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2025 (4) TMI 956 - AT - Central ExciseExemption from service tax under N/N. 25/2012-ST dated 20.06.2012 - Governmental Authority or not - services rendered to IIT Guwahati and M/s. Power Grid Corporation of India - adjudication order issued beyond the prescribed one-year time limit under Section 73(4B) of the Finance Act 1994 - HELD THAT - The Hon ble Bombay High Court in the case of IDFC First Bank Ltd. vs. Union of India 2023 (8) TMI 1153 - BOMBAY HIGH COURT while deciding whether the time limit as prescribed in Section 73 (4B) of the Act are mandatory or directory in nature laid emphasis on the word shall used in the provision to hold that the time limit prescribed in Section 73 (4B) of the Act is mandatory and held The word where it is possible to do so thus cannot be read to defeat the timelines of six months and one year as set out in clauses (a) and (b) of sub-section (4B). Also these words cannot be construed to mean that by use of such words a complete freedom is available to the adjudicating officer to adjudicate the show cause notice at his own sweet will much less with such inordinate delay as in the present case which is of almost more than 12 years. Section 73 (4B) provision of the Finance Act 1994 is pari materia the provisions of Section 11A (11) of Central Excise Act 1944 and Section 128 (9) under Customs Act 1962. Under all these Acts the words used are Shall and Where it is possible to do so and in the Manual it is as far as possible . In the case of M/S. KOPERTEK METALS PVT. LTD. VERSUS COMMISSIONER OF CGST (WEST) NEW DELHI 2024 (12) TMI 269 - CESTAT NEW DELHI decided by the Principal Bench at New Delhi it has been held that non adjudication of the order with no reason being given to the effect that the order could not be passed on time due to circumstance beyond the control of the adjudicating authority would be fatal to the legality of the order. In the present case it is observed that the Show Cause Notice was issued on 15.10.2015 and the adjudication order was passed on 06.01.2017 i.e. almost after 01 year 2 months from issue of the notice. As per amended Section 73(4B) of the Finance Act 1994 w.e.f. 06.08.2014 the time limit for issuance of Order-in-Original is a maximum of one year even in suppression related cases.From the said Order-in-Original it is observed that there is nothing to indicate that the appellant has in any way delayed the proceedings necessitating the ld. adjudicating authority to delay the passing of the order at his end. As the Order-in-Original in this case has been issued beyond the one-year time limit fixed for adjudication the whole adjudication proceedings in terms of the instant Order-in-Original have become a nullity and the Order-in-Original is to be considered as non-est in law. Conclusion - i) The whole adjudication proceedings in terms of the instant Order-in-Original have become a nullity and the Order-in-Original is to be considered as non-est in law. ii) The time limit period cannot be extended endlessly without any plausible justification. iii) The Central Excise Officer shall determine the amount of service tax due under section 73(2) within one year from the date of notice where it is possible to do so and this timeline is mandatory and not merely directory. The appeal is allowed on the ground of delay in adjudication.
The core legal questions considered in this appeal are:
(1) Whether the service tax demand on the appellant for services rendered to IIT Guwahati and M/s. Power Grid Corporation of India is valid, specifically whether these entities qualify as "Governmental Authority" under Notification No. 25/2012-ST dated 20.06.2012, thereby entitling the appellant to exemption from service tax. (2) Whether the adjudication order issued beyond the prescribed one-year time limit under Section 73(4B) of the Finance Act, 1994, is legally sustainable, and if the delay in passing the Order-in-Original renders the adjudication proceedings null and void. Issue-wise detailed analysis: 1. Qualification of Service Recipients as Governmental Authority and Applicability of Exemption Notification The appellant contended that the services rendered to IIT Guwahati and M/s. Power Grid Corporation of India fall within the ambit of "Governmental Authority" as defined in Notification No. 25/2012-ST dated 20.06.2012, thus exempting them from service tax liability. The appellant relied on the Supreme Court decisions which held IIT Patna and NIT Rourkela as Governmental Authorities, arguing that IIT Guwahati is similarly situated. Regarding Power Grid Corporation, the appellant argued it is wholly owned and controlled by the Ministry of Power, Government of India, and supplies power for public amenities such as street lighting, which are municipal functions under the Twelfth Schedule of the Constitution. Hence, it qualifies as a Governmental Authority. The Revenue disputed these contentions, asserting that neither IIT Guwahati nor Power Grid Corporation satisfy the terms and conditions of Para 12(s) of Notification No. 25/2012-ST. Therefore, the exemption does not apply, and service tax demand is justified. The Court did not delve into the merits of this issue in the present order, as it first addressed the legality of the adjudication order on the ground of delay. The question of whether these entities qualify as Governmental Authority remains unadjudicated in this judgment due to the subsequent finding on delay. 2. Legality of Adjudication Order Passed Beyond One-Year Time Limit Under Section 73(4B) Relevant Legal Framework and Precedents: Section 73(4B) of the Finance Act, 1994, mandates that the Central Excise Officer shall determine the amount of service tax due within one year from the date of notice "where it is possible to do so" in cases involving suppression or fraud. This provision is pari materia with Section 11A(11) of the Central Excise Act, 1944, and Section 28(9) of the Customs Act, 1962, which prescribe similar timelines for adjudication. Judicial pronouncements have clarified the scope of the phrase "where it is possible to do so," emphasizing that it allows limited flexibility only where insurmountable or exceptional circumstances make timely adjudication impracticable. The authorities must provide plausible justification for any delay beyond the prescribed period. Mere lethargy or failure to act does not warrant extension. Key precedents relied upon include:
Court's Interpretation and Reasoning: The Court examined the timeline in the present case: the Show Cause Notice was issued on 15.10.2015, and the Order-in-Original was passed on 06.01.2017, approximately one year and two months later, exceeding the one-year limit under Section 73(4B). The Court found no indication in the Order-in-Original that the appellant caused any delay or that any exceptional circumstances justified the delay. Applying the principles from the cited precedents, the Court held that the adjudication authority failed to comply with the mandatory time limit. The absence of plausible reasons or insurmountable constraints rendered the adjudication order a nullity and non-est in law. The Court rejected the Revenue's argument that the delay was minimal and thus excusable, clarifying that any delay beyond the prescribed period, regardless of length, constitutes a breach of statutory mandate unless justified. Application of Law to Facts: The Court applied the statutory mandate and judicial precedents strictly, emphasizing the legislative intent to ensure timely adjudication of tax demands to avoid uncertainty and prejudice to the assessee. Since the adjudication order was passed beyond the one-year period without justification, it was invalidated. Treatment of Competing Arguments: The appellant's reliance on the Kopertek Metals decision and other judgments was accepted, while the Revenue's contention that the delay was not substantial enough to invalidate the order was rejected. The Court underscored that the statutory timelines are mandatory and that the phrase "where it is possible to do so" does not permit indefinite or unexplained delays. Conclusions: The Court concluded that the adjudication order dated 06.01.2017 is legally unsustainable due to delay beyond the statutory time limit. Consequently, the service tax demand, interest, and penalties confirmed in the impugned order do not survive. Significant holdings include: "The whole adjudication proceedings in terms of the instant Order-in-Original have become a nullity and the Order-in-Original is to be considered as non-est in law." "The time limit period cannot be extended endlessly without any plausible justification." "The indifference of the Adjudicating Authority to complete the adjudicating process within the statutory time limit cannot be condoned to the detriment of the assessee or detrimental to the interest of the exchequer." "The Central Excise Officer 'shall' determine the amount of service tax due under section 73(2) within one year from the date of notice where it is possible to do so, and this timeline is mandatory and not merely directory." "The flexibility which the statute confers is not liable to be construed as sanctioning lethargy or indolence." Final determinations: (a) The appeal is allowed on the ground of delay in adjudication. (b) The Order-in-Original and the impugned appellate order confirming service tax demand, interest, and penalties are set aside. (c) Since the demand does not survive, the question of interest and penalty does not arise. Overall, the Court prioritized adherence to statutory timelines for adjudication over the substantive merits of the service tax demand, rendering the demand unsustainable due to procedural infirmity.
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