Officers Of DGGI Are Central Excise Officers: Can Issue Show Cause Notices And Adjudicate Service Tax Demand: Madras High Court

Case Title:
Officers Of DGGI Are “Central Excise Officers”; Can Issue Show Cause Notices And Adjudicate Service Tax Demand

Date Of Order:
17 June 2022

Judge:
The Hon’ble Mr.Justice C.Saravanan

Parties:
Petitioner: M/s.Redington (India) Limited, Represented by its Authorised Officer, V.Ramesh, Vice President (Taxation)
Respondent: Principal Additional Director General, Directorate General of Goods and Services Tax, Intelligence, Chennai Zonal Unit

Subject

• In order to get the respondent department's documents pertaining to the issuing of the Notice dated 30th July 2020 in reference No.F.No.INV/DGGI/CZU/ST/98/2019/5769 and to dismiss the same, a Writ Petition was filed under Article 226 of the Indian Constitution.

Important Provisions

1. Article 226 of The Constitution of India

This article gives the High Courts the ability to issue writs to any person or authority, including the government, in the forms of habeas corpus, mandamus, prohibition, quo warranto, certiorari, or any of them.

2. Chapter V of the Finance Act, 1994

Provides provisions for service tax levy and collection.

3. Rule 2(1)(ccd) of the Service Tax Rules, 1994 –

The list of individuals subject to the reverse charge mechanism under Section 68 (2) of the Finance Act of 1994 is provided in Rule 2(1)(d)(i).

Brief Facts

• For the purpose of assigning the adjudication of notices to show cause issued under the provisions of the Central Excise Act, 1944, or the Finance Act, 1994, to the Central Officers subordinate to them, the Central Government directed that the following officers may exercise the powers exercisable by the Central Board of Excise and Customs under Rule 3 of the Central Excise Rules, 2002, and Rule 3 of the Service Tax Rules, 1994:-

1. The Principal Chief Commissioner of Central Excise and Service Tax; or
2. The Chief Commissioner of Central Excise and Service Tax”.

• The Hon'ble Supreme Court's arguments in Canon India Pvt Ltd v. Commissioner, 2021 (376) E.L.T. 3 (S.C.), and Commissioner v. Sayed Ali, 2011 (265) E.L.T. 17 (S.C.), cannot be applied to the Central Excise Act, 1944, and/or The Finance Act, 1944.
• The officers from the Directorate are unquestionably "Central Excise Officers" because they have been given the authority of central exercise officers.
• The Central Excise Act of 1944's Section 2(b) definition of "Central Excise Officer" was made applicable for Section 73 of Chapter V of the Finance Act of 1994, which specifies a mechanism for recovering service tax that has been improperly imposed, short-paid, or not levied at all.
• The Board is authorised to nominate any additional official to exercise authority within the "local limitations" under Rule 3 of the Service Tax Rules, 1994. That would not, however, preclude the officers of the "Directorate of Central Excise Intelligence (DGCEI) [currently The Directorate of GST Intelligence]" from exercising their authority throughout all of India as "Central Excise Officers" as defined by Notification No.38/2001-C.E. (N.T), dated 26.06.2001. In connection with Notification No.38/2001-C.E. (N.T), dated 26.06.2001, Notification No.22/2014-ST, dated 6.09.2014, should be read.
• As a result, the petitioners' second argument about their jurisdiction to issue a Show Cause Notice cannot be accepted.
• The petitioners' contention that the Directorate of Central Excise Intelligence (DGCEI) officers [now the Directorate of GST Intelligence] are not "Central Excise Officers" and cannot execute function Pan India cannot be accepted, according to some of the petitioners' attorneys.
• When the officers of the Directorate of Central Excise Intelligence (DGCEI) [now The Directorate of GST Intelligence] are appointed to serve as "Central Excise Officers," no constraint on the Board's authority may be inferred.
• Therefore, it is impossible to claim that the officers who were given authority by the challenged Notification No. 22/2014-S.T., dated 06.09.2014, are not "Central Excise Officers."
• Regarding the challenge to the contested show cause notices on the grounds that they were issued in violation of the C.B.E. & C. Master Circular No. 1053/2/2017-CX, dated 10-3-2017, I am of the opinion that the proceedings cannot be deemed to be improper simply because there was no pre-consultation as required by the said circular. These circulars are not enforceable by the Court nor covered by the Finance Act of 1994's requirements.
• The aforementioned Master Circular is just meant to make it easier for the assessee who is in default to come forward and settle the debt so that the department won't have to deal with show cause actions.
• The impugned show cause proceedings against the petitioner(s) are not, however, invalid or without jurisdiction simply because a pre-consultation was not requested before the show cause notice was issued. Therefore, in light of the aforementioned circular, it cannot be allowed for show cause proceedings started under Section 73 of the Finance Act, 1994, aiming to demand tax that was allegedly not paid, to be abandoned.
• In any case, the Honourable Supreme Court decided in COMMISSIONER OF CENTRAL EXCISE Vs. RATTAN MELTING AND WIRE INDUSTRIES (2008) 231 ELT 22 SC that circulars are not enforceable by the courts. As a result, I do not think the challenged to the as the impugned show cause notice/Order in Original has any validity.

Questions Raised

• Whether Writ Petitions filed against the impugned Notification No.22/2014- ST, dated 16th September 2014 is justified?
• Whether Writ Petitions have been filed against the impugned Show Cause Notices (SCNs) is justified?
• Writ Petitions have been filed against the impugned Orders-in-Original passed by the Adjudicating Authority is justified?

Arguments Advanced By The Appellant

• The learned counsel for the petitioner had cited the decision of the Kerala High Court in P. Sivaramakrishnan v. State of Kerala, 1994 (5) TMI 24, wherein the Hon'ble Kerala High Court engaged in a detailed discussion of the expression "local limits" in paragraphs 26 to 35 and noted in paragraph 33 that when a law that applies to the entire State speaks of a locality or local limit, it clearly indicates that it does not refer to the entire State but to a specific area
• Therefore, it had been argued that paragraph 41 of the notifications inferred that the intelligence officer in Kottayam had authority over the entire state, violating section 3(2) of the Kerala General Sales Tax Act of 1963.
• The learned attorney cited that the Andhra Pradesh High Court's ruling in Balaji Rice Company v. CTO, 1983 (4) TMI 243, in which the court addressed the term "local bounds." Through paragraphs 31 to 41, it was determined that "local limits," as defined in Section 4 of the APGST Act, might include a region that is a part of the state of Andhra Pradesh but is not the entirety of its land.
• In paragraphs 32 and 41, it was determined that extending an officer's geographical jurisdiction to include the entire State went beyond the scope of the authority granted by the Statute. Then, a change to the law was implemented to limit jurisdiction.
• It was further argued that in P.Sivaramakrishan's cited supra, the Kerala High Court was moved to rule that "local limits" conferred jurisdiction for a specific area by taking into account that if multiple officers are given the authority to assess the same dealer, it will cause the dealers great hardship and inconvenience, severely hinder their ability to make representations, and result in conflicting orders of assessment.
• It was argued that the 16th September 2014 challenged Notification No.22/2014-S.T. was arbitrarily issued because it contains no instructions on who should exercise jurisdiction and when.
• The second respondent Additional Director General, Directorate General of Goods and Service Tax Intelligence, issued the petitioner with the contested Show Cause Notice dated October 23, 2020. The petitioner had objected to the notice on the grounds that it was issued without the proper authority.
• The learned counsel for the petitioner had submited that Section 11A of the Central Excise Act had been amended during the relevant time frame that was under consideration in the Pahwa Chemicals Private Limited case (referenced above), and as a result, only the Central Excise Officer could issue Show Cause Notices. The Central Board of Indirect Taxes' 1997 circular, which held that only the Commissioner should issue Show Cause Notice without a time restriction, was in violation of the Act's provisions, it is argued by the honourable Supreme Court.

Arguments Advanced By The Respondent

• The learned senior counsel had argued that because the beneficiary of the service had paid tax on a reverse charge basis and the petitioner had classified the service as a "sponsorship service," the petitioner could not be held liable under Rule 6(3) of the CENVAT Rules, 2004.
• The Fifth Respondent's Senior Standing Counsel, Mrs. R. Hemalatha, then drew attention to the decision of the Hon'ble Supreme Court in Commissioner of Income Tax, Gujarat v. Vijaybhia N. Chandrani, 2013 (35) Taxmann.com 580 (SC), in which the Hon'ble Supreme Court reversed the High Court's decision and sent the case back to the respondents by ordering the assessee to take part in the Show Cause Proceedings.
• The learned Senior Panel Counsel for the first to fourth respondents had objected to the prayer in these writ petitions, arguing that the question at hand concerned the classification of the service and whether the petitioners were providing an income tax service or an online information database access and retrieval service as defined in Rules 2(l) of the Place of Provision of Service Rules, 2012, read in conjunction with Rules 2(1)(ccd) of the Service Tax Rules, 1994.
• For the first through fourth respondents, the learned senior panel counsel cited the Supreme Court's judgement in Union of India and others v. Coastal Container Transporters Association and others, (2019) 20 SCC 446 in support of their argument.
• The issue was whether the service provided by the petitioners is an income tax service or an online information database access and retrieval service as defined in Rule 2(l) of the Place of Provision of Service Rules, 2012 read with Rule 2(1)(ccd) of the Service Tax Rules, 1994, according to the learned Senior Panel Counsel for the first to fourth respondents.
• Employees of the petitioner's company accepted that the services provided by the petitioners were those of the Online recipient service when the statements/submissions were recorded under Section 14 of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994, the learned senior panel counsel for the first to fourth respondents further argued. As a result, even on this count, it is not open for the petitioners to challenge the contested Show Causation.
• The fifth respondent's learned Senior Standing Counsel had added to the arguments made by the learned senior panel counsel for the first to fourth respondents, Mrs.R. Hemalatha, by arguing that the impugned order in the current writ petition is premature because the petitioners must determine the remedy and the court must be cautious when considering the writ petition. She consequently requests that these writ petitions be denied and that the petitioners be instructed to discuss the appropriate course of action with the adjudicating authorities.

Analysis By The Court

• The court stated that these writ petitions were rejected since the challenge to the impugned Notification No. 22/2014-ST dated 16.09.2014 in Category-1 (W.P.Nos. 14036,17383, 17496, 17937, 18485, 24677 of 2021 and 1570 of 2022) failed. These writ petitions that contested the Show Cause Notices and Orders in Categories 2 and 3 as well as the Original in Categories 2 and 3 consequently failed.
• However, the Category-2 petitioners (W.P.Nos. 17941,12853 of 2020, 24960, 14039, 17385, 17498, 18490, 18492, 18496 of 2021, and 1571 of 2022) who had received show cause notices are allowed to submit their replies within 30 days of receiving this Order; if they do not, the designated adjudicating officer will make a decision on the merits based on the records that are currently in the The adjudicating officer will make every effort to wrap up the proceedings, ideally, within 90 days of the date the aforementioned time expires. It goes without saying that the petitioner must be given a chance to be heard.
• The Category 3 petitioners (W.P.Nos. 24680 and 17938 of 2021) who had received the contested Orders-in-Original are likewise authorised to file statutory appeals within 30 days of receiving this Order, without fail. If such appeals are submitted before the deadline, the appellate authority will review the matter and decide the appeal in turn. It goes without saying that the appropriate petitioners who were subjected to such orders must provide the required pre-deposit required by Section 35F of the Central Excise Act, 1944, together with their appeal.

Conclusion

The writ petitions in Category-1 were denied, and those in Categories 2 and 3 were resolved with the aforementioned observations. No charges. As a result, related unrelated petitions were dismissed.

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