Bombay High Court
Shahaji Bhanudas Bhad vs Union Of India And Anr on 3 September, 2024
Author: K. R. Shriram
Bench: K. R. Shriram
2024:BHC-AS:35764-DB
TAUSEEF Tauseef 903-WP.12394.2023-J.doc
LAIQUEE
FAROOQUI IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Digitally signed by CIVIL APPELLATE JURISDICTION
TAUSEEF LAIQUEE
FAROOQUI
Date: 2024.09.06
10:44:32 +0530 WRIT PETITION NO.12394 OF 2023
Shahaji Bhanudas Bhad,
having his office at
J-179, MIDC, Bhosari, Pune - 411026. ...Petitioner
Versus
1. The Union of India,
Through the Secretary,
Department of Revenue,
Ministry of Finance,
Government of India,
New Delhi - 110 001.
2. The Principal Commissioner Central GST,
Pune 1 Commissionerate
Having his office at 2nd Floor,
E-Wing, GST Bhavan, 41-A, Sasson road,
Nr. Wadia College, Pune - 411 001. ...Respondents
__________
Mr. Prakash Shah i/b. M/s. PDS Legal for Petitioner.
Ms. P. S. Cardoza a/w. Ms. Kavita Shukla for Respondents.
__________
CORAM : K. R. SHRIRAM,
JITENDRA JAIN, J.J.
DATED : 3rd SEPTEMBER 2024
JUDGMENT:
(Per Jitendra Jain, J.)
1. Rule. Rule made returnable forthwith. By consent of the
parties, heard finally, since pleadings are complete.
2. By this petition under Article 226 of the Constitution of India,
Petitioner seeks to challenge a show cause notice dated 5 th May 2017
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issued by Respondent No.2 whereby Respondents are seeking to add the
value of bought out goods procured and supplied directly to the
customers of Petitioner to the assessable value of the goods
manufactured in the factory of Petitioner. These goods admittedly do
not enter Petitioner's factory. It is also undisputed that suppliers have
paid excise duty and Petitioner has not claimed any duty credit on these
goods.
3. On 5th May 2017, the impugned show cause notice was issued
by Respondent No.2 calling upon Petitioner to show cause why
differential Central Excise Duty should not be demanded and recovered
by enhancing assessable value on account of supply of bought out items
which were directly supplied by the suppliers of Petitioner to the site of
Petitioner's customers. Petitioner was also called upon to show cause
why interest should not be charged on the differential Excise Duty
demand and penalty should not be imposed under Section 11AC of the
Central Excise Act, 1944.
4. Under a cover of letter dated 1 st July 2017, Petitioner
complied with the aforesaid show cause notice by filing reply running
into more than 400 pages giving all the documents and submissions as
to why the show cause notice should be dropped.
5. On 18th September 2017, Petitioner attended personal hearing
before Respondent No.2 and made submissions for dropping of the
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show cause notice. Petitioner also filed additional submissions, pursuant
to the personal hearing, under a cover of letter dated 10 th October 2017,
which too consisted of almost 500 pages.
6. However, from 10th October 2017 till 4th September 2023, for
a period of almost 6 years, the impugned show cause notice was not
adjudicated. On 4th September 2023, out of the blue, Petitioner was
informed by the Superintendent (Adj) of CGST, Pune-I Commissionerate
that a personal hearing was fixed before Respondent No.2 on 26 th
September 2023. On 25th September 2023, i.e., one day before the
personal hearing, Petitioner filed additional submissions contending
that the proceedings are required to be dropped on ground of delay in
not adjudicating the impugned show cause notice. Petitioner also
contended that the issue on merits is no longer res-integra in view of
the order and judgment dated 7th July 2023 passed by the Supreme
Court in Civil Appeal No.5700 of 2019 in the case of Petitioner itself
which reads as under:-
"Having regard to the fact that for the subsequent period, the
Department has taken a stand that the bought-out items are not entered
in the factory and the Assessee has not claimed credit on them, there is
no case for adding their value in the assessable value and hence no
proceeding need be initiated in the form of a show cause notice, we find
that for the previous period, in respect of which this appeal arises, the
stand of the Department cannot be contrary to what has been statedth
above. Hence, we do not find any merit in the appeal. The Civil Appeal is
dismissed.
Pending application(s) shall stand disposed of."
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7. On 26th September 2023, Petitioner sought adjournment of
the hearing scheduled on that day and the same was granted, and the
hearing was re-fixed on 13th October 2023. Meanwhile, Petitioner
approached this Court by way of present petition challenging the
impugned show cause notice primarily on the ground of delay in
adjudicating the show cause notice and also that the issue is now
covered by the decision of the Supreme Court dated 7 th July 2023 in the
case of Petitioner itself. This Court by an order dated 9 th October 2023
was pleased to stay further proceedings by Respondent No.2.
8. Respondent Nos.1 and 2 have filed an Affidavit of one Sanjay
Mahendru affirmed on 30th November 2023 opposing the petition.
Respondents in their Affidavit, with respect to delay in adjudication
have stated that no order was passed pursuant to the impugned show
cause notice on account of change in the overall functioning of the
department involving redrawing of jurisdiction and control by the State
Government and the Central Government due to implementation of
GST and the show cause notice could not be adjudicated due to
oversight. Relevant extract of paragraph 6 of the Affidavit-in-reply reads
as under:-
".....
Unfortunately however no order came to be passed in the SCN due
to the fact that the department was going through a complete
overhaul due to implementation of GST which entailed a sea
change in the overall functioning involving redrawing of
jurisdictions and control by two different authorities i.e. the state
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government and the central government. I say that in all this
upheaval in reorganization and the transfer and change of officers
to and from different Commissionerates the order concluding the
SCN remained to be passed. This happened due to oversight which
is a real possibility and the petitioner cannot use this as an excuse
for not responding to the show cause notice only on the ground
that for 6 years nothing was done. ......."
9. Respondent No.2 in the aforesaid Affidavit has also touched
upon the merits of the case and supported the issuance of show cause
notice. However, in the said Affidavit, there is no rebuttal to the
averments made by Petitioner that the issue is now covered by the order
and judgment of the Hon'ble Supreme Court in Civil Appeal No.5700 of
2019 dated 7th July 2023 in the case of Petitioner itself.
10. Admittedly, there is no dispute that the show cause notice
dated 5th May 2017 was not adjudicated for a period of almost 6 years
and it is only in September 2023 to revive the said show cause notice
that a personal hearing came to be fixed on 26 th September 2023. The
only explanation given by Respondents for delay in adjudication is the
change in the functioning of the jurisdiction on account of
implementation of GST, which justification is reproduced above.
11. In our view, this justification cannot be accepted for more
than one reason; firstly, after the show cause notice was issued on 5 th
May 2017, Petitioner filed a detailed reply of more than 400 pages on
1st July 2017. A personal hearing also took place on 18 th September
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2017 before Respondent No.2 and pursuant to the personal hearing,
Petitioner filed further additional submissions running into 500 pages
on 10th October 2017. This shows that the office of Respondents was
functioning post introduction of GST, i.e., post 1 st July 2017. Therefore,
the justification given in the reply of Respondent No.2 for not
adjudicating the show cause notice on account of revamping of
jurisdiction cannot be accepted. The reason given is general in nature
and in any case, if the reason was true then the functioning of the
department during the period of implementation of GST ought to have
come a stand still which is not the case because the department was
functioning as evident by the fact of the proceedings which Petitioner
attended in September and October 2017. In our view, therefore, the
general bald reason given without any evidence with respect to the
present impugned show cause notice cannot be accepted. Also it is not
the case of Revenue that post July 2017 no order in case of any assessee
could be passed because of GST implementation. This itself falsifies
Respondent's justification. On the contrary, Respondents have admitted
that it was due to oversight that the show cause notice could not be
adjudicated. In our view, for such a negligence, the delay in
adjudication cannot be condoned, moreso because on merits,
Respondents have not controverted that the issue stands covered by the
decision of the Supreme Court in Civil Appeal No.5700 of 2019 dated
7th July 2023 in Petitioner's own case. Therefore, in our view, relegating
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Petitioner to attend the show cause notice would be unfair,
unreasonable and gross abuse of the power. Respondents have not filed
any evidence in support of paragraph 6 of their affidavit to show even
prima-facie that the show cause notice could not be adjudicated because
of overall in functioning of department on account of implementation of
GST.
12. The issue of delay in adjudication of the show cause notice
had come up before this Court in series of judgments to which either
one of us was a party. This Court has, in a detailed judgment, in
Coventry Estate Pvt. Ltd. Vs. The Joint Commissioner CGST and Central
Excise & Anr.1 quashed such show cause notice. The relevant paragraphs
of the said decision reads as under:-
"17. In our opinion, in the facts of the present case, such
requirement and obligation the law would mandate is completely
overlooked by the officer responsible for adjudicating the show
cause notice. We are not shown any provision, which in any
manner would permit any authority to condone such inordinate
delay on the part of the adjudicating officer to adjudicate show
cause notice. There can be none, as the legislature has clearly
intended to avoid uncertainty, which otherwise can emerge. Thus,
what would become applicable are the settled principles of law as
laid down in catena of judgments, that the period within which
such adjudication should happen is as mandated by law and in any
case it needs to be done within a reasonable period from the
issance of the show cause notice. Further, whether such period is a
reasonable period would depend upon the facts and circumstances
of each case.
18. An inordinate delay is seriously prejudical to the assessee and
the law itself would manifest to weed out any uncertainty on
adjudication of a show cause notice, and that too keeping the same
pending for such a long period itself is not what is conducive.
1 (2023) 10 Centax 38 (Bom.)
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19. It is well said that time and tide wait for none. It cannot be
overlooked that the pendency of show cause notice not only weighs
against the legal rights and interest of the assessee, but also, in a
given situation, it may adversely affect the interest of the revenue,
if prompt adjudication of the show cause notice is not undertaken,
the reason being a lapse of time and certainly a long lapse of time
is likely to cause irreversible changes frustrating the whole
adjudication.
20. We are also of the clear opinion that a substantial delay and
inaction on the part of the department to adjudicate the show
cause notice would seriously nullify the noticee's rights casuing
irreparable harm and prejudice to the noticee. A protracted
adminsitrative delay would not only prejudically affect but also
defeat substantive rights of the noticee. In certain circumstances,
even a short delay can be intolerable not only to the department
but also to the noticee. In such cases, the measure and test of delay
would be required to be considered in the facts of the case. This
would however not mean that an egregions delay can at all be
justified. This apart, delay would also have a cascading effect on
the effectiveness and/or may cause an abridgement of a right of
appeal, which the assessee may have. Thus, for all these reasons,
delay in adjudication of show cause notice would amount to
denying fairness, judiciousness, non-arbitrariness and fulfillment of
an expectation of meaningfully applying the principles of natural
justice. We are also of the clear opinion that arbitrary and
capricious administrative behaviour in adjudication of show cause
notice would be an antithesis to the norms of a lawful, fair and
effective quasi judicial adjudication. In our opinion, these are also
the principles which are implicit in the latin maxim "lex dilationes
abhorret", i.e., law abhors delay.
21. In such context as to how the Courts have dealt with similar
situations can be seen from some of the significant decisions on the
issue. In Sushitex Exports (India) Ltd. (supra), a Division Bench of
this Court was dealing with a case in which a show cause notice
was issued on 30 April, 1997, which was not adjudicated till the
petitioners filed the writ petition in the year 2020. In such context,
the Court while allowing the petition, observed that the law is well
settled that when a power is conferred to achieve a particular
object, such power has to be exercised reasonally, rationally and
with objectivity. It was observed that it would amount to an
arbitrary exercise of power if proceedings initiated in 1997 are not
taken to their logical conclusion even after a period of over two
decades. The Court agreed with the view taken in Parle
International Ltd. (supra) that the proceedings should be
concluded within a reasonable period, and if the proceedings that
are not concluded within a reasonable period, the Court
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considering such facts, may not allow the proceedings to be carried
any further. Referring to the contentions on behalf of the
respondent that the respondent should be granted the liberty to
conclude the proceedings, it was observed that except for the
petitioners who had approached the Court to have the impugned
show-cause notice set aside invoking the writ jurisdiction of the
Court of this Court, the show cause notice would have continued to
gather dust. The Court observed that the petitioners, in such
circumstances, cannot possibly be worse off in seeking a
constitutional remedy and thereby suffer an order to facilitate
conclusion of the proceedings, which was most likely to work out
prejudice to them. The following are the observations as made by
the Court:
"15. We are also not persuaded, at this distance of time, to
agree with Mr. Jetly that the respondents should be granted
liberty to conclude the proceedings. It is the petitioners who
have approached the Court to have the impugned show-cause
notice set aside. Had the petitioners not invoked the writ
jurisdiction of this Court, the show-cause notice would have
continued to gather dust. The petitioners, in such
circumstances, cannot possibly be worse off for seeking a
Constitutional remedy and thereby suffer an order to facilitate
conclusion of the proceedings which, because of the
inordinate delay in its conclusion, is most likely to work out
prejudice to them.
16. Article 14 of the Constitution of India is an admonition
to the State against arbitrary action. The State action in this
case is such that arbitrariness is writ large, thereby incurring
the wrath of such article. It is a settled principle of law that
when there is violation of a Fundamental Right, no prejudice
even is required to be demonstrated."
22. In Bombay Dyeing and Manufacturing Company Limited vs.
Deputy Commissioner of CGST and CX, DIV-IX, Mumbai Central
GST Commissionerate, 2022 (382) E.L.T. 206 (Bom.), a co-ordinate
Bench of this Court observed on the prejudice which would be
caused to the assessee if for a long period the show cause notice is
not adjudicated. It was held that belated hearing of the show cause
notice would amount to violation of principles of natural justice.
Following are the observations of the Court:
"10. It is not expected from the assessee to preserve the
evidence/record intact for such a long period to be produced
at the time of hearing of the show-cause notice. The
respondent having issued the show cause notice, it is their
duty to take the said show-cause notice to its logical
conclusion by adjudicating upon the said show-cause notice
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within a reasonable period of time. In view of the gross delay
on the part of the respondent, the petitioner cannot be ade to
suffer. The law laid down by the Division Bench of this Court
in the case of Parle International Limited (supra), applies to
the facts of this case. We do not propose to take any different
view in the matter. Hearing of show-cause notice belatedly is
in violation of natural justice."
23. In ATA Freight Line (I) Pvt. Ltd. (supra), a Division Bench of
this Court considering the decisions in Parle International Ltd.
(supra), Bhagwandas S. Tolani vs. B.C. Aggarwal & Ors., 1983 (12)
E.L.T. 44 (Bom.) and Reliance Industries Ltd. (supra) held that a
show cause notice issued a decade back should not be allowed to
be adjudicated by the Revenue merely because there is no period of
limitation prescribed in the statute to complete such proceedings.
The relevant observations of the Court are required to be noted,
which reads thus:
"24. This Court in case of Parle International Ltd. (supra)
after considering the identical facts and after adverting to the
judgment in cases of Bhagwandas S. Tolani (supra), Sanghvi
Reconditioners Pvt. Ltd. (supra) and Reliance Industries Ltd.
(supra) held that 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 in the statute to complete such proceedings. Larger
public interest requires that revenue should adjudicate the
show-cause notice expeditiously and within a reasonable
period. It is held that keeping the show-cause notice in the
dormant list or the call book, such a plea cannot be allowed
or condoned by the writ court to justify inordinate delay at
the hands of the revenue. This Court was accordingly pleased
to quash and set aside the show cause notices which were
pending quite some time.
25. In case of Sushitex Exports India Ltd. (supra), Division Bench
of this Court was pleased to quash and set aside the show cause
notices which remained pending for adjudication from 1997. This
Court considered the fact that though the petitioner therein was
called for hearing in the year 2006, no final order was passed
immediately after hearing was granted to the petitioner. It is held
that the respondents seem to have slipped into deep slumber
thereafter. This Court while quashing and setting aside the show
cause notices which were not decided after long delay was pleased
to grant consequential relief to the petitioner therein by directing
the respondents to return the amounts paid by the petitioner under
protest during the course of investigation with interest @ 12% p.a."
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13. Similar view is taken in series of judgments, same of which
are as under:-
1. Godrej & Boycee Mfg. Co. Ltd. Vs. Union of India & Ors., reported
in 2022 (9) TMI 318 (Bom.);
2. ICICI Home Finance Company Ltd. Vs. Union of India & Pr. CGST &
CX Mumbai, reported in 2024 (6) TMI 682 (Bom);
3. EPL Ltd. Vs. The Union of India & Ors., reported in 2023 (9) TMI
15 (Bom);
4. UPL Limited Vs. The Union of India & Ors., reported in 2023 (8)
TMI 1152 (Bom).
14. Respondents have not been able to distinguish the above
decisions.
15. We, therefore, have no hesitation in exercising our jurisdiction
under Article 226 of the Constitution of India to allow the petition in
terms of prayer clause (a) which reads as under:-
"(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari
or a writ in the nature of Certiorari or any other writ, order or
direction under Article 226 of the Constitution of India calling
for the records pertaining to the Petitioner's case and after
going into the validity and legality thereof to quash and set
aside the impugned Show Cause Notice
No.01/P-II/C.Ex./AE/COMMR/2017-18 dated 05.05.2017
issued by the then Commissioner of Central Excise, Pune-II
and pending adjudication before the learned Principal
Commissioner, Central GST, Pune 1 Commissionerate;"
16. Rule is made absolute in above terms. Petition disposed.
[JITENDRA JAIN, J.] [K. R. SHRIRAM, J.]
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