Karanveer Singh Yadav Enterprises Private Limited V. The Union of India through the Chief Commissioner of Central Goods and Services Tax (GST) and Central Excise (CX), Patna Central Division, Patna and The Principal Commissioner, Central Goods and Services Tax (CGST) and Central Excise (CX), Patna-I, Patna

CWJC/16975/2024

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The case involves Karanveer Singh Yadav Enterprises Private Limited, which challenged an order imposing service tax liabilities and penalties for the financial years 2016-17 to 2017-18. The petitioner argued that the order was passed arbitrarily and without following statutory provisions or principles of natural justice. The primary contention was the significant delay (over two years) in passing the order, which exceeded the one-year limit prescribed under Section 73(4B) of the Finance Act, 1994. The court examined the procedural delays and the lack of substantive action by the tax authority during this period, leading to the conclusion that the order was not passed within a reasonable time frame as required by law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 799977 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 05-05-2025
• Assessment Year: misc
• Other Referred Cases: M/s Kanak Automobiles, L.R. Sharma & Co. v. Union of India, Sunder System Pvt. Ltd. v. Union of India, National Building Construction Co. Ltd. v. Union of India, Power Spectrum, Pawan Kumar Upmanyu v. Union of India
• Laws Referred To: Finance Act, 1994, Service Tax Rules, 1994
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K N SINGH; ANSHUMAN SINGH
• Assessee Lawyers: ADITYA PRAKASH; RUDRA SINGH; AKSHANSH ANKIT
• Keywords: Delay in adjudication; Erection, Commissioning and Installation Service; Natural Justice; Reverse Charge Mechanism; Service tax
• Section: 68; 73(1); 78; 67; 65(105); 70; 77(2); 77(1)(c)(ii)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE AT PATNA Civil Writ Jurisdiction Case No.16975 of 2024 ====================================================== Karanveer Singh Yadav Enterprises Private Limited, a Private Limited Company having its office at Ramayan Bhawan, Daldali Road, Bakarganj, Patna, Bihar-800004 through its Director and authorized representative Shri Ranvir Kumar, aged about 40 years (Male), son of Late Ramvilash Prasad @ Ramvilas Yadav, R/o Ward No. 04, N.H. 31, Near School, Gulab Bag, Barh, Patna, Bihar-803213. ... ... Petitioner Versus 1. The Union of India through the Chief Commissioner of Central Goods and Services Tax (GST) and Central Excise (CX), Patna Central Division, Patna. 2. The Principal Commissioner, Central Goods and Services Tax (CGST) and Central Excise (CX), Patna-I, Patna. ... ... Respondents ====================================================== Appearance : For the Petitioner : Mr. Aditya Prakash, Advocate Mr. Rudra Pratap Singh, Advocate Mr. Akshansh Ankit, Advocate For the Respondents : Dr. K.N. Singh, Additional Solicitor General Mr. Anshuman Singh, Senior SC ====================================================== 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. Aditya Prakash, learned counsel for the petitioner and Dr. K.N. Singh, learned ASG assisted by Mr. Anshuman Singh, learned Senior Standing Counsel for the Department of CGST and CX. 2. The present writ application has been filed seeking the following reliefs:- “a) To quash the impugned order-in-original vide No. 41/ST/Aayukt/2024 dated 24.06.2024 passed by Respondent No. 2 whereby and Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 2/11 whereunder tax liabilities and penalties for the Financial Year 2016-17 to 2017-18 (upto June, 2017) were imposed against the Petitioner under the Finance Act, 1994, in a most arbitrary manner without following the statutory provisions as well as the principles of natural justice. b) For issuance of appropriate direction restraining the respondents from taking any coercive action against the Petitioner for recovery of any amount of service tax, interest and penalty, in terms of the impugned order- in-original vide No. 41/ST/Aayukt/2024 dated 24.06.2024 passed by Respondent No. 2 during the pendency of the present writ application. c) To pass any other order/orders in shape of a consequential relief to which the Petitioner may be found to be legally entitled to in the facts and circumstances of the instant case at hand.” Brief Facts of the Case 3. Petitioner-company is engaged in providing services to their clients of “Erection Commissioning and Installation Service” as defined under Section 65(105) of the Finance Act, 1994 (hereinafter referred to as the ‘Act of 1994’). 4. It is the case of the petitioner that on 12.10.2021, the Respondent No. 2 issued a notice to the petitioner alleging that he has contravened the provisions of Sections 67, 68 and 70 of the Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 3/11 Act of 1994 read with Rules 6 and 7 of the Service Tax Rules, 1994 (hereinafter referred to as the ‘Rules of 1994’) as he has not paid Service Tax amounting to Rs. 2,96,85,837/- on the consideration amount received by them from their various clints during the period 2016-17 to 2017-18 (til June, 2017) and also not paid Service Tax amounting to Rs. 11,60,639/- under Reverse Charge Mechanism as recipient of the Service as per Notification No. 30/2012-Service Tax dated 20.06.2012 as amended during the relevant period on the basis of third party data received from Income Tax Department for the Financial Year 2016-17 and hence the amount of Service Tax shown to be liable for recovery under Section 73(1) of the Act of 19945 and further petitioner was held liable for penalty under Section 78 of the Act of 1994. In addition to this the petitioner was also held liable for penalty under Section 77(2) of the Act of 1994 for non-filing of ST-3 Returns for the period April 2016, 2016 and April, 2017 to June, 2017. The petitioner was also held liable for penalty under Section 77(1) (c) (ii) of the Act of 1994 for their failure to produce document called for by the Department. Submission on behalf of the petitioner 5. Learned counsel for the petitioner submits that there is no fraud or mis-statement or suppression of facts on the part of Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 4/11 the petitioner in making non-payment of service tax for the relevant period. It is submitted that the respondent no. 2 passed the impugned order without considering the materials available on the record. 6. It is submitted that the adjudicating officer has passed the impugned order after a substantial delay of approximately 2 years and 8 months which is in contravention of the stipulated time frame in terms of Section 73(4B) of the Act of 1994 which envisaged that an order must be passed within a period of six months from the date of the notice. Consideration 7. When this case was taken up for consideration on 24.04.2025, this Court passed the following order:- “The solitary issue which has been raised on behalf of the petitioner is that in this case, the respondent authority did not determine the liability within the prescribed period of one year as envisaged under clause (b) of sub-section (4B) of Section 73 of the Finance Act, 1994 (hereinafter referred to as the ‘Act of 1994’). At the same time, the authority who has passed the Order-in-Original has not indicated in his order as to why it could not become possible for him to pass the Order-in-Original within the prescribed period. 2. Learned counsel for the petitioner has argued that the words “…where it is possible to do so...” as occurring under clause (b) of sub-section (4B) of the Act of 1994 has fallen for consideration before this Court as well as before the several High Courts in India. The Courts Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 5/11 have a consistent view that though the period prescribed in clause (b) of sub-section (4B) of the Act of 1994 is not an absolute period and the same cannot be taken as a period of limitation for passing of the order determining the liability, the Taxing Authority must show that why it could not become possible for him to determine the amount of service tax within a period of one year from the date of notice. It is submitted that in this case, the show cause notice was issued on 12.10.2021 but the first notice of hearing was issued after a period of two years. The counter affidavit nowhere explains the reason behind it. 3. In view of the aforementioned submissions, this Court directs the Respondent Authority to produce the records. If they wish to file an additional counter affidavit, the same may also be filed within a week. 4. List this case on 05th May, 2025 under the same heading maintaining its position.” 8. Today, learned ASG has produced the official file. On perusal of the official file placed before this Court, it is found that a copy of the demand-cum-show cause notice no. 18/2021/Pr.Commr/Patna-I dated 12.10.2021 addressed to the petitioner by the Principal Commissioner, CGST and CX, Patna-I is on the record. There is no ordersheet showing placement of the draft show cause notice, approval thereof and the order of the issuing authority. The only order available on the record is the order dated 24.06.2024 which contains the operative part of the order dated 24.06.2024. It appears from the records that the first Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 6/11 date of personal hearing was fixed on 19.10.2023. In between the period issuing show cause notice and the date of personal hearing, no action has been taken by the respondent. The records do not show that either any communication was made or any date was fixed in the matter. It is not known what prevented the respondent authority from proceeding with the file. 9. 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 12.10.2023. 10. 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 frustration of the goal of expediency as required statutorily. We hence find that the proceedings cannot be continued.” Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 7/11 11. 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 03.01.2025, 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. 12. 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 the relevant paragraph nos. ‘16’ and ‘17’ from the judgment of M/s Power Spectrum (supra) hereunder for a ready reference:- Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 8/11 “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 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 Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 9/11 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 decide each case as it comes, unless restrained by an order of a higher forum.” (Emphasis added)”” 13. 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 that the delay was 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:- Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 10/11 “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.” 14. 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. 15. This Court, therefore, sets aside the Order-in- Original No. 41/ST/Aayukt/2024 dated 24.06.2024 (Annexure ‘P2’) and the consequent demands raised against the petitioner. 16. 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 Principal 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 Patna High Court CWJC No.16975 of 2024 dt.05-05-2025 11/11 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. 17. This writ application is allowed. lekhi/- (Rajeev Ranjan Prasad, J) (Ashok Kumar Pandey, J) AFR/NAFR CAV DATE Uploading Date 08.05.2025 Transmission Date "