Ms Kamaladitya Construction P LTD Represented Through Its Director Sri Aditya Kumar vs. The Principal Commissioner Of Central Goods And Services Tax And Central Excise

Held

The Court held that the delay in adjudicating the Show Cause Notice for over seven years was unreasonable and prejudiced the petitioner. It was noted that Section 73(4B) of the Finance Act, 1994, provides for time limits for adjudication. Even in cases where no specific time limit is prescribed by statute, the power must be exercised within a reasonable period. The Court referred to Supreme Court judgments in State of Punjab and Others Vs. Bhatinda District Cooperative Milk Producers Union Ltd. and K.B. Nagur, M.D. (Ayurvedic) Vs. Union of India, emphasizing that the maximum period of limitation provided under the Act for other purposes should be considered a reasonable period. In this case, the maximum period of five years under Section 73(1)/73(4) was considered the reasonable period for adjudication. The Court found that it would not be possible for the petitioner to defend its case effectively at this belated stage, causing serious prejudice. Therefore, the impugned Show Cause Notice and the subsequent notice for personal hearing were quashed and set aside. The Court expressly left undecided the revenue's objection regarding alternative remedy, deeming it not applicable due to the prejudice caused by the delay.

Facts

M/s Kamaladitya Construction (P) Ltd. (the petitioner) filed a writ petition challenging a Show Cause Notice (SCN) dated 24.12.2014 issued by Respondent No. 2, and a subsequent notice dated 06.06.2022 for personal hearing issued by Respondent No. 3. The SCN was issued under the proviso to Section 73(1) of Chapter V of the Finance Act, 1994. The petitioner argued that the adjudication of the SCN was delayed for over seven years, violating Section 73(4B) of the Finance Act, 1994, and Article 14 of the Constitution. The petitioner had filed a reply on 04.10.2016 and attended a personal hearing on 05.10.2016, after which the proceedings were suspended. The revenue contended that there was no prescribed time limit for adjudication in the erstwhile Service Tax law, and orders were often passed after many years.

Key Issues

1. Whether the adjudication proceedings initiated by the impugned Show Cause Notice dated 24.12.2014, which remained pending for over seven years, are liable to be quashed on grounds of delay and violation of the principles of natural justice, particularly in light of Section 73(4B) of the Finance Act, 1994? Petitioner's arguments: The petitioner contended that Section 73(4B) of the Finance Act, 1994, prescribes time limits of six months and one year for adjudication, which were not adhered to. The phrase "where it is possible to do so" does not grant perpetual extension but applies only to extraordinary situations. The delay prejudices the petitioner and violates Article 14 of the Constitution. The maximum period of five years under Section 73(1)/73(4) should be considered a reasonable period for adjudication. They relied on various Supreme Court and High Court judgments concerning delay in adjudication and reasonable time limits. Revenue's arguments: The revenue argued that under the erstwhile Central Excise Act and Service Tax law, there was no prescribed time limit for passing adjudication orders, and it was common for orders to be passed after many years. They stated that the adjudication is a quasi-judicial function requiring consideration of submissions.