By TIOL News Service

NEW DELHI, NOV 19, 2018: THE petitioner challenges the letter dated 3rd December, 2015 from the DGCEI informing them about the permission accorded authorizing the ADG, DGCEI, Lucknow Zonal Unit to investigate service tax evasion cases of all the branches of the petitioner.

The petitioner has also prayed for quashing of notice/summons dated 21st and 28th January,2016 for production of documents on the ground that they are unwarranted and arbitrary.

The petitioner corporation is primarily engaged in carrying out civil work and construction for various departments of the government and public sector undertakings all over India. The petitioner has not opted for centralized registration for the purpose of service tax. The petitioner has 88 service tax registrations in different Commissionerates and consequently files and submits separate service tax returns as per the registrations.

As per the respondents, the issue and question of service tax liability on Project Management Consultancy Charge (PMC Charge) is almost a universal issue that would arise across most registrations. Consequently, file F.No. DGCEI/LNZU/NBCC/190/2015 was moved and vide impugned letter dated 3rd December, 2015, the Assistant Director (Investigation), DGCEI has conveyed and authorised the Additional Director General, Lucknow to investigate the case of service tax evasion by all branches of the petitioner. The investigation and enquiry are specific to the PMC Charge. The impugned letter dated 3rd December,2015 was issued for unified detailed enquiry on the PMC Charge by the Additional Director General, Lucknow after approval of the Director General. The respondents submit that centralised investigation is necessary and justified as multiple investigations all over the country on the same issue and question would result in inconvenience, harassment and wastage of time and resources.

Division Bench vide order dated 10th February, 2016 had stayed further proceedings pursuant to summons dated 21st and 28th January, 2016. This stay order was made absolute vide order dated 26th April, 2016.

The High Court observed that the following overlapping questions need consideration -

+ Firstly, whether the respondents can centralize investigation with DGCEI, Lucknow at one place with all India jurisdiction, though the petitioner has opted for 88 service tax registrations for different projects in different States.

+ Secondly, whether an officer of DGCEI can act as the Central Excise Officer to issue summons for production of documents and papers and for recording of statements Section 14 of the CE Act even when no proceedings under Section 73 of the Finance Act, 1994 or other provision are pending before the said officer. In other words, whether summons to produce documents/papers and for recording of statements on oath can be issued by an officer of DGCEI under Section 14 of CE Act to investigate and enquire into allegations of non-payment and evasion of tax.

After extracting the provisions of the Acts and a plethora of case laws, the High Court inter alia observed -

+ As per Section 73, unless payment is made in terms of sub-section 3 and 4 thereof, the starting point for proceedings for adjudicatory assessment is the issue of the show cause notice under Section 73(1) of the Fin Act. It is not the service tax return per se , but the show cause notice which is adjudicated and decided. This is the procedure prescribed by the statute for recovery of service tax in cases of non levy, non payment, short levy, short payment and erroneous refund.

+ Issue of show cause notice is a condition precedent to raising an enforceable demand.

+ There could be more than one show cause notice over-lapping the same period of time for distinct issues and subject matters. The Fin Act does not bar and prohibit different show cause notices on different issues, facts and subject matter. Each show cause notice being independent has to be adjudicated and decided.

+ Repeated or multiple show cause notices under Section 73(1) of the Fin Act can result in harassment and inconvenience and also reflect on the governance and administration of the Fin Act. Every attempt should be made to issue consolidated show cause notices even on divergent issues and subject matters.

+ Summons under Section 14 of the CE Act can be issued to ascertain and verify details and ask for relevant evidence and material for the purpose of the Fin Act.

+ Pendency of proceeding of recovery under Section 73(1) of the Fin Act or any other statutory proceedings is not a condition precedent for issue of notice under Section 14 of the CE Act . Notice or summons under Section 14 of the CE Act can be issued by the Central Excise Officer when required and necessary for any enquiry relating to service tax.

+ The choice whether or not to exercise power of special audit, summons etc. is for the respondents to decide and exercise, and not for the petitioner to direct.

+ We would observe that Rule 3 of the Rules confers very wide discretion to the Board without any restriction and limitation to confer jurisdiction on the Central Excise Officers to exercise powers under the Fin Act and the Rules.

+ Lack of jurisdiction by way of subject matter can be challenged at any time, even in the execution proceedings and cannot be waived by consent. Lack of jurisdiction by "venue" can be waived by consent or when not raised within reasonable time by applying principle of estoppel. No assessee has a vested right to be assessed at a particular location and "venue".

+ Consequently, it follows and we hold that the Board has wide discretion in power while fixing the local limit assigned to a Central Excise Officer. Local limit can be pan or all India. This position must be accepted as in cases of centralized registrations all India jurisdiction is exercised.

+ The Board is equally empowered to authorize centralised or pan India investigations to be undertaken by the Central Excise Officers. This may indeed be desirable and necessary to curtail delay, facilitate complete and detailed investigation at one location rather than multiple investigations and enquiries which would be overlapping. Multiple enquiries would be inconvenient and cause harassment to many-a-assessee specially when similar or identical issues are involved. A pragmatic and practical approach is required in matters of procedure.

+ In terms of the said Rule (3), the Board has issued Notification Nos. 20/2014-ST and 22/2014-ST both dated 16th September, 2014. Notification No. 20/2014 (the first notification) is a master notification which defines territorial jurisdiction (local limits) of the field formations on geographical basis. It specifies territorial jurisdiction for exercise of powers by officers in service tax matters. Notification No. 22/2014 (the second notification) specifies jurisdiction of officers of DGCEI throughout territory of India and empowers them with all powers under Chapter V of the Fin Act. The second notification clearly answers the contention raised.

+ We do not agree with the Petitioner's assertion that centralisation of investigation would lead to harassment and inconvenience. Normally, it would be desirable that investigation are centralised when identical and similar issues in case of an assessee arise for consideration in different Commissionerates.

+ Interestingly, the petitioner in their letter bearing despatch No. 1244 dated 8th July, 2015 had stated that they have centralised accounting system and all transactions were recorded at their head office level and they did not have unit-wise accounting system. The respondents, therefore, plead that information sought whether in form of figures or documents would be available centrally.

+ The court must ensure that when the stay order is vacated no party should suffer on account of limitation because of the interim stay order.

The Writ petition was dismissed.

(See 2018-TIOL-2432-HC-DEL-ST)