Issue of mandatory pre-consultation before Issue of SCN: Bombay HC stays SCN

Heard the learned Counsel for the parties.

2. Common ground raised in these petitions is that the impugned Show Cause Notices raising demand of service tax issued to the Petitioners are not preceded by pre consultation which is mandatory as per circular issued by the Central Board of Excise and Customs. Section 73 of the Finance Act, 1994 deals with service tax provides for issuance of Show Cause Notice. Though section 73 does not provide that Show Cause Notice for recovery of service tax under section 73 should be preceded by pre-consultation, the same has been incorporated by virtue of Master Circular No. 1053/02/2017-CS dated 10 March 2017 issued by the Central Board of Excise and Customs and subsequently clarified by circular dated 19 November 2020.

3. Master circular on Show Cause Notices dated 10 March 2017 states that consultation with noticee before issuance of Show Cause Notice is mandatory for claim above fifty lakhs and it is an important steps towards trade facilitation and promoting voluntary compliance and to reduce the necessity of issuing Show Cause Notice. It is common ground that the demands made in these petitions are all above fifty lakhs.

4. Whether pre show cause consultation in the stipulated circumstances is mandatory or otherwise has fallen for consideration of various Courts. The learned Counsel for the parties have placed on record the following decisions : Amadeus India Pvt. Ltd. Versus Principal Commissioner, Central Excise, Service Tax and Central Tax Commissioneate¹, Tube Investment of India Ltd. Versus Union of India², Hitachi Power Europe GMBH Versus C.B.I. & C.³, Freight Systems (India) Pvt. Ltd. Versus Commr. of CGST & C. Ex., Chennai⁴, Siemens Ltd. Vs. State of Maharashtra and Ors.⁵, Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate Versus Amadeus India Pvt. Ltd.⁶, M/s. Excellency Service Versus Union of India⁷, DHR Holding India Pvt. Ltd. Versus Union of India⁸, Back Office IT Solutions Pvt. Ltd. Versus Union of India⁹, Yaduka Agrotech Pvt. Ltd. Versus Commissioner of CGST¹⁰, The Commissioner of CGST, Kolkata Audit -I, Commissionerate vs. M/s. Saumya Agrotech Private Limited & Ors.¹¹, M/s.Victory Electric Vehicles International Pvt. Ltd. Vs. Union of India & Anr. ¹², L and T Hydrocarbon Engineering Ltd. Vs. Union of India¹³, Commissioner of Central Excise Versus Ratan Melting and Wire Industries¹⁴, Union of India Versus Garware Nylons Ltd.¹⁵, Hindustan Ferodo Ltd. Versus Collector of Central Excise, Bombay¹⁶, Nanya Imports & Exports Enterprises Versus Commr. of Cus. Chennai¹⁷, Chairman, Board of Mining Examination and Chief Inspector of Mines versus Ramjee¹⁸, Union of India Versus Bajaj Tempo Limited¹⁹, B P L Ltd. Versus State of Madhya Pradesh²⁰, K. P.Varghese v. Income-tax Officer ²¹ , Raza Textiles Ltd. Versus Income Tax Officer, Rampur²², ITW Signode India Ltd. Versus Collector of Central Tax²³, Phoenix Mills Ltd. Versus Union of India ²⁴, Alpa Management Consultants P. Ltd. Versus Commr. of S.T. Bangalore²⁵, Commr. of S.T. Bangalore Versus Alp Management Consultants P. Ltd.²⁶, Kush Constructions Versus CGST Nacin, ZTI, Kanpur²⁷, Commissioner of C. Ex., Bangalore Versus Brindavan Beverages (P) Ltd.²⁸, Sharma Fabricators & Electors Pvt. Ltd. Versus C.C.E. Allahabad²⁹, Union of India Versus Vicco Laboratories³⁰, State of West Bengal Versus Calcutta Club Limited³¹, Kothari Petrochemicals Ltd. Versus Union of India³², Union of India Versus Kothari Petrochemicals Ltd.³³and Sai Cuisine Hospitality Pvt. Ltd. & Anr. Versus Union of India & Ors.³⁴

5. As regards the decision of the High Court of Delhi in the case of Amadeus India Pvt. Ltd. (supra), a Special Leave Petition (Civil) Diary No (s). 35886 of 2019 was filed by the Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate and on 4 November 2019, while issuing notice, the Hon’ble Supreme Court has passed the following order:

“Delay condoned.

Learned Additional Solicitor General submits that if a fresh show cause notice is to be issued as directed by the High Court after pre-consultation, the Department may be given liberty to revive the earlier show cause notice to obviate any objection in regard to limitation.

Issue notice confined to the above issue, returnable in eight weeks”.

Consequently, the Division Bench of Delhi High Court in the case of Back Office IT Solutions Pvt. Ltd. (supra) has taken note of the order dated 4 March 2019 and has passed certain directions remanding the matter to the Respondents.

6. Before us, one of the issue that is agitated is the consequences of setting aside the Show Cause Notices on the aspect of limitation. We note that it is on this restricted aspect notice is issued by the Hon’ble Supreme Court.

7. Prima facie, from the limited argument advanced by the Revenue and the issue being restricted to the limitation aspect, the mandatory nature of pre consultation is impliedly accepted by the Revenue. In these circumstances, we deem it appropriate that since the issue is pending before the Hon’ble Supreme Court and to avoid any further litigation, to list the petitions for hearing.

8. Since the arguable questions are raised, Rule in these petitions. The learned Counsel appearing for the Respondents waive service. Rule made returnable on 10 April 2023. Liberty to the parties to apply.