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WISDOM CAN BE LEARNT. BUT IT CANíT BE TAUGHT.

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WISDOM CAN BE LEARNT. BUT IT CANíT BE TAUGHT.
By: Jayaprakash Gopinathan
January 25, 2021
All Articles by: Jayaprakash Gopinathan       View Profile
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[“Burr, who seems never to have developed the habit of thinking things through, reportedly considered the ‘Rule’ a waste of time”]

(Barack Obama- ‘A Promised Land”-Page 243,para 2)

While reading the above sentence many of us may feel, YES! The moot question is whether those who draft the law, execute the same and adjudicate alleged offence can shy away from the Rules, procedures prescribed and principles enunciated over the years?

This paper is about a deviation that might have caused dearly on the consolidated fund of India through a misconception about an insertion of a sub section to Section 73 in Finance Act, 1994 in 2006 and in Section 11A in Central Excise Act, 1944 and that permitted an alternative, a Statement cum Notice, to a lengthy Show Cause Notice cum demand Notice issued by different Indirect Tax officials of the Central Government for alleged evasion of Central Excise Duty and Service Tax. The intention of the Parliamentary draftsman in 2006 & 2013 for such a novel thought might have been for reduction of wastage of paper as part of campaign to protect the nature or to reduce the work load on the  recurring process of issuing notices on a similar issue till the contention is settled by higher judicial for a.  This might have lead them to get Section(s) 73(1A) in Finance Act, 1994 and 11A (7A) in Central Excise Act, 1944 inserted in to the respective Acts vide Section 68 of Finance Act, 2006 w.e.f 18.06.2006 and vide Finance Act, 2013. These two almost identically worded Sections permitted an abridged version of a Show Cause Notice as a Statement cum Notice by declaring a full-fledged Show Cause Notice on the same issue already issued to the assessee as a relied upon Show Cause Notice;

Section 73(1A) Notwithstanding anything contained in sub-section (1) except the period of thirty months of serving the notice for recovery of service tax), the Central Excise Officer may serve, subsequent to any notice or notices served under that sub-section, a statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on the person chargeable to service tax, then, service of such statement shall be deemed to be service of notice on such person, subject to the condition that the grounds relied upon for the subsequent period are same as are mentioned in the earlier notices.

Section 11A (7A) Notwithstanding anything contained in sub-section (1) or sub-section (3) or sub-section (4) or sub-section (5), the Central Excise Officer may, serve, subsequent to any notice or notices served under any of those sub-sections, as the case may be, a statement, containing the details of duty of central excise not levied or paid or short-levied or short-paid or erroneously refunded for the subsequent period, on the person chargeable to duty of central excise, then, service of such statement shall be deemed to be service of notice on such person under the aforesaid sub-section (1) or sub-section (3) or sub-section (4) or sub-section (5), subject to the condition that the grounds relied upon for the subsequent period are the same as are mentioned in the earlier notice or notices.”

The Parliamentary drafts man who is credited with half of the litigation, as usual, failed to envisage situations where the chances of such relied upon Show Cause Notices ceased to exist in the eye of law when the same is relied upon in a Statement cum Notice due to adjudication of the relied upon Show Cause Notice. The absence of ‘Collectors’ Conference’ till nineties that discussed and made the field formations to learn on their deliberations through the minutes of the conference and very often sought reports of implementation of suggestions paved way for islands of authoritative interpretations bereft of collective wisdom.  It is interesting to hear the Master’s voice in ‘One minute Nonsense’ – “wisdom can be learnt. But it can’t be taught’.

 The abridged substitute for the Show Cause Notice is permissible for subsequent periods after issue of a full-fledged Notice for similar issues as alleged in the earlier Notice. However the permissibility, possibility or plausibility of such an abridged version of a Show Cause Notice as provided in Section 73(1A) of Finance Act, 1994 or Section 11A (7) of Central Excise Act, 1944 was never discussed in the public domain by the department either as a circular or as Instructions.

 It is ancient wisdom that when a cause is adjudicated / determined the cause is ceased to exist. This wisdom is equally applicable to a Statement cum Notice issued by relying on a full-fledged Notice after it is adjudicated. It was not enumerated by the Parliamentary draftsman in the relevant Section(s) that permitted a Statement cum Notice instead of a full-fledged Notice for the simple reason that it is a primitive legal wisdom. It was for those in the field to have this legal wisdom. If the Hon’ble adjudicating/ appellate authorities had different views, at least when an assessee makes a claim about nullity of an abridged statement issued by relying on a Show Cause Notice already adjudicated instead of a full-fledged Notice since the Notice is no more in existence when the same is adjudicated, they ought to have consulted legal luminaries who happened to retain their positions as senior standing counsels for the department  in both UPA and NDA regimes and sought their opinion on the subject.

This paper writer used to argue before the different authorities about the absence of a relied upon Show Cause Notice when the statement cum Notice relied on a Show Cause Notice which had been adjudicated. The order of the CESTAT (Mumbai) in Re: Savitha Oil Technologies case was relied upon after the decision. However, they spent voluminous pages to phoo phoo the submissions that when a case is adjudicated based on a Show Cause Notice, the same does not exists after the decision and held that even after adjudication, the Show Cause Notice exists legally. Now the Hon’ble High Court of Bombay in JYOTI PLASTIC WORKS PVT. LTD., JAI PLASTICS, N.D. PATEL VERSUS UNION OF INDIA [2020 (11) TMI 156 - BOMBAY HIGH COURT] in an obiter reference explained the legal principle regarding the status of a Show Cause Notice after the same is adjudicated. In para 44 of the above judgment, the Hon’ble Division Bench of the High Court stated as follows:

44. Reverting back to the facts of the present case, we are of the view that the initial show cause-cum- demand notice dated 17.1.1992 cannot be said to be in existence after the order-in-original was passed on 29.03.2006 which order has been accepted by the Department……

Hope neither C& AG nor a Hon’ble Member of Parliament will seek a quantification of the duty/tax that may be lost when the appellate courts accepts the correct legal principle and allow the appeals.  However, the issue being a question of law, those who had missed the opportunity can make another attempt.

By

G.Jayaprakash, Advocate

 

By: Jayaprakash Gopinathan - January 25, 2021

 

Discussions to this article

 

Well discussed article.

Only in issues of identical nature,this short cut method was to be adopted.However,in practice,even this fundamental aspect was not examined.

It is simple conclusion that when one notice is disposed of all subsequent notices also would get lapsed as nonest.However,gst laws do not provide similar provisions ,thank GOD.

Unnikrishnan v Cochin.

By: Ajit Ramakrishnan
Dated: 25/01/2021

sir

l.refer section 73 of the CGST Act . Similar procedure is available there

By: Gnanamuthu samidurai
Dated: 27/01/2021

 

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