By TIOL News Service

GUWAHATI, OCT 23, 2018: IN all the writ petitions, the demand-cum-show cause notices issued under Sections 75, 76 and 78 in respect of a proceeding initiated under Section 73 of the Finance Act, 1994, for failure on the part of the petitioners from paying the service tax that is leviable upon them are assailed on the ground that in view of the provisions of Section 173 of the Central Goods and Service Tax Act, 2017, further proceedings that were initiated under Section 73 of the Finance Act of 1994 are no longer sustainable.

The petitioners submit that Section 173 of the CGST Act of 2017 having omitted chapter V of the Finance Act of 1994, no proceeding initiated under Chapter V can further be continued, in view of the legal implication of a statutory provision being omitted, as laid down by the Supreme Court in its decision in Rayala Corporation (P) Ltd - 2002-TIOL-295-SC-FERA-LB, Kolhapur Canesugar Works Ltd. - 2002-TIOL-188-SC-CX-CB and General Finance Co. - 2002-TIOL-1895-SC-IT.

The counsel for the respondent Revenue submitted that the judgment rendered in Messrs Rayala Corporation (P) Ltd (supra) was per-incuriam of the provisions of Section 6A of the General Clauses Act and that the provisions laid down in the said judgment had been clarified by a subsequent Judgment of the Supreme Court rendered in Fibre Boards Pvt. Ltd. - 2015-TIOL-178-SC-IT, to the extent that the applicability of Section 6 of the General Clauses Act in respect of an omission of a statute cannot be said to be a ratio decidendi at all and it is really in the nature of an obiter dicta .

The High Court adverted to the case laws cited by both sides and inter alia observed –

+ A reading of Section 6-A of the General Clauses Act clearly shows that even if an enactment stands omitted by a subsequent amendment, a proceeding initiated under the omitted enactment on its own does not come to an end upon omission and further continuance cannot be said to be impermissible under the law.

+ In the instant case, it is taken note of that the provisions of Chapter V of the Finance Act of 1994 were omitted by Section 173 of the CGST Act of 2017, where Section 173 is under the heading of 'Amendment of Act 32 of 1994'. Section 174 of the said Act which is under the heading of 'Repeal and Saving' in Sub-Section 1 provides that save and otherwise provided in the Act, on and from the date of commencement, the portion of the Central Excise Act of 1944, the Medicinal and Toilet Preparation (Excise Duties) Act 1955, the Additional Duties of Excise (Goods of Special Importance) Act 1957, the Additional Duties of Excise (Textiles and Textile Articles) Act and the Central Excise Tariff Act, 1985 stood repealed.

+ But Section 174(2) of the CGST Act of 2017 provides that the repeal of the said Acts and the amendment of the Finance Act of 1994 (Act 32 of 1994) to the extent mentioned in Section 174(1) or 173, as the case may be, shall not, amongst others, effect any investigation, enquiry or verification (including scrutiny and audit), assessment proceedings, adjudication or any other legal proceeding or recovery of arrears etc., and all such proceedings may be instituted, continued or enforced as if the Act had not been so amended or repealed.

+ The proposition in paragraph 37 of Kolhapur Canesugar Works Ltd. (supra) providing that the proceedings under an omitted enactment continues to remain in the event of there being a savings clause in the enactment bringing about such omission appears to be more appealing than the proposition in Rayala Corporation (P) Ltd (supra) providing for a discontinuance of such proceeding.

+ As the provisions of Section 174(2) also is clearly applicable in respect of an omission of the enactment under Section 173, therefore, any such investigation, enquiry, etc., that was instituted, continued or enforced under Chapter V of the Finance Act of 1994, continues to remain in place inspite of such omission of Chapter V of the Finance Act. In other words, Section 174(2)(e) is a savings clause in respect of any investigation, enquiry etc., that was/to be instituted under Chapter V of the Finance Act of 1994.

+ A conjoint reading of Section 173 and 174(2)(e) would show that while bringing an omission to the provision of Chapter V of the Finance Act of 1994, a savings clause for continuing with the proceedings initiated/to be initiated was also duly provided. Existence of the savings clause in respect of omission of Chapter V of the Finance Act of 1994 clearly brings it within the purview of the provisions laid down by the Constitution Bench of the Supreme Court in paragraph 37 of Kolhapur Canesugar Works Ltd. (supra).

+ A conjoint reading of the provisions laid down in paragraph 37 of Kolhapur Canesugar Works Ltd. (supra) and Section 173 and 174(2)(e) would lead to a conclusion that although Chapter V of the Finance Act of 1994 stood omitted under Section 173, but the savings clause provided under Section 174(2)(e) will enable the continuation of the investigation, enquiry, verification etc., that were made/to be made under Chapter V of the Finance Act of 1994.

Concluding that the Writ petitions are devoid of any merit, the same were dismissed.

It is also clarified that the respondents may proceed ahead with the said demand-cum-show cause notices, and the same be done strictly in accordance with law, but from the point of view that the demand-cum-show cause notices came into effect from the date of this judgment.

(See 2018-TIOL-2238-HC-GUW-ST)