SHRI. M. N. KUMAR vs. THE PRINCIPAL COMMISSIONER OF CENTRAL TAX

1 IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 16TH DAY OF SEPTEMBER, 2022

BEFORE

THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR

WRIT PETITION No.8093 OF 2022 (T-RES)

BETWEEN:

SHRI. M.N. KUMAR S/O LATE NANJAPPA AGED ABOUT 58 YEARS NO.526, 9TH MAIN ROAD RPC LAYOUT, HAMPINAGAR BENGALURU – 560 040. …PETITIONER (BY SRI. CHIDANANDA URS B.G., ADVOCATE)

AND:

THE PRINCIPAL COMMISSIONER OF CENTRAL TAX GST–EST COMMISSIONERATE TTMC / BMTC BUILDING BANASHANKARI BENGALURU – 560 070.

…RESPONDENT (BY SMT. VANITHA K.R., ADVOCATE)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED OIO NO.20/2021-22 (PR.COMMR.) DTD: 17.12.2021 PASSED IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY R-1 VIDE ANNX-D AND ETC.

THIS W.P. COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-

2 ORDER

In this petition, petitioner has sought for the following reliefs: a. Issue a writ of certiorari, or such other writ, Order or direction as this Hon’ble Court may deem fit to quash the impugned OIO No.20/2021-22 (Pr. Commr.) dated 17.12.2021 passed in gross violation of principles of natural justice by respondent No.1 which is herewith enclosed as Annexure – D;

b. Issue a writ of mandamus, or such other writ, directing the respondent to provide opportunity of hearing and to re-adjudicate the show cause notice at Annexure – C and to pass order in accordance with law.

c. Pass such other order, make such other direction or writ as this Hon’ble High Court may deem fit and appropriate in the facts and circumstances of the case, and in the interests of justice.

3 referring to the material on record, learned counsel for the petitioner submits that pursuant to the Show Cause Notice dated 16.04.2019 issued by the respondent, the petitioner appeared before the respondent and submitted his reply along with the documents pursuant to which personal hearing was conducted on 12.06.2020. Subsequently, the petitioner submitted further written submissions along with documents on 26.06.2020. It is pointed out that despite the petitioner furnishing the written submissions along with documents, the respondent has passed the impugned order only on 17.12.2021 after lapse of more one and half years without affording any further opportunity to the petitioner nor hearing him, which is contrary to the Circular dated 10.03.2017, which mandates at Clause No.14.10 that order has to be passed within a period of one month from the date of completion of the proceedings. It is also submitted that on account of Covid-19 pandemic and non- intimation by the respondent, petitioner could not furnish additional replies and documents to the respondent. Lastly, it is contended that if one more opportunity is granted in favour of the petitioner, he would submit additional

4 documents and pleadings and the respondent is to be directed to reconsider the same, in accordance with law. Learned counsel for the petitioner places reliance upon the following decisions: (i) Union of India V. Arviva Industries (I) Ltd. – 2007 (209) ELT.5 (SC); (ii) Innovative Security Solutions Vs. Commissioner of GST & C.Ex. Chennai – 2019 (31) GSTL 18 (Mad.) & (iii) Infra Dredge Services Pvt. Ltd. Vs. Union of India – 2020 (372) ELT 691 (Bom.)

5 respondent under Section 119 of the IT Act are binding on the revenue. So also, in Infra Dredge Services case referred to supra, the Bombay High Court at Bombay and Madras have come to the conclusion that, delay in passing an order after completion of personal hearing of any proceedings by the respondent would vitiate the order. In the said decision, it is held as under: “Heard learned counsel for the parties. 2. The Petitioner has challenged the order passed by the Commissioner of CGST and Central Excise, Thane- Respondent No.2 dated 12 July, 2019. 3. The Petitioner provides dredging services. A show cause notice came to be issued to the petitioner on 19 March, 2013. The demand was made for three periods. First was regarding 'Management Maintenance or Repair Service' under the Reverse Charge Mechanism for the period April, 2008 to March, 2012. For a period April, 2009 to March, 2012 for 'Supply of Tangible Goods for Use Service' under Reverse Charge Mechanism. For a period 7 May, 2010 to 16 November, 2010 for 'Supply of Tangible Goods for Use Service' and for 'Dredging Service' for a period 26 November, 2009 to 23 February, 2010. 4. By order dated 30 September, 2015, demand was confirmed against ex parte. The Petitioner filed a writ petition in this Court. By directing the petitioner to deposit an amount of Rs.25,00,000/-, this Court quashed and set aside the order and directed that the petitioner be heard

6 after the deposit of the amount. Proceedings were relegated to the Commissioner. 5. The petitioner appeared for hearing on 3 January, 2019 and submitted documentary evidence. By the impugned order dated 29 July, 2019 the Commissioner confirmed the demand totalling to Rs.18,31,80,394/- under Section 73 of the Act was confirmed. Hence this Petition. 6. We have heard Learned Counsel for the parties. Learned Counsel for the petitioner relied upon the decisions in the case of Shivsagar Veg. Restaurant v. Asstt. Commr. of Income Tax, Mumbai [ITXA No.144 of 2006, decided on 14 November, 2008 = 2008 (232) E.L.T.780 (Bom.) = 2009 (13) S.T.R.11(Bom.)] and EMCO Ltd. v. Union of India [Writ Petition No.12124 of 2013, decided on 11 February, 2014. = 2015 (319) E.L.T.28 (Bom.) = 2017 (51) S.T.R. 475 (Bom.)]. He submitted that there is not only delay of six months from conclusion of the argument till pronouncement of order but because of this delay gross errors have occurred in the order which has caused severe prejudice to the petitioner. Learned Counsel also relied upon the Circular issued by the Central Board of Excise and Customs dated 10 March, 2017 laying down guidelines for adjudicating authorities while adjudicating the matters, more particularly Clause 14.10 thereto. It is contended that in view of this the writ petition be entertained without relegating the petitioner to the appellate remedy. 7. Learned Counsel for the respondent submitted that all contentions raised by the petitioner could be raised by the petitioner before the Appellate Authority and merely

7 because statutory pre-deposit is mandated, the petitioner cannot invoke writ jurisdiction. 8. The factum of delay of six months in passing the order after the hearing was concluded is not in dispute. The Division Bench of this Court in the case of Shivsagar Veg. Restaurant had observed thus :- "11. Having said so, the inordinate unexplained delay in pronouncement of the impugned judgment has also rendered it vulnerable. 12. The Learned Counsel for the appellant has referred to various judgments of the Apex Court as well as of this Court and various other High Courts to show that only on the ground of delay in rendering the judgment for period ranging from four months to 10 months, judgments were held to be bad in law and set aside. It has been held time and again that justice should not only be done but should appear to have been done and that justice delayed is justice denied. Justice withheld is even worse than that. The Apex Court in the case of Madhav Hayawadanrao Hoskot v. State of Maharashtra, 1978 (3) SCC 544 had an occasion to take serious note of the prejudice normally caused to the litigant due to delayed delivery or pronouncement of the judgment for the reasons which are not attributable either to the litigant or to the State or to the legal profession. 13. In R.C. Shama v. Union of India, 1976 (3) SCC 474, the Apex Court after

8 noticing absence of the provision in the Code of Civil Procedure in the matter of time frame in delivery of judgment, observed as under : "Nevertheless, we think that unreasonable delay between hearing of arguments and delivery of a judgment, unless explained by exceptional or extraordinary circumstances, is highly undesirable even where written arguments are submitted. It is not unlikely that some points which the litigant considers important may have escaped notice. But, what is more important is that litigants must have complete confidence in the results of litigation. This confidence tends to be shaken if there is excessive delay between hearing of arguments and delivery of judgments. Justice, as we have often observed, must not only be done but must manifestly appear to be done." 14. Recently, the Apex Court in the case of Anil Rai v. State of Bihar, 2002 (3) BCR (SC) 360 : 2001 (7) SCC 318 has also reconsidered the serious issue of delayed delivery of judgment by some of the High Courts and laid down certain guidelines in the matter of pronouncement of judgments by the High Courts. 15. In the case of Devang Rasiklal Vora v. Union of India, 2003 (158) E.L.T. 30 (Bom.) = 2004 (3) BCR 450, the Division Bench of this Court to which one of us is a party (Daga, J.) had an occasion to issue

9 directions to the President of the Customs, Excise and Gold (Control) Appellate Tribunal, Mumbai to frame and lay down the guidelines on the similar lines as were laid down by the Apex Court in the case of Anil Rai v. State of Bihar (supra) and to issue appropriate administrative directions to all the Benches of the said Tribunal. The similar guidelines can conveniently be laid down for the courts, tribunals and quasi-judicial authorities prescribed under the Income-Tax Act, 1961 ("Act" for short) so as to prevent delayed delivery of the judgment and/or order which at the end of the day results in denial of justice as happened in the instant case." This decision was rendered in the context of the order passed by Appellate Tribunal. Thereafter the Division Bench in the case of EMCO Ltd. extended the principal order of the Additional Commissioner adjudicating or the original authority. The Division Bench observed thus :- "5. We have heard the Learned Counsel for the Parties. In the present case, the personal hearing was concluded on 17 September, 2012 and the written submissions were filed by the Petitioner on 24 September, 2012. The impugned order was passed on 31 July, 2013 i.e. almost nine months after the hearing. This delay has resulted in the Petitioner's submissions of goods being returned within 180 days not being considered. This evidence was sought to be brought on record before the Tribunal but not allowed. However, this

10 Court by its order dated 14 September, 2010, while remanding the matter to the Adjudicating Authority, had left all issues open. Therefore, the above evidence, which was available before the Adjudicating Authority and also relied upon by the Petitioner at the time of hearing, was not considered in the impugned order, then the same can only be attributed to the delay in passing the order. This delay does appear to have caused prejudice to the Petitioner. This Court in the matter of Shivsagar Veg. Restaurant (supra) has, after considering the various decisions of the Apex Court, laid down that undue delay (four months) in delivery of judgment by the ITAT after the hearing is in itself sufficient to set aside the impugned order without considering the merits of the order. The Apex Court in the matter of Anil Rai (supra) has reiterated the observations made by an earlier Bench of Apex Court in R.C.Sharma v. Union of India {(1976)3-SCC-574}, which reads as under :

".....Nevertheless an unreasonable delay between hearing of arguments and delivery of judgment, unless explained by exceptional or extraordinary circumstances, is highly undesirable even when written arguments are submitted. It is not unlikely that some points which the litigant considers important may have escaped notice. But, what is more important is that litigants must have complete confidence in the results of litigation. This confidence tends to be shaken if there is excessive delay between hearing of arguments and delivery of judgments ." (emphasis supplied)

11 6. In view of the above, it is very clear that the authorities under the Act are obliged to dispose of proceedings before them as expeditiously as possible after the conclusion of the hearing. This alone would ensure that all the submissions made by a party are considered in the order passed and ensure that the litigant also has a satisfaction of noting that all his submissions have been considered and an appropriate order has been passed. It is most important that the litigant must have complete confidence in the process of litigation and that this confidence would be shaken if there is excessive delay between the conclusion of the hearing and delivery of judgment. 7. Therefore, in this case, we find that the delay by the Adjudicating Authority in rendering its order nine months after the conclusion of the hearing has caused prejudice to the Petitioner as it has not considered the evidence produced in respect of return of goods within 180 days. 8. We have not relegated the Petitioner to the alternate remedy of filing an appeal under the Act, as we find that the impugned order is against the parameters laid down by this Court in Shivsagar Veg. Restaurant (supra). 9. In the aforesaid circumstances, we set aside the impugned order dated 31 July, 2013 and direct the Additional Commissioner of Central Excise and Customs to pass a fresh order after granting the Petitioner an opportunity of personal hearing. Needless to add that the resultant adjudication order would be passed within a reasonable time

12 after the conclusion of the hearing granted to the Petitioner. Basis of these two decisions is not the delay alone but the resultant prejudice discernable from omissions and need to inculcate discipline. 9. The Learned Counsel for the petitioner points out various errors to impugned order which likely to have resulted from the delay in passing order. He states that the criteria for imposing liability on the petitioner has been adopted from the wrong provision of law and that an affidavit of the petitioner placing certain factual position on record supported by the decisions of the Tribunal has not been considered at all even though it was on the record. 10. The operative portion of the impugned order regarding Dry Docking reads as under :- "6 (iv) the services received by the Noticee in India under said agreements from SSSHIPL related to dry docking (maintenance & repair) of dredgers are classified under the category of 'Management, Maintenance or Repair Service', as per definition contained in Section 65(64) and Section 65 (105)(zzg) of the Finance Act, 1994 read with Section 66A of the Finance Act, 1994 & Rule 2(i)(d)(iv) of the Service Tax Rules, 1994." The liability therefore is imposed under Section 65 (105)(zzg) of the Finance Act. The discussion and conclusion about how

13 this liability is imposed is in Para 5.22 of the said order, which reads thus :- "5.22 The noticee further contended that the demand of Rs.10,45,71,398/- in the category of Management, Maintenance or Repair services as defined under Section 65 (105) (zzzg) of the Finance Act, 1994 was not maintainable as the same was rendered outside India. It is admitted position that the noticee had made payment in foreign currency to SSIHPL for repair and maintenance of the 'goods' during the period their dry dock. The noticee was the recipient of service situated in India. The service provider was situated outside India. In respect of maintenance and repair services it is not mandatory provision of the rule that the article undergoing repair and maintenance should be located in India. Therefore, as per the provisions of Rule 2 (1)(d)(iv) of the Service Tax Rules, 1994 read with Section 66A of the Finance Act, 1994, the noticee was required to pay service tax under reverse charges as being recipient of service located in India in respect of service provided from a place outside India. The demand of service tax totally amount to Rs.10,45,71,398/- for receipt of 'Management, Repair and Maintenance Service' falling under Section 65(105)(zzzg) of the Finance Act, 1994 is therefore maintainable."

14 In the discussion, at both the places the Commissioner has referred to Section 65 (105) (zzzg) of the Act. 11. Section 65(105) (zzg) relates to 'Management, Maintenance or Repair Service' while Section 65 (105)(zzzg) refers to 'Mailing List Compilation and Mailing'. It is not even the case of the respondents that the activities of the petitioner are in relation to Mailing List. Taxation of Services (provided from outside India and received in India) Rules, 2006 have been framed. Rule 3 has categorized different activities. Rule 3(ii) deals with categorized sub-clauses (zzg) and (zzzzg) and does not include (zzzg), which is referable to Rule 3(iii). Rule 3(ii) and Rule 3(iii) deal with different contingencies. Rule 3(ii) refers to services provided in India and Rule 3 (iii) refers to services received by a recipient located in India for use in relation to business or commerce. These categories would require a different conclusion and approach. It is clear from the impugned order that there is a mix up between the provisions. This is attributable to the delay that has occurred in passing the order. A clear prejudice that has arisen to the petitioner. 12. The second ground put forth by the petitioner is that the Tribunal in the case of Reliance Industries Ltd. Vs. Commissioner of C.Ex. & S.T., LTU, Mumbai [2014 (36) S.T.R. 820 (Tri. – Mumbai)] has emphasized that operations must be performed wholly in India and that by filing an affidavit of that Managing Director, petitioner had sought to place on record the movement of

15 dredgers. There is no reference to this affidavit in the impugned order. 13. The Division Bench in the case of EMCO Ltd. has emphasized that when the proceedings are disposed of expeditiously by the authorities, it ensures there is an application of mind and litigants are satisfied that their submissions have been considered. A Circular by the Central Board of Excise and Customs dated 10 March, 2017 also directs a decision be taken expeditiously where the hearing has been concluded, and the decision be communicated expeditiously. 14. Considering these peculiar facts, we are of the opinion that the writ petition can be entertained to set aside the order. The Commissioner will have to take a fresh decision. 15. In the circumstances, the impugned order dated 12 July, 2019 passed by the respondent No.2 is quashed and set aside. The proceedings are restored to the file of respondent No.2. The petitioner will appear before respondent No.2 – The Commissioner of CGST and Central Excise, Thane on 24 February, 2020, wherein the Commissioner may give a further date for the hearing. The Commissioner will pass the order expeditiously in the light of the observations made by this Court in the case of EMCO Ltd. The above observations are limited to emphasis on the need for expeditious disposal and the related prejudice, and are not to be construed as reflections on the merits of the controversy. 16. Writ petition is disposed of.”

16 6. In the facts and circumstances of the case on hand, it is an undisputed fact that despite completion of the proceedings by the respondent after the petitioner submitted his written submission along with documents on 26.06.2020, there has been a delay of more than one and half years by the respondent in passing the impugned order dated 17.12.2021, which is contrary to Clause No.14.10 of the Circular dated 10.03.2017. Under these circumstances, as held in Infra Dredge Services case referred to supra, by the Bombay High Court, I am of the considered opinion that the impugned order deserves to be quashed and the matter remitted back to the respondent for reconsideration afresh in accordance with law.

17 (iii) Liberty is reserved in favour of the petitioner to submit additional pleadings, documents, etc., before the respondent, who shall consider the same and proceed further in accordance with law.

Sd/- JUDGE