Patna High Court
Pankaj Rai vs The Union Of India on 5 May, 2025
Author: Rajeev Ranjan Prasad
Bench: Rajeev Ranjan Prasad, Ashok Kumar Pandey
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.11936 of 2024
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Pankaj Rai a proprietorship concern having its office at Mathiya Mohalla,
Civil Lines P.O.- Buxar, P.S.- Bauxar, Dist.- Buxar 802101 through authorised
signatory Sima Rai, Gender- Female, aged about 50 years, wife of Late
Pankaj Rai, Resident of Purab Tola, Korantadih Ujiar, Post- Korantadih,
Police Station - Korantadih, Dist. - Ballia, Uttar Pradesh- 277501.
... ... Petitioner
Versus
1. The Union of India through the Ministry of Finance, New Delhi- 110001.
2. The Chief Commissioner of CGST and CX, Ranchi Zone, Patna.
3. The Superintendent of CGST and CX- Range, Buxar- 802101.
4. The Assistant Commissioner of CGST and CX, Patna West Division,
Karpoori Thakur Sadan, Ashiana Digha Road, Patna- 800025.
5. The Assistant Commissioner of CGST and C.EX, Outer Cicle Road
Bistupur, Jamshedpur, Jharkhand - 831001.
... ... Respondents
======================================================
Appearance :
For the Petitioner : Mr. Bijay Kumar Gupta, Advocate
For the CGST & CX : Dr. K.N. Singh, Additional Solicitor General
Mr. Anshuman Singh, Senior SC
Mr. Shivaditya Dhari Sinha, Advocate
Mr. Alok Kumar, Advocate
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE ASHOK KUMAR PANDEY
ORAL JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 05-05-2025
Heard Mr. Bijay Kumar Gupta, learned counsel for the
petitioner and Dr. K.N. Singh, learned ASG assisted by Mr.
Anshuman Singh, learned Senior Standing Counsel for the CGST
and CX.
2. In the present writ application, the petitioner has
prayed for the following reliefs:-
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
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"i) The show cause notice bearing No.:- C. No.
V(18)379/Pankaj Rai/SCN/PD-W/2021-
22/1585 dated 11.10.2021 (as contained in
Annexure-P-2) issued by the Respondent No.-
4 for Service tax amounting to Rs.13,07,700
(Thirteen lakhs Seven Thousand Seven
hundred only) for the Period April 2016 to
June 2017/- under proviso to sub section (1) of
Section 73 Finance Act, 1994 read with S 174
of the CGST Act, 2017, applicable interest
under S. 75 Finance Act, 1994 read with S 174
of the CGST Act, 2017, Penalty under Section
78 Finance Act, 1994 read with S 174 of the
CGST Act, 2017 for, Penalty under Section
77(1)(c)(ii) Finance Act, 1994 read with S 174
of the CGST Act, 2017, penalty under section
77(1)(a) & Penalty under section 77(1)(c)(ii)
Finance Act, 1994 read with S 174 of the
CGST Act, 2017 be quashed as the show cause
notice is time barred in view of the provision
of Section 73(1) of Finance Act, 1994 wherein
there is time limit of 30 months to issue notice
and extended period of limitation is not
applicable in this case.
ii) The Order in Original bearing No.-
AC/JSR/ST-120/2024 dated 13.05.2024 (as
contained in Annexure-P-5) passed by the
Respondent No.-5 demanding Service tax
amounting to Rs.13,07,700 (Thirteen lakhs
Seven Thousand Seven hundred only) under
sub section (2) to Section 73 of Chapter V of
the Finance Act, 1994 read with Section 174 of
the Central Goods and Services Tax Act, 2017
for the period April 2016 to June 2017 and
Penalty of similar amount along with
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
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applicable interest be quashed as a demand
order issued by Respondent No 5 is violative
of statutory time limit of one year provided
under Sub-section (4B) of Section 73 of
Finance Act, 1994 as Respondent No. 5 failed
to adjudicate the issue within one year from
issuance of show cause notice i.e. 11.10.2021
(Annexure-P2) and the demand order was
passed on 13.05.2024 (Annex-P-5) after lapse
of more than 2 years 7 months.
iii) For issuing a writ in the nature of
prohibition to direct Respondent No. 03, 04
and No.-5 not to take any coercive step against
the petitioner as the demand order was not
adjudicated within one year of issuance of
show cause notice in violation of statutory
limit of one year as provided in Sub-section
(4B) of Section 73 of Finance Act, 1994 and
demand order was passed without jurisdiction
(Annex P-5).
iv) For granting any other relief (s) to which
the petitioner is otherwise found entitled to in
accordance with law."
Brief Facts of the Case
3. It is the case of the petitioner that on 11.05.2020, the
Respondent No. 3 issued a notice to the petitioner's Late Husband
Pankaj Rai alleging non-payment of service tax for the financial
year 2016-17 on the basis of gross value of turnover shown in the
income tax return as credited under Section 194C, 194J and 194H
and demanded various documentary evidences shown in the notice
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within 15 days. Thereafter, a reminder notice was also issued. The
husband of the petitioner submitted his reply on 06.09.2020,
however, his submissions were ignored and not acknowledged.
4. The further case of the petitioner is that the
petitioner's Late husband was issued a Show Cause Notice (in
short 'SCN') bearing C. No. V(18)379/Pankaj Rai/SCN/PD-W/21-
22/1585 dated 11.10.2021 (Annexure 'P2') by Respondent No. 4
claiming a service tax amounting to Rs.13,07,700/- for the period
from April, 2016 to June, 2017. The notice to show cause was
issued under proviso to sub-section (1) of Section 73 of the
Finance Act, 1994 (hereinafter referred to as the 'Act of 1994')
read with Section 174 of the Central Goods and Services Tax Act,
2017 (hereinafter referred to as the 'CGST Act'). The Respondent
No. 4 alleged that there was a willful suppression and
misrepresentation of facts, therefore, the extended period of
limitation of five years was invoked.
5. It is stated that the Order-in-Original bearing no.
AC/JSR/ST-120/2024 dated 13.05.2024 (Annexure 'P5') has been
issued by Respondent No. 5 who received the file on transfer of
records. Respondent No. 5 has demanded the aforementioned tax
amount and has imposed penalty of some amount along with
applicable interest.
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
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Submissions on behalf of the Petitioner
6. Learned counsel for the petitioner submits that the
order as contained in Annexure 'P5' to the writ application is liable
to be set aside on the solitary ground that the impugned order has
been passed after about three years from the date of issuance of the
show cause notice. In this connection, learned counsel has placed
before this Court sub-section (4B) of Section 73 of the Act of
1994, particularly, clause (b) thereof. It is submitted that sub-
section (4B) was inserted in the statute book with effect from
06.08.2014
vide Finance Act No. 2 of 2014. It is submitted that the
intention behind insertion of sub-section (4B) under Section 73 of
the Act of 1994 was to determine the amount of service tax which
were due under sub-section (2) expeditiously and that would not
only benefit the revenue but would also end the uncertainty in the
mind of the tax payers.
Consideration
7. When this case was taken up for consideration on
28.04.2025, this Court having taken notice of the submissions of
learned counsel for the petitioner as also the judgments of the
learned co-ordinate Bench of this Court in cases of M/s Kanak
Automobiles Private Limited Vs. The Union of India and
Others (CWJC No. 18398 of 2023 dated 04.04.2024) and Pawan
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
Kumar Upmanyu Vs. The Union of India and Others (CWJC
No. 11975 of 2024 dated 14.02.2025) and the judgment of this
Court in the case of M/S Power Spectrum, Sarbidipur,
Kahalgaon, Bhagalpur Vs. The Union of India and Another
(CWJC No. 16772 of 2024 dated 17.04.2025), called upon the
learned ASG to take a plea. Learned ASG requested this Court for
some time in order to obtain the records of the case from the
Department and to produce the same to satisfy this Court with
regard to the steps taken during two years' period i.e. between
29.10.2021 and 18.12.2023.
8. We have noticed in the order dated 28.04.2025 that
the 'SCN' was issued on 11.10.2021 and a response on behalf of
the proprietorship concern (the petitioner) was submitted on
20.10.2021 but for more than two years, the respondent authority
of the Department remained sitting over the matter.
9. Today, the records have been produced by learned
ASG. On a bare perusal of the records, it would appear that a draft
'SCN' was placed before the competent authority on 08.10.2024
which was ultimately approved by the Assistant Commissioner on
11.10.2021. Thereafter, no action at all has been taken in the file.
After the said approval of the 'SCN', the only order which is
available on the record is the order dated 13.05.2024. In between
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
11.10.2021 and 13.05.2024, there is no movement of file, no date
was fixed and it may be safely recorded that the respondent
authorities even though received the reply of the petitioner, as it
appears from the seal and the date affixed on the reply petition
kept on the record, on 02.11.2021, even that receipt of reply has
not been recorded in the ordersheet. At the time of final order only,
the Respondent No. 5 has recorded that "I have carefully gone
through show cause notice, relevant case records and the noticee's
submissions."
10. This Court has found from the records that in the
counter affidavit filed on behalf of the respondents, there is no
whisper from their end as to why after more than two years, a
notice of personal hearing was issued on 18.12.2023.
11. In the case of M/s Kanak Automobiles (supra), the
learned co-ordinate Bench of this Court has, though, held that the
period prescribed in clause (b) of sub-section (4B) of Section 73 of
the Finance Act cannot be taken as an absolute mandate that the
proceeding should be completed within one year from the notice
but at the same time, the learned co-ordinate Bench has recorded
".. but it requires the statutory authority to take all possible steps,
so to do and conclude the proceedings within an year. No steps
were taken in the entire one year period, which results in the
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
frustration of the goal of expediency as required statutorily. We
hence find that the proceedings cannot be continued."
12. The judgment of the learned co-ordinate Bench in
M/s Kanak Automobiles (supra) was challenged before the
Hon'ble Supreme Court in SLP (Civil) Diary No. 54313/2024
decided on 03.01.202, however, the Hon'ble Supreme Court
refused to interfere with the judgment of the learned co-ordinate
Bench in M/s Kanak Automobiles (supra) and held that it is not
laying down a law but considering the quantum involved, the
Hon'ble Supreme Court was not inclined to interfere with the
judgment.
13. This Court has taken a view that whether it was
possible to determine the service tax within the period of one year
or not is required to be determined in the facts of the case. In the
case of M/s Power Spectrum (supra), this Court had occasion to
consider a similar plea where the Order-in-Original was passed
after five years of the issuance of 'SCN'. This Court was
persuaded in the facts of the case and by citing two judgments of
the Hon'ble Delhi High Court in the case of L.R. Sharma & Co.
v. Union of India reported in 2024 SCC OnLine Del 9031 and
Sunder System Pvt. Ltd. v. Union of India and Others reported
in 2020 (33) G.S.T.L. 621 (Del). 14. This Court would reproduce
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
the relevant paragraph nos. '16' and '17' from the judgment of M/s
Power Spectrum (supra) hereunder for a ready reference:-
"16. In the case of L.R. Sharma (supra) and in
the case of Sunder System Pvt. Ltd. v. Union
of India and Others reported in 2020 (33)
G.S.T.L. 621 (Del), sub-section (4B) of Section
73 of the Finance Act, 1994 has fallen for
consideration. In Sunder System Pvt. Ltd.
(supra), the Hon'ble Delhi High Court has
quoted in paragraph '9' of it's judgment one
paragraph from National Building
Construction Co. Ltd Vs. Union of India
reported in 2019 (20) G.S.T.L. 515 (Del.). The
relevant paragraph from the said judgment is
being reproduced hereunder:-
"9. A Coordinate Bench of this Court
in the case of National Building
Construction Co. Ltd. Vs. Union of
India; 2019 (20) G.S.T.L. 515 (Del.)
has held as under:-
"20. ... Sub-section 4B to Section 73
of the Fin Act fixes the time or
limitation period within which the
Central Excise Officer has to
adjudicate and decide the show cause
notice. The time period fixed under
Clause A or B is six months and one
year respectively. Limitation period for
passing of the adjudication order,
described as Order-in-Original, starts
from the date of notice under Sub-
section 1 to Section 73 of the Fin
Act.""
17. In L.R. Sharma (supra), the Hon'ble Delhi
High Court has referred the judgment of the
Hon'ble Gujarat High Court in Siddhi Vinayak
Syntex Pvt. Ltd. v. Union of India reported in
2017 (352) E.L.T. 455 (Guj.) in respect of
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
Section 11A of the Central Excise Act, 1944
wherein the Hon'ble Court has observed as
under:-
27. Similarly, the High Court of
Gujarat in Siddhi Vinayak Syntex Pvt.
Ltd. v. Union of India (supra), in
respect of Section 11A of Central
Excise Act, 1944, had observed as
under:
"When the legislature has used the
expression "where it is possible to do
so", it means that if in the ordinary
course it is possible to determine the
amount of duty within the specified
time frame, it should be so done. The
legislature has wisely not prescribed a
time limit and has specified such time
limit where it is possible to do so, for
the reason that the adjudicating
authority for several reasons may not
be in a position to decide the matter
within the specified time frame,
namely, a large number of witnesses
may have to be examined, the record of
the case may be very bulky, huge
workload, non-availability of an
officer, etc. which are genuine reasons
for not being able to determine the
amount of duty within the stipulated
time frame. However, when a matter
is consigned to the call book and
kept in cold storage for years
together, it is not on account of it not
being possible for the authority to
decide the case, but on grounds
which are extraneous to the
proceedings. In the opinion of this
court, when the legislature in its
wisdom has prescribed a particular
time limit, the CBEC has no power
or authority to extend such time
limit for years on end merely to
await a decision in another case. The
adjudicatory authority is required to
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
decide each case as it comes, unless
restrained by an order of a higher
forum."
(Emphasis added)""
14. Learned counsel for the petitioner has further
submitted that in a recent judgment, the another learned co-
ordinate Bench of this Court has in the case of Pawan Kumar
Upmanyu (supra) set aside the order of the respondents finding
the delay beyond one year for no reason explained and the
quantum of the tax involved. The relevant paragraph of the
judgment in the case of Pawan Kumar Upmanyu (supra) is being
extracted hereunder:-
"3. Having regard to the quantum of tax
involved in the present case and M/S Kanak
Automobiles Private Limited are concerned, in
Kanak Automobiles it is Rs. 86 Lakh whereas in
the present case it is Rs. 6,33,879/-, therefore,
we intend to dispose of in the light of Kanak
Automobile case read with Hon'ble Supreme
Court decision dated 03.01.2025."
15. Since we have noticed from the records that there
was no movement at all of the file for two years and the matter
remained pending at the end of the taxing authority, there being no
reason shown that it was not possible to determine the liability of
the petitioner within the period of one year, we are of the
considered opinion that the present case would be covered by the
judgments of this Court as discussed hereinabove.
Patna High Court CWJC No.11936 of 2024 dt.05-05-2025
16. This Court, therefore, sets aside the impugned order
dated 13.05.2024 (Annexure 'P5') and the consequent demands
raised against the petitioner.
17. While parting with this case, this Court must place
on record it's concern for the manner in which the case was kept
pending without any movement of file for more than two years.
What went wrong on the part of the Department is required to be
looked into by the Chief Commissioner of CGST and CX
(Respondent No. 2). The Respondent No. 2 is expected to look
into the failure which has taken place in this matter, even as this
Court has been coming across several matters in which similar
situation exist. What action may be taken by Respondent No. 2 is
left to his wisdom.
18. This writ application is allowed.
(Rajeev Ranjan Prasad, J)
(Ashok Kumar Pandey, J)
lekhi/-
AFR/NAFR NAFR
CAV DATE N/A
Uploading Date 06.05.2025
Transmission Date
