The Bombay High Court quashed the Show Cause Notices (SCNs) for failure to follow the mandatory pre-consultation process required under Section 73 of the Finance Act, 1994, opining that failure to comply with such process would invalidate the SCNs. However, the Court preserved the Revenue Department’s right to issue fresh notices after due pre-consultation, with exclusion of limitation periods during the interim stay and consultation.
The Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethnaobserved that the requirement of a pre-consultative process cannot be dismissed as an empty formality, as the Central Board of Indirect Taxes and Customs (CBIC) Circulars make it mandatory for tax demands exceeding Rs. 50 lakhs and promote alternate dispute resolution, vital for ease of doing business.
Reference was made to the decision in the case of Amadeus India Pvt Ltd. Vs Pr. Commissioner of. Central Excise, S.T. & Central Tax [2019 (25) G.S.T.L. 486 (Del.)], where it was held that pre-consultation is mandatory, and traced this requirement to Section 37B of the Central Excise Act, 1944, making CBEC instructions binding on departmental officers. Reference was also made to Dharamshil Agencies vs Union of India [2022 96 GSTR 220], where it was held that consultation must be conducted by the adjudicating authority as an important step towards trade facilitation and promoting voluntary compliance.
The Bench therefore concluded that the impugned show cause notices, admittedly issued without adopting the pre-consultation process mandated by the Master Circulars dated March 10, 2017, and November 19, 2020, deserve to be quashed.
The core dispute arose from show cause notices issued by the Central Board of Indirect Taxes and Customs (CBIC) and various Commissioners of CGST & Central Excise demanding service tax above Rs. 50 lakhs without issuing mandatory pre-consultation notices as required under CBEC Master Circular No. 1053/02/2017-Cx dated 10 March 2017 and subsequent Circular No. 1076/02/2020-Cx dated 19 November 2020. All the petitioners contended that the demands exceeded Rs. 50 lakhs, making pre-consultation mandatory as per the circulars. The revenue authorities, however, argued that pre-consultation was not a statutory requirement under Section 73 of the Finance Act, 1994, and failing to issue such a notice did not invalidate the show cause notices.
Appearances:
Senior Advocate Prakash Shah, along with Advocates Prithiviraj Choudhary, Ankit Trivedi, Kausar Jahan Sayed, Bharat Raichandani, Mahesh Raichandani, Dhanishta Kawale, Mihir Mehta, and Mohit Raval, for the Petitioner/ Taxpayer
Advocates Maya Majumdar, Saket Ketkar, J.B. Mishra, Rupesh Dubey, Satyaprakash Sharma, Sangeeta Yadav, Harpreet Kaur, Dhananjay B. Deshmukh, Abhishek Mishra, Mamta Omle, and Yashodeep Deshmukh, for the Respondent/ Revenue