Clipped from: https://taxguru.in/service-tax/pre-consultation-mandatory-service-tax-scn-madras-hc.html
Brilliant Corporate Services Private Limited, (Now known as M/s. Brivas Private Limited) Vs Commissioner (Madras High Court)
The petitioner, Brilliant Corporate Services Private Limited, challenged a show cause notice dated 23.10.2019 issued by the Commissioner of GST and Central Excise, Chennai Outer Commissionerate. The notice was issued to five entities, including the petitioner, based on common directorship and partnership among them. The petitioner argued that the notice violated the CBEC Master Circular No.1053/2/2017-CX dated 10.03.2017, which mandates a pre-consultation when the amount involved exceeds ₹50 lakhs. It was contended that the absence of such pre-consultation rendered the notice without jurisdiction. Reliance was placed on earlier decisions, including Tube Investment of India Ltd. v. Union of India (2018), Hitachi Power Europe GmbH v. CBI & C (2019), Amadeus India Pvt. Ltd. v. Principal Commissioner of Central Excise (2019), and Back Office IT Solutions Pvt. Ltd. v. Union of India (2021), where courts emphasized the necessity of pre-consultation before issuing show cause notices involving large amounts.
The High Court examined the petitioner’s contentions and noted that the show cause notice covered combined service tax demands totaling ₹27,08,05,519, including alleged short payments and wrong CENVAT credit availed by five entities. The Court observed that the circular cited by the petitioner was only intended to encourage voluntary compliance and reduce litigation, but it did not have statutory force under the Finance Act, 1994. Referring to the Supreme Court’s ruling in Commissioner of Central Excise v. Rattan Melting and Wire Industries (2008), the Court held that departmental circulars are not binding on courts.
The Court concluded that the impugned notice was issued by a competent authority under Section 73 of the Finance Act, 1994, and therefore could not be considered without jurisdiction. The petitioner and other co-noticees were directed to submit their replies to the notice and contest the allegations on merits. The writ petition was dismissed, with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner has challenged the impugned show cause notice dated 23.10.2019 primarily on the ground that the impugned show cause notice was issued to five different persons merely on the ground that the registered premises of each of the co-noticees are having common directors and partners and that it has been issued without pre-consultation as per CBEC Water Circular Dated 10.03.2017.
2. It is submitted that the show cause notice though detailed cannot be answered as the impugned show cause notice is contrary to CBEC Master Circular No. 1053/2/2017-CX order dated 10.03.2017.
3. It is submitted that as per the above circular, before issuing notices, wherever the amount involved is more than 50 lakhs a pre-consultation is a must and therefore, the impugned show cause notice is without jurisdiction.
4. It is submitted that this view has been affirmed by this Court on several occasions and a reference was made to the following cases:-
i. TUBE INVESTMENT OF INDIA LTD. UNION OF INDIA 2018 (16) G.S.T.L 376 (MAD) in W.P.No.11858 of 2017 and W.M.P.No.12788 of 2017 dated 09.02.2018
ii. HITACHI POWER EUROPE GMBH C.B.I. & C, 2019 (27) G.S.T.L12(MAD) in W.P.No.30456 of 2018 and W.M.P.No.35527 of 2018, dated 02.04.2019.
5. Learned counsel for the petitioner has also placed reliance on the decision of the Division Bench of the Delhi High Court in AMADEUS INDIA PVT.LTD. Vs. PR.COMMR.OF C.EX., S.T. & CENTRAL TAX 2019 (25) G.S.T.L 486 (Del.).
6. It is submitted that in the light of the above cited decisions of the Hon’ble Court and the decision of the Delhi High Court in BACK OFFICE IT SOLUTIONS PVT. LTD Vs. UNION OF INDIA & ORS. 2021-VIL-334-DEL-ST in W.P.(C) 5766/2019 & CM APPL.25101/2019 dated 05.04.2021, impugned show cause notice proceedings is liable to be quashed. Though the respondent has sought time for filing counter, I do not find any reasons to keep this writ petition pending.
7. I have considered the arguments advanced by both the counsels. The impugned show cause notice has been issued to all the five co-noticees by combining the following demand:-
| Name of the unit | Period | Total Service Tax Payable on forward Charge | Total ST Payable under RCM | Total Service Tax Payable | Paid by Cash in ST-3 | Short Paid S. Tax | CENVAT Credit Wrongly availed in ST- 3 that has to be paid in cash along with interest |
| M/s. Brilliant | 04/14 to06/17 | 14,69,54,649 | 3,20,31,532 | 17,89,86,181 | 5,61,32,889 | 12,28,53,292 | 1,65,52,989 |
| M/s. V4U Company | 04/16 to06/17 | 5,33,99,152 | 2,61,65,904 | 7,95,95,056 | 82,22,254 | 7,13,72,802 | 1,63,09,854 |
| M/s. V4U Firm | 04/14 to06/17 | 72,81,805 | 0 | 72,81,805 | 5,66,535 | 67,15,270 | 0 |
| M/s. Caussa | 10/16 to06/17 | 32,38,091 | 0 | 32,38,091 | 14,04,668 | 18,33,423 | 3728 |
| M/s. Talent | 04/17 to06/17 | 17,04,386 | 0 | 17,04,386 | 0 | 17,04,386 | 0 |
| TOTAL | 21,25,78,083 | 5,82,27,436 | 27,08,05,519 | 6,63,26,346 | 20,44,79,173 | 3,28,66,571 |
8. The petitioner has challenged the notice primarily on the ground that there was no pre-consultation as per the above mentioned circular. These circulars neither binding on the Court nor are contemplated under the provisions of the Finance Act, 1994.
9. The aforementioned Master Circular is intended to only facilitate the parties to come forward to pay the amount so that the department is not burdened with show cause proceedings. However, by that itself would not impugned show cause proceedings initiated against the petitioner would be either illegal or without jurisdiction. The show cause proceedings initiated under Section 73 of the Finance Act, 1994 seeking to demand tax which was allegedly not paid, show cause proceedings cannot be allowed to be scuttled in the light of the above circular. In any event circulars are not binding on the Courts as per the decision of the Hon’ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE RATTAN MELTING AND WIRE INDUSTRIES (2008) 231 ELT 22 SC. Therefore, I do not find any merits in the present writ petition as the impugned show cause notice has been issued a competent authority namely The Commissioner, Office of the Commissioner of GST and Central Excise, Chennai Outer Commissionerate under the Finance Act, 1994. The respective noticees can file their reply to the impugned show cause notice and meet out the allegations on merits.
10. I am therefore not inclined to interfere with the impugned show cause proceedings. The noticees are directed to file their separate reply to the show cause notices.
11. This writ petition stands dismissed with the above observations. There shall be no order as to costs.
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