Case Law Details
National Building Construction Company Limited Vs Union of India & Ors. (Delhi High Court)
The matter arose from an application filed in a writ petition by the petitioner challenging an investigation initiated by the Directorate General of Central Excise Intelligence (DGCEI) regarding alleged non-payment of service tax. Earlier, by judgment dated 16 November 2018, the Court had held that DGCEI officers possessed all-India jurisdiction to investigate service tax matters and could issue notices under Section 14 of the Central Excise Act even when proceedings under Section 73 of the Finance Act, 1994 were not pending. The Court had also directed the petitioner to comply with notices seeking documents and evidence relating to Project Management Consultancy (PMC) charges, except those covered by a separate show cause notice issued by the Patna Commissionerate. Further, the period from 10 February 2016, when an interim stay was granted, until the pronouncement of the judgment was directed to be excluded for computing limitation for issuance of a show cause notice.
Subsequently, the petitioner filed a review petition against the judgment, which remained pending until 4 December 2020, when it was dismissed. During this period, the respondents filed an application alleging that the petitioner was not cooperating with the investigation and seeking exclusion of the period consumed in disposal of the review petition for limitation purposes.
The respondents contended that despite notices seeking documents and information, the petitioner was stalling the investigation. They further argued that the period during which the review petition remained pending should also be excluded while computing the limitation period for issuing a show cause notice.
The petitioner denied non-cooperation and argued that the respondents had failed to consider its representations. It also contended that the documents sought by the department related to periods beyond the original show cause notice and concerned output services outside the scope of the Court’s earlier directions. The petitioner maintained that the department had not clarified what constituted PMC charges and therefore relevant documents could not be identified and furnished.
The Court examined the petitioner’s stand and observed that the department’s case from the beginning had been that the petitioner collected a percentage of project costs as PMC charges and had not paid service tax on those charges. Since the original challenge itself related to PMC charges, the Court held that the petitioner was fully aware of what constituted such charges. The Court found that the petitioner’s claim of uncertainty regarding PMC charges amounted to feigning ignorance. It reiterated that DGCEI had been permitted to investigate the collection of PMC charges and any related service tax liability. Accordingly, the petitioner was directed to provide the information sought and to cooperate fully with the investigation in both letter and spirit.
On the issue of limitation, the Court noted that the review petition had been filed immediately after the judgment of 16 November 2018 and remained pending until 4 December 2020. During this period, settlement discussions were also explored, and no action was taken by the respondents while the review petition was pending before the Court. Applying the rationale adopted in the main judgment, the Court clarified that the period from 10 February 2016, when the stay order was passed, until 4 December 2020, when the review petition was disposed of, would be excluded for computing the limitation period for issuance of a show cause notice under Section 73(1) of the Finance Act.
The Court clarified that it had not examined the merits of the allegations raised by the petitioner in its reply, as those issues did not arise in the present application. The application was disposed of accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
This hearing has been done by video conferencing.
CM APPL.27543/2020 in W.P.(C) 1144/2016
1. The writ petition was filed by the Petitioner-NBCC challenging the action of the DGCEI to initiate investigation against the Petitioner in respect of non-payment of service tax. Vide a detailed judgment dated 16th November, 2018, the writ petition was disposed of, with the following directions:
“…
55. In the given circumstances we would hold and treat the period between 10th February 2016 when the stay order was passed in respect of the summons dated 21st and 28th January, 2016 till the pronouncement of judgment should be excluded for the purpose of computing limitation and period specified for issue of show cause notice under Section 73(1) of Fin Act. This would be in terms of Explanation to Sub-Section 1 to Section 73 of the Fin Act. It would be just and fair in terms of the decision in Grindlay’s Bank Ltd. (supra). Officers from DGCEI and Commissionerates who had issued notice under Section 14 of CE Act by the interim orders have been barred and prohibited from taking action in terms of the notices issued by them. The court must ensure that when the stay order is vacated no party should suffer on account of limitation because of the interim stay order.
56. In view of the aforesaid discussion, it is held as under:
(i) Central Excise Officers of DGCEI have all India jurisdiction and can issue notices and enquire into the matters relating to service-tax against any assessee/ person even if the said person or assessee is registered with one or multiple Commissionerates.
(ii) Notice under Section 14 of the CE Act i.e. Central Excise Act can be issued even if proceedings under Section 73 of the Fin Act i.e. Finance Act, 1994 are not pending. However the notice should relate to matters and issues relating to provisions of services and imposition of service tax.
(iii) The petitioner should comply with the notices issued or would be issued by the Central Excise Officers, DGCEI to furnish evidence and documents pertaining to the PMC charge i.e. Project Management Consultancy Charge in respect of Commissionerate/ registration except those subject matter of show cause notice dated 13th March, 2015 issued by the Commissionerate of Central Excise and Service Tax, Patna.
(iv) Interim orders are accordingly, vacated except and limited to evidence and documents, subject matter of demand-cum-show cause notice dated 13th March, 2015 issued by the Patna Commissionerate.
(v) Period between 10th February,2016 when the stay order was passed till the pronouncement of the judgement would be excluded for purpose of computing limitation period specified for issue of show cause notice under Section 73(1) of the Fin Act.”
2. Thereafter, a review petition being Review Pet. 470/2018 was filed by the Petitioner, seeking review of the above judgment, which was dismissed on 4th December, 2020.
3. An application has also been moved on behalf of the Respondents, on the premise that the Petitioner is not cooperating in the investigation and the period during which the review remained pending ought to be excluded from computation of limitation as already directed in paragraph 56(v) of the main judgment. The application seeks the following reliefs:
“i) the petitioner may kindly be directed to cooperate in the investigation and provide the requisite information/documents to the Investigating Officer forthwith;
(ii) the time period being consumed in disposal of present Review Petition may kindly be excluded from the period of limitation;
(iii) the next date of hearing may kindly be pre-poned and the present Review Petition may be finally heard and disposed of.
iv) Any other order(s) as may be deemed fit and appropriate may also kindly be passed.”
4. Mr.Radhakrishnan, ld. Senior Counsel submits that in terms of the judgment dated 16th November, 2018, the Respondents had issued a notice to the Petitioner to produce documents and had also sought further information. However, the Petitioner is stalling the entire investigation. Further, he submits that in paragraph 56 of the judgment, this Court had already excluded the period between 10th February, 2016 till pronouncement of the judgment for the purpose of computing limitation period for the issuance of show cause notice under Section 73(1) of the Finance Act. He submits that since a review petition was filed by the Petitioner, the period consumed in the disposal of the review petition ought to also be excluded in computing limitation.
5. On the other hand, Mr. J.K. Mittal, ld. counsel for the Petitioner submits that there is no evidence of non-cooperation by NBCC. In terms of paragraph 50 of the judgment dated 16th November, 2018, the Respondents were directed to give due regard to any representation or submission made by the Petitioner/Assessee. However, the representations of NBCC are not being considered. Moreover, oral directions were also issued for an Inter-Ministerial Committee to explore the possibility of settlement, which was never held. Only a meeting was held between the Petitioner and the Respondents, which did not fructify in a settlement.
6. Ld. counsel further argues that the documents now sought by the Respondent, vide the notice dated 10th December, 2018 and other notices are beyond the period to which the original Show Cause Notice was related to. Moreover, the documents are being sought in respect of output services, which is not permitted by this Court, as this Court was only dealing with the Project Management Consultancy (hereinafter ‘PMC’) charges.
7. Heard ld. counsels for the parties.
8. Insofar as the first issue of non-cooperation is concerned, a perusal of the reply to the application filed by NBCC shows that the stand of NBCC is that the Respondent should inform the Petitioner as to what are PMC charges. Relevant paragraphs of the reply are set out below:
“…
The Hon’ble High Court (as stated in the present application also) gave directions to furnish documents related to PMC Charges i.e. Project Management Consultancy charges. However, there is no such term used and defined in the Finance Act, 1994 or the Service Tax Rules, 1994 and any Notifications issued under the said Act. Therefore, the Respondents may define the PMC Charges i.e. Project Management Consultancy charges. Therefore, unless the Respondent inform to the Petitioner, what they consider and construed as the PMC Charges i.e. Project Management Consultancy charges, the documents pertaining to the same could not be provided.
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(g) The Respondents Department in their letter dated 28.08.2015 stated that “Construction Services and Project Management Consultancy Service are two different services.” On the other hand, in another internal letter dated 28.10.201 5 it is stated that “project management consultancy is not provided along with construction” and Project Management consultancy services is normally provided by independent consultants”. Therefore, it is although more necessary and incumbent upon the Department, to inform to NBCC what they construed as PMC services, as inquiry is limited to that, and the Department cannot seek entire records of all output services, which is not part of inquiry at all as the Hon’ble High Court has limited the scope of said inquiry to PMC charges only.”
9. A perusal of the above shows that the stand of NBCC is that the Respondents ought to inform NBCC as to what constitutes `Project Management Consultancy’ charges. Right from inception, the case of the Department has been that in the agreements entered into by NBCC, a percentage of the project cost called as PMC charges was collected by NBCC. No service tax was being paid in respect of these PMC charges which led to the issuance of the show cause notices. The said Show Cause Notices were challenged by NBCC in the present writ petition related to PMC charges. Thus, the NBCC is well aware as to what are PMC charges. The stand in the reply as extracted above clearly shows that the NBCC is feigning ignorance.
10. Moreover, this Court had permitted Director General of Central Excise Intelligence (‘DGCEI’) to investigate and enquire into the collection of these charges and liability, if any, for payment of service tax. NBCC is expected to co-operate in the investigation, in terms of the judgment dated 16th November, 2018. Thus, the information sought by the DGCEI ought to be provided by NBCC and it should also fully co-operate with the investigation, both in letter and spirit.
11. Insofar as the computation of limitation is concerned, the judgment was rendered on 16th November, 2018 and immediately thereafter, the review petition no. 470/2018 was filed and was listed on 21st December, 2018. The same was disposed of only on 4th December, 2020. During this period, settlement was also explored between the parties, which did not fructify and no action was taken by the Respondents as the Court was in seisin of the review petition. In view of this, following the rationale given in the main judgment, it is clarified that the period between the 10th February, 2016 when the stay order was passed till the disposal of the review petition i.e. 4th December, 2020 would be excluded for the propose of computing limitation period for the issuance of Show Cause Notice under Section 73(1) of the Finance Act.
12. It is made clear that this Court has not examined the merits of the allegations raised by the NBCC in its reply to this application as none of the said issues arise as part of the said application.
13. The present application is disposed of, in the above terms.
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