TMI Blog2024 (3) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... ts are almost identical. These judgments underscore the significance of consistency in tax administration and the need for tax authorities to adhere to established principles and precedents. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity. It is evident in the instant case that the Department has deviated from the show cause notice, and as such any order passed by it running contrary to the grounds taken in the show cause notice, cannot be sustained. Issuance of the show cause notice represents a pivotal juncture in legal or administrative proceedings, demarcating the boundaries within which any authority can exercise its powers. Adhering to the confines of the show cause notice upholds principles of fairness, accountability, procedural regularly, and legal certainty essential for the legitimacy and effectiveness of the governance systems. Any attempt to transcend these limits not only violates the rights of the individuals or entities involved but also undermines the rule of law and public trust in the institutions tasked with uphol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent No. 2. The said orders are hereby quashed and set aside. Petition allowed. - Hon ble Shekhar B. Saraf, J. For the Petitioner : Sri M.P. Devnath, Sri Nishant Mishra and Sri Abhishek Anand, Advocates For the Respondents : Sri Rishi Kumar, Additional Chief Standing Counsel ORDER HON BLE SHEKHAR B. SARAF, J. 1. M/s Samsung India Electronics Private Limited (hereinafter referred to as the Petitioner ) has preferred the instant writ petitions under Article 226 of the Constitution of India challenging the order of the Additional Commissioner, Grade 2 (Appeal) I, Commercial Tax, NOIDA. 2. The facts and submissions made in the instant writ petitions bearing Writ Tax Nos. 777 of 2022 and 660 of 2023 are similar except for the relevant period and refund amount in question and hence, they are being taken up together. FACTS 3. The factual matrix leading up to the instant writ petitions has been laid down below: a. The petitioner is a company engaged in the export of Information Technology design and software development services pertaining to mobile devices ( IT Services ) to its overseas holding company, namely, M/s Samsung Electronics Company Limited, Korea (hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing submissions: a. The Department has adopted an inconsistent approach in dealing with the refund applications of the Petitioner, despite the fact that each of the refund applications arise out of the same set of facts and circumstances, which is grossly incorrect in law. b. It is imperative to mention that for the subsequent and prior periods, except the period from July 2019 to March 2020, the refund claims have duly been sanctioned to the Petitioner on the same facts and circumstances only. c. It is a settled position of law that the Department cannot take contrary stand and adopt an inconsistent approach while dealing with the same set of facts as well as legal background. Reliance in this regard is placed on the judgments of the Hon ble Supreme Court in Birla Corporation Ltd. v. CCE reported in 2005 (186) ELT 266 (SC) , Indian Oil Corporation Ltd. v. Collector of C. Ex., Baroda reported in 2006 (202) ELT 37 (SC) , and Boving Fouress Ltd. v. Commissioner of Central Excise, Chennai reported in 2006 (202) ELT 389 (SC) . d. The Department has travelled beyond the scope of show cause notices. The show cause notices and the refund rejection orders had rejected the refund on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s procured by it were used for the purpose of R D, software development, and validation thereof, which includes, inter alia , development of project, testing and validation of the output results. The Petitioner used these specific goods for undertaking research, design, and development related activities. Since the specific goods were procured by the Petitioner specifically for the purpose of software development and the validation thereof, the Petitioner did not capitalise these goods in its books of accounts. The Petitioner followed the capitalisation method based on use of goods and given that specific items became redundant after completion and validation of software and were discarded thereafter, the said goods were not capitalised in the books and accordingly, the Petitioner availed ITC on such goods by treating them as inputs. Therefore, the Petitioner has clearly treated the specific goods as inputs . h. It is further submitted that the capitalisation of assets cannot depend upon any straight jacket formula. The question of capitalisation has to be seen and analysed, keeping in mind the use case of the given industry. Goods which can be capital goods for one industry can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not mean that the refund claims for subsequent period will also be sanctioned. b. It is clear that the Petitioner while preparing its financial statements has not adhered to the Accounting Standards. Specific goods have not been capitalised by the Petitioner in accordance with Accounting Standard 10. ANALYSIS AND CONCLUSION 6. I have heard the learned counsels appearing on behalf of the parties and perused the materials on record. 7. Taxation serves as the cornerstone of governmental revenue, facilitating the provision of public services and infrastructure. Essential to this system is consistency, ensuring that similar factual and legal circumstances are met with uniform treatment. Inconsistencies can erode public trust, undermine compliance, and ultimately compromise the integrity of the tax system. Consistency in taxation entails the application of standardized rules and principles to taxpayers confronting analogous factual and legal circumstances. This uniformity is fundamental to fostering fairness, transparency and predictability within the tax regime. The absence of consistency can breed perceptions of inequity and arbitrariness, eroding taxpayer compliance and faith in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elines, taxpayers may find it challenging to navigate the tax system, resulting in increased compliance costs and administrative burdens. Taxpayers have a legitimate expectation that similar factual and legal circumstances will be met with uniform treatment, and any deviations from this principle undermine the credibility and legitimacy of the actions taken by tax authorities. 11. The inconsistency and irrationality displayed by the Department in withholding refund claims for July-September 2019 and October-December 2019, despite having sanctioned similar claims in the past and in the future are indefensible. 12. The Supreme Court has upheld the doctrine of consistency on numerous occasions and held that Revenue cannot take a different stand when facts are almost identical. In Birla Corpn. Ltd. v. CCE (supra) , the Supreme Court held has follows: 5. In the instant case the same question arises for consideration and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses to a Bench of superior jurisdiction. 15. What emerges from the aforementioned judgments of the Supreme Court is that the principles of consistency is sacrosanct in taxation matters. The Supreme Court has consistently emphasized that Revenue cannot take a different stand when facts are almost identical. These judgments underscore the significance of consistency in tax administration and the need for tax authorities to adhere to established principles and precedents. The arbitrary withholding of refund claims for specific periods, despite past precedents and the absence of any material change in circumstances, is contrary to the principles of fairness and equity. 16. Another ground taken in the instant dispute by the Petitioner revolves around the difference between input and capital goods. Under Section 2 of the CGST Act, 2017 capital goods are defined as goods value of which is capitalized in the books of account of the person claiming ITC and are used in the course or furtherance of business. On the other hand, input is defined as any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. The distinction between input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks the initiation of a dialogue between the authority and the recipient, providing an avenue for the latter to present their perspective and defend against any allegation made. This process is rooted in the principle that individuals or entities should be given an opportunity to be heard before any adverse action is taken against them. By formally notifying the recipient of the grounds for initiating action, the authority is compelled to provide a coherent and substantiated basis for its actions, thereby fostering transparency in decision-making processes. 18. In Ramlala v. State of U.P. and others reported in 2023 SCC OnLine (All) 2479 this Court propounded that a person must be accorded a fair chance to put up his case and therefore the authorities cannot traverse beyond the show cause notice. Relevant paragraphs are extracted herein: 9. The principle that emerges from the above judgments is patently clear that a show cause notice is required to provide details of the nature of the offence and the grounds on which the show cause notice has been issued. Furthermore, the order that is subsequently passed, based on the show cause notice, cannot go beyond the said show cause notice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against it, enabling it to formulate an informed response. Any attempt by the authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the notice would violate this principle of specificity, depriving the recipient of a fair opportunity to address the accusations leveled against it. 9. The issuance of a show cause notice represents a pivotal juncture in administrative proceedings, demarcating the boundaries within which any authority can exercise its powers. By adhering to the confines of the notice, authorities uphold principles of fairness, accountability, procedural regularity, and legal certainty essential for the legitimacy and effectiveness of governance systems. Any attempt to transcend these limits not only violates the rights of the individuals or entities involved but also undermines the rule of law and public trust in the institutions tasked with upholding it. Thus, this Court holds that, adhering to the show cause notice is not merely a procedural formality, but a mandatory requirement, beyond the scope of which, no action can be taken. Adherence to the show cause notice is a fundamental safeguard against arbitrary exercises of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to clearly outline the specific allegations or concerns against the recipient. In no case, the Department can be allowed to traverse beyond the confines of the Show Cause Notice, since the same will trample upon the recipient s right to defend itself. Any attempt by the issuing authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the show cause notice would constitute a violation of the principles of natural justice. Such actions would not only undermine the recipient s right to a fair hearing but also erode trust in the integrity and impartiality of the adjudicatory process. Any action taken beyond the confines of the Show Cause Notice, is void ab initio and cannot be sustained. 22. In light of the aforesaid, it is evident that the impugned orders dated October 25, 2021 and February 24, 2023 are palpably erroneous, and cannot be sustained. Accordingly, let there be a writ of certiorari issued against the orders dated October 25, 2021 and February 24, 2023 passed by the Respondent No. 2. The said orders are hereby quashed and set aside. 23. The writ petitions bearing Writ Tax No.777 of 2022 and Writ Tax No.660 of 2023 are, accordingly ..... 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