Delhi High Court: Duty of Authority to Inform Assessee that Show Cause Notice is kept in Abeyance Else Proceedings Not Justified after lapse of 13 years

Delhi High Court: Duty of Authority to Inform Assessee that Show Cause Notice is kept in Abeyance Else Proceedings Not Justified after lapse of 13 years

The Delhi High Court by its division judges bench comprising of Justices Vibhu Bakhru and Amit Mahajan has observed that it is necessary for the Revenue to inform the assessee that the show cause notice has been kept in abeyance, otherwise there would be no necessity for the assessee to preserve the record for the inordinately long period. Hence, Revenue Authority in the present case, was precluded from proceeding with the impugned show cause notice on the ground of inordinate delay.

The background of the case was that petitioner/assessee is a partnership firm engaged in the business of executing civil construction works. The petitioner claimed that it executes contracts for civil works awarded by authorities, institutions, and other entities, including the Central Government and the State Governments. The petitioner was awarded the contract for the construction of residential flats by the Housing Board of Haryana, Gurugram.

It was the contention of the petitioner that the respondents had failed to conclude the proceedings within a reasonable period from the date of issuance of the show cause notice.

Per contra, the respondents claimed that the proceedings pursuant to the show cause notice were kept in abeyance as the matter was placed in a call book in terms of the circulars issued by the Central Board of Excise and Customs (CBEC) from time to time.

At the outset, the principal controversy to be addressed was whether the respondents were precluded from proceeding with the impugned show cause notice on the ground of inordinate delay, i.e., after the lapse of almost thirteen years?

The bench noted that Section 73 of the Finance Act 1994, as in force at the material time, did not stipulate any time period.

In this regard, the bench opined that it is settled law that where there is no period stipulated for exercising jurisdiction, the same must be done within a reasonable period.

The Court avowed, “it merely stipulated the period within which the show cause notice was required to be issued. However, there is no cavil that the authority conferred with the jurisdiction is required to exercise the same within a reasonable period.”

Averting to the facts of the present case, the Court noted that the reasonable period was required to be determined considering the ‘Call Book’ procedure. Respondent no. 1- Commissioner of CGST & Central Excise, Goods and Service Tax Commissionerate, Delhi had resumed the proceedings immediately after finding that the matter was no longer required to be kept in abeyance (in the ‘Call Book’).

To this the bench referred the decision passed in the case of, Siddhi Vinayak Syntex Pvt. Ltd. vs. Union of India (2017), wherein the Gujarat High Court had observed that the concept of the ‘Call Book’ neither relates to uniformity in the classification of excisable goods nor to the levy of duties of excise on such goods, which were matters in respect of which the CBEC was empowered to issue circulars under Section 37B of the Excise Act, 1944. Thus, the concept of the ‘Call Book’ could not be traced to Section 37B of the Excise Act, 1944 or any other provisions of the said Act.

Further, the Court was informed that the question as to the validity of the ‘Call Book’ procedure is yet pending for consideration before the Supreme Court in a batch of matters. Hence, the assessee must await the outcome of the proceedings pending in the Supreme Court, the bench ruled.

The Court pertinently noted, that the petitioner was provided with no information that the impugned show cause notice has been placed in the ‘Call Book’.

“Even if it is accepted that it is permissible for the respondents to place the matter in the ‘Call Book’ – which this Court does not – it was necessary for the respondents to have communicated the said fact to the petitioner. There are a series of decisions rendered by the Bombay High Court restraining the respondents from continuing with the proceedings in cases where the matters were placed in the ‘Call Book’ without any information to the assessee,” the bench stated.

The bench referred the decision passed in Sanghvi Reconditioners Pvt. Ltd. vs. Union of India & Ors. (2017), the Court had observed that the larger public interest requires that the Revenue and its officials adjudicate the show cause notice expeditiously and within a reasonable time. The Court had further observed that “the term ‘reasonable time’ is flexible enough and would depend upon the facts and circumstances of each case.” However, there was no justification for not adjudicating the notice for more than fifteen years after its issuance. The Court had also highlighted that it is necessary for the Revenue to inform the assessee that the show cause notice has been kept in abeyance, otherwise there would be no necessity for the assessee to preserve the record for the inordinately long period.

In view of the above, the Delhi High Court concluded that the proceedings pursuant to the impugned show cause notice were inordinately delayed and it was now impermissible for the respondents to continue the same.