TMI Blog2021 (4) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... personal hearing to the authorized representative of the petitioner-company - petition disposed off. - W.P.(C) 5766/2019 & CM APPL. 25101/2019 - - - Dated:- 5-4-2021 - HON'BLE MR. JUSTICE RAJIV SHAKDHER AND HON'BLE MR. JUSTICE TALWANT SINGH Petitioner Through : Mr. Puneet Agrawal, Mr. Deepak Anand, Ms. Purvi Sinha and Ms. Hemlata Rawat, Advs. Respondents Through : Mr. Apoorv Kurup, CGSC with Mr. Abhishek Khanna, Adv. for UOI. Mr. Satish Aggarwala, Mr. Gagan Vaswani and Ms. Jasneet Jolly, Advs. for R-2, 4 5. Ms. Sonu Bhatnagar, Sr. Standing Counsel with Ms. Venus Mehrotra, Ms. Anushree Narain, Ms. Mallika Joshi and Mr. Vaibhav Joshi, Advs. For R-3. RAJIV SHAKDHER, J. (ORAL): 1. Mr. Puneet Agrawal, who appears on behalf of the petitioner-company, says that, although several grievances and resultant reliefs have been sought, in the instant writ petition, for the moment, the grievance and consequent relief sought, is confined to the failure on the part of the contesting respondents [i.e., respondent nos. 2, 4 and 5] to scrupulously adhere to the provisions of the instruction dated 21.12.2015 bearing F. No. 1080/09DLA/MISC/15/757 [in short 2015 instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Action', the following was provided Pre show cause notice consultation with the Principal Commissioners and Commissioners is being made mandatory prior to issue of SCN (Show Cause Notice) in the case of demands of duty above ₹ 50 lakhs (except for preventive/offence related SCN's). (emphasis added) Furthermore, Master Circular No. 1053/02/2017-CX dated 10.03.2017 (Annexure-C) vide its Para 5.0 provided Consultation with the notice before issue of Show Cause Notice: Board has made pre show cause notice consultation by the Principal Commissioner/Commissioner prior to issue of Show Cause Notice in cases involving demands of duty above ₹ 50 lakhs (except for preventive/offence related SCN's) mandatory vide instruction issued from F.No. 1080/09/DLA/MISC/15 dated December 2015. Such consultation shall be done by the adjudicating authority with the assessee concerned. This is an important step towards trade facilitation and promoting voluntary compliance and to reduce the necessity of issuing show cause notice . In the instant case, intelligence was gathered and developed by the officers of DGGI, JZU, Jaipur that M/s. Back Office IT Solutions Priva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting respondents in paragraph 2 of their sur-rejoinder. 3.3. Pertinently, no other submission has been advanced on behalf of Mr. Satish Aggarwala. 4. In rejoinder, Mr. Puneet Agrawal contends that the petitioner-company is in the business of providing accounting services to its clients which includes services such as software development, system analysis, Fund Accounting, NAV computation and reporting etcetera [hereafter referred to as services ]. These services, according to him, are provided by the petitioner-company with the help of information technology tools. Mr. Agrawal also emphasizes that the petitioner-company, thus, exports the aforementioned services to two separate legal entities located outside India i.e. NAV Consulting Inc. USA [in short NAV Consulting ] and NAV Fund Services (Cayman) Ltd. [in short NAV Fund ]. 4.1. Mr. Puneet Agrawal says, contrary to the claim of Mr. Satish Aggarwala that there is an attempt to evade service tax; the petitioner-company is not exigible to service tax. For this purpose, reliance is placed by him on Rule 6A of the Service Tax Rules, 1994 [in short Service Tax Rules ] which concerns Export of Services . 4.2. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s trade facilitation and promoting voluntary compliance and to reduce the necessity of issuing show cause notice. [Emphasis is ours] 5.1. A perusal of the aforesaid extract, taken from the 2017 Master Circular, would show that respondent no. 3 has made pre-show cause notice consultation by the Principal Commissioner/Commissioner before issuance of a show cause notice [in cases involving demands concerning duty above ₹ 50,00,000/-] mandatory in line with the provisions of the 2015 instruction. 5.2. As noticed above, there are two exceptions to the pre-show cause notice consultation. First, where the matter concerns prevention and second, where the show cause notice relates to an offence said to have committed by the assessee. 5.3. Insofar as Mr. Satish Aggarwala s submission is concerned, which is, that this is a case in which preventive action is sought to be taken - in our view, this contention cannot be sustained for the reasons set forth hereafter. Firstly, the period qua which the instant show cause notice has been issued spans between 01.10.2013 and 30.06.2017. Secondly, a perusal of the impugned show cause notice would show that its import and scope is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, in the counter-affidavit and the sur-rejoinder, that this is a case that falls in the first exception, i.e., prevention , would not take it out of the purview of the 2017 Master Circular. The 2017 Master circular has been framed with the object of facilitating trade, cutting out, wherever possible, disputes, by exhorting assessees to voluntarily comply with the extant tax regime. In this context, tax administrators have to bear in mind the well-established dicta that circulars issued by the statutory authorities are binding on them, although, they cannot dictate the manner in which assessment has to be carried out in a particular case. A Circular cannot be side-stepped causing prejudice to the assessee by bringing to naught the object for which it is issued. [See: K.P. Varghese vs. Income-tax Officer1, [1981] 7 Taxman 13 (SC); Also see: UCO Bank, Calcutta vs. Commissioner of Income Tax, W.B., (1999) 4 SCC 599 ]. 6.4 The coordinate bench of this Court in Amadeus India Pvt. Ltd. dealt with a somewhat similar issue. The observations made by the Court in paragraph 12 to 16, being apposite, are extracted hereafter: 12. It will be immediately noticed that there are tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a position to decide whether an offence is made out. 15. In any event, as far as the present case is concerned the officers of the Respondent do not appear to have taken any conscious decision in regard to the requirement of the Master Circular. A pointed question was posed by the Court to Mr.Harpreet Singh whether prior to issuing the impugned SCN, a decision was taken by the Respondent in the light of para 5.0 of the Master Circular not to undertake the pre-notice consultation. After going through the notes in file, Mr. Harpreet Singh stated that there was no noting in the file to that effect. In other words, it appears that the Respondent completely ignored the Master Circular before proceeding to issue the impugned SCN. 16. The mandatory character of the Master Circular can be traced to Section 83 of the Finance Act, 1994 which makes Section 37 B of the Central Excise Act, 1944 applicable in relation to service tax. In terms Section 37 B of the Central Excise Act, 1944 instructions issued by the CBEC would be binding on the officers of the Department. [Emphasis is ours] 6.5. Thus, having regard to the aforesaid observations of the coordinate bench of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a fit case for continuing with the proceedings in accordance with the mandate of the law including the Finance Act. (iv) If the concerned officer concludes that it is a fit case in which proceedings should continue against the petitioner-company, then, he/she would decide as to whether or not the impugned show cause notice should be revived or a fresh show cause notice should be issued in consonance with the decision that would be rendered by the Supreme Court in SLP (Civil) Diary No. 35886/2019. 8. The writ petition is disposed of in the aforesaid terms. Pending application(s) shall also stand closed. ---------------- Notes : 1 . 12. But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio. The two circulars of the CBDT to which we have just referred are legally binding on the revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well-settled as a result of two decisions of this Court, one in Navnit Lal C. Jhaveri v. K.K. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t suffer from the vice of unconstitutionality. This decision was followed in Ellerman Lines'case (supra) where referring to another circular issued by the CBR under section 5(8) of the 1922 Act on which reliance was placed on behalf of the assessee, this Court observed: Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this Court observed in Navnit Lal C. Jhaveri v . K.K. Sen, AAC [1965] 66 ITR 198, 203: 'It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision.' The directions given in that circular clearly deviated from the provisions of the Act, yet this Court held that the circular was binding on the Income-tax Officer. (p. 921) The two circulars of the CBDT referred to above mu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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