-Report by Arunima Jain
The Delhi High Court on Thursday while referring to Section 73 of the Finance Act, 1994, upheld that the question of whether the notice or demand for recovery was given within a reasonable length of time considering the case’s facts and circumstances should be considered by the pertinent official. Moreover, it is established law that jurisdiction must be exercised within a reasonable amount of time even if a time limit is not specified. If there exist nojustified reasons to condone the delay cause, then the relevant case becomes unreasonable in the court of law. Through the case of Sanghvi Reconditioners Pt. Ltd. v. Union of India through the Secretary, Department of Revenue & Ors., the court further iterated the fact that the definition of ‘reasonable time’ is sufficiently open-ended to take account of the particular facts and circumstances of each case.
In the matter at hand, the petitioner is a partnership firm registered under the IndianPartnership Act, 1932. The petitioner company was a contractual worker which was tasked with building residential flats by the Housing Board, Haryana (HBH) during July 2005 which had been completed thereafter. The Anti-Evasion branch of the Respondent organisation proceeded investigation as to why the petitioner company hadn’t paid taxes amounting toapproximately
2.15 crores in addition to not having registered with the Service Tax Department.Accordingly show cause notices and letters were issued to the petitioner from the respondent. After initial proceedings, the petitioner did not receive further communication from the respondent, and considered the case to be closed. But the respondent further asked the petitioner to submitshow cause as to the inability to pay taxes. The show cause notices and letters are being challenged in the present court by the petitioner on the grounds of exceeding the limitationperiod and the nature of the contracts between the petitioner company and its clients beingstatutory bodies in nature.
The petitioner’s learned counsel has submitted before the High Court that the contractsprovided by the Housing Board of Haryana were composite in nature and were solely ‘workcontracts. Moreover, since the construction of the residential flats was made in the interest ofpublic good, alongside HBH, the petitioner company was merely aiding in a statutory activityand was hence not liable for service tax. In addition, the petitioner also claimed that theperiod of limitation under Section 73 of the Finance Act, the present case had exceeded its capacity.
Contrary to the petitioner’s counsel, the respondent’s learned counsel submits that therespondent no.1 had immediately placed the matter at hand in the ‘Call Book’ with theapproval of the commissioner, as had been prescribed by the norms of the CBEC Circulars.Additionally, the respondent also claims that the petitioner was not eligible to attain 67%value of the benefits from the taxable service since the supplies for these services were received by the Petitioner at zero cost from the HBH.
Upon giving due regards to the facts and law in the above-mentioned case, the Hon’ble HighCourt finds it challenging to accept that the impugned show cause notice could not have been decided upon because the Supreme Court was still debating the controversy it involved as regards to the matter of M/s Sobha Developers Ltd. when it came to the concept of ‘CallBooks.’ Even if the concept of such books was assumed to be true, it was still quintessentialfor the respondents to have maintained communication with the petitioner company which itwas unable to do. Moreover, there is no excuse for delaying the decision on the notice formore than fifteen years after the show cause notice and letters were issued. The respondents were directed to restrain from taking any actions regarding the same and the petition was allowed, disposing of all other pending applications.
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