$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision:
19. h September, 2013 + Writ Peittion (C) No.990/2013 M/S RR FINANCIAL CONSULTANTS LTD ..... Petitioner Through Mr. J.K. Mittal, Mr. Varun Prabhakar and Mr. Varun Gaba, Advocates. versus UNION OF INDIA AND ORS ..... Respondent Through Mr. Rahul Kaushik, Advocate for R-2 and 4. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA SANJIV KHANNA, J.
(ORAL) R.R. Financial Consultants Ltd. have filed the present writ petition with various prayers but the primary prayer is that the services being rendered by them do not fall in the category of „business auxiliary service‟ and „business support service‟ as defined and covered under the various provisions of Section 65 of Chapter V of the Finance Act, 1994. Another prayer made is that Rs.2,64,98,557/- paid by the petitioner, which is claimed to be illegally collected, should be refunded.
2. Interestingly, during the course of arguments, learned counsel for the petitioner W.P.(C) 990/2013 submitted that once Rs.2,64,98,557/-, Page 1 of 7 which includes interest of Rs.58,31,270/-, stands paid, then the show cause notice under Section 73(1) is bad in law as the petitioner herein has made self payment and therefore benefit of Section 73(3) of the Finance Act, 1994 is applicable. We need not examine the said issue but it does appear that the contention raised by the petitioner is self contradictory. If the petitioner claims that they had voluntarily paid service tax under Section 73(3), then they cannot ask for refund. Further, it is apparent that the question of refund can only be decided, when the issue of chargeability and assessability of tax is first determined and decided. The said questions and question of refund are pending consideration before the authorities.
3. As per Section 73(4) of the Finance Act, 1994 benefit of voluntary payment of tax under Section 73(3) is not available in cases of frauds, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of the Chapter V or the Rules made therein with the intent to evade payment of service tax. In the present case, the show cause notice which has been impugned, invokes proviso to Section 73(1) for the extended period. Proviso to Section 73(1) uses the same terminology as sub-section 4 to Section 73. Whether or not the said proviso has been rightly invoked has to be determined and decided by the authorities under the provision of the Act. The statute also provides for appellate remedies in case of an adverse or wrong order. It is normally a mixed question of law and facts.
4. Learned counsel for the petitioner has submitted that the authorities have already issued demand cum show cause notice dated 17th October, 2011. Our attention is drawn to the heading and paragraphs 10.1 and 10.4 of the show cause notice. He relies upon decisions of the Supreme Court in Oryx Fisheries Pvt. Ltd. Vs. Union of India, 2011 (266) ELT 42.(SC) and Commissioner of Central Excise, Banglore Vs. Brindavan Beverages (P) Ltd. 2007 (213) ELT 487(SC).
5. In Oryx Fisheries Pvt. Ltd.(supra) the following observations have been made:
“28. It is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in this instant case, the entire proceeding initiated by the show cause notice get vitiated by unfairness and bias and the subsequent proceeding become an idle ceremony. xxxxxxxxx 31. It is of course true that the show cause notice cannot be read hyper-technically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a showcause notice the person who is subject to is must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence.”
6. In the light of the aforesaid observations, we have examined paragraphs 10.1 and 10.4 of the impugned show cause notice. Paragraph 10.1 of the show cause notice refers to prima facie findings in favour of the petitioner. The said paragraph deals with the reverse charge mechanism and the factum that the petitioner had claimed that R.R. Investors Capital Services Pvt. Ltd. had made certain payments of service tax. Accordingly, opinion formed states that brokerage amounting to Rs.1,07,51,563/- was not taxable in the hands and at the end of the petitioner. The aforesaid paragraph only shows objectivity and that authority had applied his mind. Reading of paragraph 10.4 does not disclose a pre determined mind or decision. A show cause notice must and should make prima facie allegations and facts have to be pointed out and confronted for answer. Paragraph 10.4 in the first line uses the words “it appears that” which is indicative of a prima facie opinion and not final determination. No doubt the cause title of the show cause notice uses the words “show cause cum demand notice” but a reading of the notice would reveal that it is not a demand notice but a show cause notice calling upon the petitioner to make submissions. Final determination on various aspects will be after hearing, if requested and considering the submissions of the petitioner.
7. In paragraph 16 of the notice it is recorded that notice was being issued in respect of the amounts mentioned in sub-paras (B) and (C) including Rs.2,64,98,557/- which has already been deposited by the petitioner but has to be appropriated. In paragraph 17 the petitioner has been asked to produce evidences in support of their defence and whether they want to be heard in person and liberty to submit their reply.
8. The Commissioner, Service Tax has been directed to adjudicate and decide the case at the earliest. Show cause notice is to be decided by a different authority, namely, Commissioner of Service Tax, New Delhi. Thus, show cause notice has not been issued by the authority who is to decide and pass the order in original.
9. It will be appropriate here to reproduce paragraph 10 of Brindavan Beverages (P) Ltd. (supra):
“There is no allegation of the respondents being parties to any arrangement. In any event, no material in that regard was placed on record. The show cause notice is the foundation on which the department has to build up its case. If the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the notice was not given proper opportunity to meet the allegations indicated in the show cause notice. In the instant case, what the appellant has tried to highlight is the alleged connection between the various concerns. That is not sufficient to proceed against the respondents, unless it is shown that they were parties to the arrangements, it any. As no sufficient material much less any material has been placed on record to substantiate the stand of the appellant, the conclusions of the Commissioner as affirmed by the CEGAT cannot be faulted.”
10. Aforesaid paragraph states that a show cause notice must be lucid and clear and relevant facts have to be stated. In these circumstances, we do not accept the contention of the petitioner that the show cause notice reveals that the adjudicating authority has already formed an opinion and decided the issue. The adjudicating authority is not the author of the show cause notice.
11. Writ petitions against show cause notice especially in tax matters should not be entertained when alternative remedy under the statute is available. Otherwise it leads to delay and creates innumerable legal complications. Authorities including appellate authorities are persons who are specialists and can dispose of the cases at the earliest. The statute also provides for appeals so that a wrong order if passed can be corrected or rectified. We record that in the case of Brindavan Beverages (P) Ltd. (supra), the assessee therein had taken benefit of the adjudicating process including the appeals and thereafter the matter was taken to the Supreme Court.
12. In view of the aforesaid, it is held that this writ petition has no merit and has to be dismissed. Ordered accordingly. We clarify that we have not expressed any opinion on merits of the cases. The case will be decided by the adjudicating authority without being influenced by any of the observations made in this order. In case of an adverse order, the petitioner will be entitled to challenge the same in accordance with law. Petitioner may submit reply/additional reply and documents within 15 days from today. No costs. SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
SEPTEMBER 19 2013 NA