Cma-Cgm Agencies (INDIA) PVT LTD. vs. The Union Of INDIA, Ministry Of Finance, Thru The Secretary And Ors

Facts

The Petitioner, CMA-CGM Agencies (India) Pvt. Ltd., was issued a Show Cause cum Demand Notice No. 59 of 2009 dated 12 October 2009 by the Commissioner of Service Tax, Delhi. This notice, pertaining to the period 2004-05 to 2007-08, demanded service tax, education cess, and higher education cess amounting to Rs. 5,07,70,296/-, Rs. 48,22,124/-, and Rs. 41,83,916/-, along with interest and penalties. The Petitioner filed a reply on 30 December 2009. Subsequently, the Petitioner obtained a centralized service tax registration effective from 9 September 2010, falling under the jurisdiction of Respondent No. 2, Commissioner, CGST & C. Ex., Navi Mumbai. Despite this, the adjudication of the show cause notice was delayed, with personal hearing notices being issued by the Delhi authorities and later by Respondent No. 2 in 2020, over a decade after the initial notice.

Held

The Court held that the adjudication of Show Cause cum Demand Notice No. 59 of 2009 dated 12 October 2009 could not be proceeded with due to an inordinate and unreasonable delay. The Court found that the Respondents had not acted in the manner required by law, failing to transfer proceedings or adjudicate the notice promptly after the Petitioner obtained centralized registration. The Court reasoned that while the right to initiate proceedings is undisputed, the Respondents do not possess an unfettered right to conclude them at their convenience. The phrase 'reasonable period' requires a flexible construction, and a delay exceeding eleven years, without a satisfactory explanation from the Respondents, was deemed unreasonable. The Court agreed with the principle that proceedings not concluded within a reasonable period should not be allowed to continue, especially when such delay causes severe prejudice to the Petitioner. Therefore, the Court quashed and set aside the impugned show cause cum demand notice.

Key Issues

1. Whether the adjudication of Show Cause cum Demand Notice No. 59 of 2009 dated 12 October 2009, issued by the Commissioner of Service Tax, Delhi, should be proceeded with after an inordinate delay of over eleven years since its issuance and over seven years since the Petitioner obtained centralized registration and informed the authorities. Petitioner's arguments: The Petitioner contended that upon obtaining centralized service tax registration, the relevant records should have been transferred to the new jurisdiction. However, this did not happen, leading to significant delays. The Petitioner argued that the prolonged delay in adjudicating the show cause notice, coupled with changes in management and office, made it difficult to collate documents. They relied on the principle that proceedings should be concluded within a reasonable period, citing the decision in Parle International Limited (supra) which held that proceedings not concluded within a reasonable period may not be allowed to proceed further. Respondents' arguments: The Respondents did not dispute their right to initiate proceedings but argued that they do not have an unfettered right to choose the time for their termination. They acknowledged the delay but did not provide a sufficiently satisfactory explanation for the same, relying on the affidavit-in-reply.