teeth of provisions of Section 73 (4B) of the Act, 1994 and the settled legal proposition, cannot be sustained and consequently, the writ petition is allowed. The impugned order dated 07.11.2024 (Annexure-1) and the show cause notice dated 19.10.2015 (Annexure-2) are quashed and set aside. Order Date :- 8.4.2025 SL (Kshitij Shailendra, J) (Arun Bhansali, CJ) SHYAM LAL High Court of Judicature at Allahabad

Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.