2025 (4) TMI 888 - HC - Service Tax

Challenge to order dated 07.11.2024 issued by the Assistant Commissioner (Adjudication) under Section 73(2) of the Finance Act 1994 concerning a demand for service tax on services categorized as Outdoor Catering - exemption from service tax under N/N. 25/2012 and Circular No. 172/7/2013-ST. - HELD THAT - The mandate of Section 73 of the Act 1994 is very clear wherein the Central Excise Officer is required to determine the amount of service tax within six months from the date of notice where it is possible to do so in respect of cases falling under sub-section (1) and within one year from the date of notice where it is possible to do so in respect of cases falling under proviso to sub-section (4A). The Bombay High Court in the case of UPL Limited 2023 (8) TMI 1152 - BOMBAY HIGH COURT observed that even in absence of provisions of sub-section (4B) of Section 73 of the Act 1994 the Authority could not have acted oblivious to the settled principle of law that a show cause notice would be required to be adjudicated within a reasonable time depending on facts of each case and consequently quashed the show cause notice. A perusal of the order impugned (Annexure-1) would reveal that the respondent no.2 while passing the order impugned without providing for any justification in keeping the show cause notice pending for over 9 years has passed the order impugned concerning to demand of service tax which order passed by the respondent no.2 being in teeth of provisions of Section 73 (4B) of the Act 1994 and the settled legal proposition cannot be sustained. Conclusion - The impugned order and the show cause notice quashed due to the failure to comply with statutory adjudication timelines without reaching a conclusive determination on the service tax exemption claim. Petition allowed.

The legal judgment involves a petition challenging an order dated 07.11.2024 issued by the Assistant Commissioner (Adjudication) under Section 73(2) of the Finance Act, 1994, concerning a demand for service tax on services categorized as 'Outdoor Catering'. The petitioner contends that the services provided were exempt from service tax under Notification No. 25/2012 and Circular No. 172/7/2013-ST. The adjudication process was delayed significantly, exceeding the statutory timelines set out in Section 73(4B) of the Act, 1994.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the adjudication proceedings conducted under Section 73 of the Finance Act, 1994, were completed within the prescribed statutory timelines.
Whether the delay in adjudication proceedings, without any justification, renders the order and the show cause notice invalid.
Whether the services provided by the petitioner fall under the category of 'Outdoor Catering' and are subject to service tax, or are exempt under the relevant notifications and circulars.

ISSUE-WISE DETAILED ANALYSIS

1. Adjudication Timelines under Section 73 of the Finance Act, 1994

Relevant Legal Framework and Precedents: Section 73(4B) of the Finance Act, 1994, mandates that the adjudication of service tax demands must be completed within six months or one year from the date of the notice, depending on the case specifics. The Bombay High Court in ATA Freight Line and UPL Limited, as well as the Delhi High Court in M/s L.R. Sharma, have emphasized the necessity of adhering to these timelines.
Court's Interpretation and Reasoning: The Court noted the absence of any justification for the delay in adjudication, which spanned over nine years. It underscored the statutory requirement for timely adjudication and the principle that proceedings must be completed within a reasonable time frame.
Key Evidence and Findings: The factual timeline of the issuance of the show cause notice and the final order was undisputed. The Court observed that the impugned order was passed without addressing the delay in proceedings.
Application of Law to Facts: The Court applied the statutory timelines of Section 73(4B) to the facts, finding the delay unjustified and contrary to legal mandates.
Treatment of Competing Arguments: The respondents did not dispute the timeline of events, effectively conceding the procedural lapse.
Conclusions: The Court concluded that the delay in adjudication violated Section 73(4B) and established legal principles, warranting the quashing of the impugned order and show cause notice.

2. Classification of Services and Exemption from Service Tax

Relevant Legal Framework and Precedents: Notification No. 25/2012 and Circular No. 172/7/2013-ST provide exemptions for certain services from service tax. The classification of services as 'Outdoor Catering' was central to determining tax liability.
Court's Interpretation and Reasoning: The Court did not delve deeply into this issue, as the procedural lapse in adjudication timelines was dispositive. However, it acknowledged the petitioner's argument regarding the exemption.
Key Evidence and Findings: The petitioner had provided services to educational institutions, which they argued were exempt under the specified notifications.
Application of Law to Facts: The Court's decision was primarily based on procedural grounds, rendering a detailed analysis of the exemption claim unnecessary.
Treatment of Competing Arguments: The respondents did not effectively counter the exemption argument, focusing instead on procedural defenses.
Conclusions: The Court did not make a definitive ruling on the exemption due to the procedural basis for quashing the order.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: The Court emphasized, "The mandate of the provision is very clear wherein the Central Excise Officer is required to determine the amount of service tax within six months from the date of notice where it is possible to do so..."
Core Principles Established: The judgment reinforces the principle that statutory timelines for adjudication must be adhered to, and any significant delay without justification can invalidate proceedings.
Final Determinations on Each Issue: The Court quashed the impugned order and the show cause notice due to the failure to comply with statutory adjudication timelines, without reaching a conclusive determination on the service tax exemption claim.

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