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Patna High Court
M/S Surya Cef Jv vs The Chief Commissioner, Cgst And … on 15 April, 2025
Author: Rajeev Ranjan Prasad
Bench: Rajeev Ranjan Prasad, Ashok Kumar Pandey
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.9317 of 2024
======================================================
M/s Surya CEF JV, having its site office at Arya Nalanda Colony, Khajpura,
Patna- 800014, through its authorized representative Nitish Kumar Singh,
aged about 32 years, Male, Son of Shrinivas singh, resident of Gram- Nonar,
P.O.- Chhewari, Nonar, P.S.-Ramgarh District- Kaimur (Bhabua), Bihar-
821110.
... ... Petitioner
Versus
1. The Chief Commissioner, CGST and Central Excise, Ranchi Zone, Patna, 3rd
Floor, Central Revenue (Annex) Building, Bir Chand Patel Path, Patna, PIN-
800001.
2. The Principal Commissioner, CGST and Central Excise, Patna-I
Commissionerate, 1st Floor, Central Revenue (Annex) Building, Bir Chand
Patel Path, Patna, PIN- 800001.
3. The Commissioner, Central Tax (Audit), 4th Floor, Central Revenue (Annex)
Building, Bir Chand Patel Path, Patna, PIN- 800001.
4. The Superintendent, CGST and Central Excise Range, Phulwarisharif.
... ... Respondents
======================================================
Appearance :
For the Petitioner/s : Mr. Chitta Ranjan Das, Advocate
Ms. Smriti Singh, Advocate
Mr. Samir Kumar, Advocate
Ms. Sippy Sinha, Advocate
For the Respondent/s : Mr. Anshuman Singh, Senior SC
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
and
HONOURABLE MR. JUSTICE ASHOK KUMAR PANDEY
ORAL JUDGMENT
(Per: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD)
Date : 15-04-2025
Heard Mr. Chitta Ranjan Das, learned counsel assisted
by Ms. Smriti Singh, learned counsel for the petitioner and Mr.
Anshuman Singh, learned Senior Standing Counsel for the CGST
and CX.
2. This writ application has been filed for the following
reliefs:-
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
2/17
"(i) For issuance of appropriate writ in the
nature of certiorari or any other appropriate
writ, order or direction to set aside/quash the
demand of Service Tax of Rs.3,54,59,160/-
under proviso to Section 73(1) of the Finance
Act, 1994 along with levy of interest under
Section 75 and equal amount of penalty under
Section 78 and further penalty of Rs.10,000/-
each under Section 77(1)(a), 77(1)(c) and
77(2) of the Act arises out of the Order No.
17/ST/Commissioner/2023-24 dated
29.02.2024
.
(ii) For issuance of appropriate writ to the
effect that order passed demanding tax,
interest and penalty is violative of principles
of natural justice and contrary to Section 83 of
the Finance Act, 1994 read with Section 33A
of the Central Excise Act, 1944 and
C.B.E.&C. Circular No. 1053/02/2017-CX
dated 10.03.2017 by not extending third
opportunity of personal hearing.
(iii) For issuance of appropriate writ to the
effect that receipt of income from design,
construction, supply, testing and
commissioning of pipe water supply scheme
with electric-driven pump and suitable
treatment plant in fluoride effective habitants
of Jamui district on turnkey basis is exempted
from the Service Tax under Serial No. 12(e) of
the Mega Exemption Notification No.
25/2012-ST dated 20.06.2012.
(iv) For issuance of a direction to stay the
operation of the impugned Order No.
17/ST/Commissioner/2023-24 dated
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
3/17
29.02.2024 during the pendency of the writ
application.
(v) For such other relief(s), direction(s) to
which the petitioner may be entitled to in the
facts and circumstances of this case.”
3. The petitioner is aggrieved by and dissatisfied with
the order dated 29.02.2024 passed by the Commissioner, Central
Goods and Services and Central Excise (Audit), Patna
(Respondent No. 3) vide Order No. 17/ST/Commissioner/2023-24
as contained in Annexure-P4 to the writ application.
4. By Annexure-P4, the Commissioner, CGST and CX
(Respondent No. 3) has been pleased to hold and declare that the
petitioner is liable to pay service tax amounting to
Rs.3,54,59,160/-. Respondent No. 3 has further held the petitioner
liable to pay penalty under Section 78 of the Finance Act, 1994
(hereinafter referred to as the ‘Act of 1994’) and interest under
Section 75 of the Act of 1994. Accordingly, Respondent No. 3 has
directed the petitioner to pay interest as well as penalty. The
operative part of the order (Annexure-P4) reads as under:-
“5. In view of the above discussions and
findings, I pass the following orders:
Order
(i) I hereby confirm the demand of Service Tax
amounting to Rs.3,54,59,160/- (Rupees Three
Crores Fifty Four Lakhs Fifty Nine Thousand
One Hundred and Sixty only) (Inclusive of all
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
4/17Cesses) against the noticee under the proviso to
Section 73(1) of the Finance Act, 1994 and order
for recovery of the same from the noticee under
Section 73(2) of the Act ibid read with Section
174 of CGST Act, 2017;
(ii) I also confirm the demand of interest on the
amount of Service Tax confirmed at Sl. No.. 5(i)
above at the prescribed rate under the provisions
of Section 75 of the Act, as amended, read with
Section 174 of CGST Act, 2017;
(iii) I also impose a penalty of Rs.3,54,59,160/-
(Rupees Three Crores Fifty Four Lakhs Fifty
Nine Thousand One Hundred and Sixty only)
upon the noticee under Section 78 of the Act, as
amended, read with Section 174 of CGST Act,
2017;
(iv) I also impose penalty of Rs.10,000/-
(Rupees Ten Thousand only) under Section
77(1)(a) of the Act read with Section 174 of the
CGST Act, 2017;
(v) I impose penalty of Rs.10,000/- (Rupees Ten
Thousand only) under Section 77(1)(c) of the
Act read with Section 174 of the CGST Act,
2017; and
(vi) I also impose penalty of Rs.10,000/-
(Rupees Ten Thousand only) upon the Noticee
under Section 77(2) of the Act read with Section
174 of the CGST Act, 2017;”
Submissions on behalf of the Petitioner
5. Learned counsel for the petitioner submits that the
petitioner has been engaged under an agreement dated 30.11.2016
executed by the Executive Engineer, Public Health Division,
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
5/17Jamui to execute, design, construction, supply, testing and
commissioning of 100 pipe water supply schemes with electric
driven pump and suitable treatment plants in fluoride affected
habitations of Jamui District on turnkey basis with three months of
trial run after commissioning and comprehensive O&M of sixty
months after successful completion of trial run period, for an
amount of Rs.41,87,94,900/-. A copy of the agreement dated
30.11.2016 along with issue of notice to proceed with the work,
approval letter, item wise cost break up, press notice and bidding
document for the work have been brought on record as Annexure-
P1 Series.
6. Learned counsel for the petitioner submits that
another agreement was executed on 24.04.2017 to execute, design,
construction, supply, testing commissioning of Piped Water Supply
Schemes with electric powered pump and suitable treatment plants
for removal of excess fluoride in the fluoride affected habitation of
Jamui District of Bihar on turnkey basis with three months trial
run after commissioning and comprehensive operation and
maintenance of sixty months after successful completion of trial
run period (in different blocks of Jamui District), (Group- ‘B’) for
an amount of Rs.42,80,70,000/-. Copy of this agreement and other
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
6/17documents in support thereof have been enclosed as Annexure-P2
Series.
7. By relying upon Notification No. 25/2012-S.T. dated
20.06.2012 (Annexure-P3), learned counsel submits that the
services which are being rendered by the petitioner would be
falling in the category of exempted services under Entry Serial No.
12(e) of the notification which is popularly called ‘Mega
Exemption Notification’. It is, thus, his submission that for these
services, no service tax would have been payable.
8. Learned counsel submits that the agreements
(Annexures-P1 and P2) were executed during the period 2016-17
and 2017-18. The Respondent No. 2 issued a show cause notice on
13.10.2021 alleging that the Company is engaged in providing
taxable services as defined under Section 65B(51) of the Act of
1994 read with Section 65B(44) of the said Act to its various
clients in lieu of consideration for money but have willfully
escaped the assessment of taxable value by resorting to
suppression with intention to evade the payment of service tax
including Krishi Kalyan Cess and Swachh Bharat Cess total
amounting to Rs.3,54,59,160/- for the period April, 2016-June,
2017. The Respondent No. 3 was of the view that the amount
would be recoverable from the petitioner company along with
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
7/17interest under the first proviso of Section 73(1) and Section 75 of
the Act of 1994. Accordingly, the demand-cum-show cause notice
was issued.
9. Learned counsel submits that even as no defence
reply could be filed by the petitioner pursuant to the show cause
notice, the Respondent No. 3 remained sitting over the matter and
no action whatsoever was taken for about two and half years. The
date of personal hearing was fixed calling upon the petitioner to
appear on 11.01.2024. In response to the notice of personal
hearing, a representative of the petitioner appeared and requested
for time on the ground that the matters under consideration were
being managed by those employees of the petitioner company who
were no longer associated with the company, hence, the petitioner
company would require some time to come back and produce the
relevant documents.
10. It is submitted that the discussions which took place
on 14.02.2024 have been mentioned in the first part of paragraph
‘3.2’ of the impugned order (Annexure-P4) and from this part of
the order, it would appear that second date of hearing was fixed on
14.02.2024 but thereafter, no further date was fixed by Respondent
No. 3. In the later part of paragraph ‘3.2’, Respondent No. 3 has
stated that the representative of the petitioner was explicitly asked
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
8/17to provide substantiating documentation supporting the assertions
made by the noticee but even after 15 days, the noticee had failed
to submit any documents in support of his claim. In fact, the
representative of the petitioner company had informed Respondent
No. 3 about the nature of the company’s operations. It was brought
to the notice of Respondent No. 3 that the company is focusing on
water treatment and solar energy projects, therefore, this fact was
well within the notice of Respondent No. 3.
11. It is submitted that on the 15th day from 14.02.2024,
the impugned order (Annexure-P4) has been passed.
12. Learned counsel submits that on perusal of Section
83 of the Act of 1994, it would appear that some of the provisions
of the Central Excise Act, 1944 have been made applicable in
relation to the service tax as they apply in relation to a duty of
excise. Section 33A of the Central Excise Act, 1944 is one of the
sections which has been made applicable in relation to the matters
under the Act of 1994. Section 33A lays down the adjudication
procedure and a reading of the same would show that it gives
emphasis upon an opportunity of hearing to the party and for this
reason, the proviso to sub-section (2) of Section 33A restricts that
the adjournment shall not be granted for more than three times to a
party during the proceeding. Keeping this adjudication procedure
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
9/17in mind, the Government of India through its Ministry of Finance
(Department of Revenue), Central Board of Excise and Customs,
New Delhi has issued a master circular on show cause notice,
adjudication and recovery proceedings vide Circular No.
1053/2/2017-CX dated 10.03.2017. It is pointed out that under
paragraph ‘14.3’ of the master circular (Annexure-5), it is recorded
that at least three opportunities of personal hearing should be given
with sufficient interval of time so that the noticee may avail the
opportunity of being heard. Separate communication should be
given to the noticee for each opportunity of personal hearing. It is
also stated that in fact, separate letter for each hearing/extension
should be issued at sufficient interval.
13. Learned counsel submits that Respondent No. 3 has
not followed the mandate of the master circular and has not
provided three opportunities of personal hearing. This would result
in violation of principles of natural justice as embodied under
paragraph ‘14.2’ of the master circular.
14. Learned counsel further submits that it is not a case
of fraudulent or willful suppression or evasion of tax, therefore,
the benefit of extended period of limitation under proviso to sub-
section (1) of Section 73 of the Act of 1994 would not be available
to Respondent No. 3.
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
10/17
15. Learned counsel further submits that the impugned
order (Annexure-P4) has been passed much after the expiry of the
period of limitation as provided under sub-section (4B) of Section
73 of the Act of 1994. Relying upon a judgment of the Hon’ble
Division Bench of Delhi High Court in the case of Shyam Indus
Power Solutions Private Limited Vs. Principal Commissioner
CGST, Delhi North reported in (2025) 29 Centax 94 (Del.),
learned counsel submits that in the said case, the Hon’ble Division
Bench has referred to the previous case laws on the subject and has
held in unequivocal words that the matters having financial
liabilities or penal consequences cannot be kept unresolved for
years and the phrase “where it is possible to do so” cannot be a
license to keep matters pending for years. The flexibility provided
by the legislation is not meant to be misused or construed as
sanctioning indolence. The statutory lethargy cannot be brought
into play routinely and in an unfettered manner for years, without
any due justification or explanation.
16. It is submitted that in this case, even as the show
cause notice was issued on 13.10.2021, the first date of hearing
was 11.01.2024 i.e. after more than two and half years. This is an
inordinate delay without there being any plausible reason and at
least on record, nothing has been brought to demonstrate that it
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
11/17was not possible for Respondent No. 3 to determine the liability of
the petitioner within the prescribed period of one year under
Clause (b) of sub-section (4B) of Section 73 of the Act of 1994.
17. On these grounds, prayer has been made to set aside
the impugned order.
Submissions on behalf of the Respondents
18. Mr. Anshuman Singh, learned Senior Standing
Counsel for the CGST and CX has relied upon the stand taken in
the counter affidavit. It is his submission that sufficient
opportunity of hearing has been given to the petitioner. His
representative was given opportunity to produce the relevant
documents to support his contention that the service in question
would be falling under exempted category under Serial No. 12(e)
of the ‘Mega Exemption Notification’ but despite the opportunity
given to the representative of the petitioner company when he
failed to produce any document, the Respondent No. 3 was
constrained to take a view that the activities of the petitioner are
not falling under the negative list and they are not eligible for any
exemption.
19. Respondent No. 3 has taken a view that the
petitioner is required to discharge service tax liability of 100
percent taxable value without any abatement. It is submitted that
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
12/17principles of natural justice cannot be put in a straight-jacket
formula and in the present case, the petitioner is not correct in
alleging that there is a violation of principles of natural justice.
20. As regards the plea of the petitioner that the case
would not fall in any of the categories mentioned under proviso to
sub-section (1) of Section 73 of the Act of 1994, learned Senior
Standing Counsel submits that the fact that the petitioner company
had not taken any registration in accordance with law under the
Service Tax and had not produced the documents showing that the
petitioner company was engaged in carrying on the business which
would be falling in the exempted category, the Respondent No. 3
is fully justified in taking a view that it is a case of fraud/willful
suppression and evasion of tax in violation of the statutory
provisions.
21. Learned Senior Standing Counsel would further
submit that so far as the determination of liability in terms of sub-
section (4B) of Section 73 of the Act of 1994 is concerned, the
words occurring thereunder “wherever it is possible to do so”
makes it very clear that this provision is not mandatory and every
case has to be dealt in its own facts and circumstances. In the
present case, the Chief Commissioner, CGST and CX accorded
approval for transfer of 34 cases including the present case to the
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
13/17
Commissioner, CGST and CX, Audit Commissionerate, Patna for
adjudication vide Letter C.No. v(8)1-CCO/Patna/Stt./Adj. 17-
18/Pat-1/12494-99 dated 18.09.2023. Within five and half months
thereafter, the impugned order has been passed by the Respondent
No. 3. It is submitted that considering that the show cause notice
was issued on 13.10.2021 which was the Corona period, the delay
in determination of the liability cannot be taken to have given a
right to the petitioner to assail the impugned order on this ground.
Consideration
22. We have heard learned counsel for the petitioner as
well as learned Senior Standing Counsel for the CGST and CX.
Since we are of the view that this writ application is fit to be
allowed on the very first ground taken by learned counsel for the
petitioner i.e., the ground of violation of principles of natural
justice, the other issues raised by learned counsel for the petitioner
are not required to be discussed and adjudicated upon for the
present in this writ application.
23. On the point of violation of principles of natural
justice, this Court finds that the petitioner has made out a case. The
facts reveal that the show cause notice was issued on 13.10.2021,
no defence reply was filed but then for two and half years nothing
happened in the proceeding. For the first time, a date was fixed on
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
14/17
11.01.2024 for personal hearing. On this date, the petitioner
submitted a letter requesting a deferment which was accepted by
Respondent No. 3 and a date of hearing was fixed on 14.02.2024.
Admittedly, on 14.02.2024, the representative of the petitioner
appeared. The nature of the company’s operations was explained
to Respondent No. 3 and at the same time, it was informed that the
matters under consideration were previously managed by a team of
employees who were no longer associated with the company. The
impugned order (Annexure-P4) nowhere records that the
Respondent No. 3 fixed a further date giving an opportunity to the
petitioner company to appear with the documents and make its
submissions. All that is stated in the impugned order in paragraph
‘3.2’ is that the representative of the petitioner was explicitly asked
to provide substantiating documentation supporting the assertions
made by the noticee. However, as of the present moment, even
after 15 days, the noticee has failed to submit any documents in
support of his claim. Thus, it appears that when the hearing took
place on 14.02.2024, no specific date was fixed by Respondent
No. 3 giving an occasion to the petitioner company to know the
actual date of the next hearing.
24. At this stage, this Court finds that by virtue of
Section 83 of the Act of 1994, Section 33A of the Central Excise
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
15/17
Act, 1944 would be applicable in relation to the adjudication
procedures which were adopted by Respondent No. 3. Section 33A
of the Central Excise Act, 1944 reads as under:-
“1[33A. Adjudication procedure.–(1) The
Adjudicating authority shall, in any proceeding
under this Chapter or any other provision of this
Act, give an opportunity of being heard to a party
in a proceeding, if the party so desires.
(2) The Adjudicating authority may, if sufficient
cause is shown, at any stage of proceeding
referred to in sub-section (1), grant time, from
time to time, to the parties or any of them and
adjourn the hearing for reasons to be recorded in
writing:
Provided that no such adjournment shall be
granted more than three times to a party during
the proceeding.]”
25. The spirit of Section 33A may be found in paragraph
‘14.3’ of the master circular no. 1053/2/2017-CX dated 10.03.2017
(Annexure-P5). Paragraph ‘14.3’ reads as under:-
14.3 Personal hearing : After having given a fair
opportunity to the noticee for replying to the show
cause notice, the adjudicating authority may proceed
to fix a date and time for personal hearing in the case
and request the assessee to appear before him for a
personal hearing by himself or through an authorised
representative. At least three opportunities of
personal hearing should be given with sufficient
interval of time
1. Inserted by Act 23 of 2004, S.81 (w.ef. 10-9-2004).
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
16/17
so that the noticee may avail opportunity of
being heard. Separate communications should be
made to the noticee for each opportunity of
personal hearing. In fact separate letter for each
hearing/extension should be issued at sufficient
interval. The Adjudicating authority may, if
sufficient case is shown, at any stage of
proceeding adjourn the hearing for reasons to be
recorded in writing. However, no such
adjournment shall be granted more than three
times to a noticee.”
26. Further, paragraph ‘14.4’ of the master circular
mandates that the adjudicating authority must maintain a record of
personal hearing and written submission made during the personal
hearing. Evidence of personal hearing and written submission on
record, would be very important while adjudicating the case. A
combined reading of paragraph ‘14.3’ and ‘14.4’ of the master
circular leaves no room to contest that Respondent No. 3 may
deviate from these provisions of the master circular but in the
present case, we find that Respondent No. 3 has not followed the
mandate of granting at least three opportunities of personal hearing
to the petitioner company.
27. In our considered opinion, the statutory requirement
as envisaged under Section 33A of the Central Excise Act, 1944
read with paragraph ‘14.3’ of the master circular has not been
complied with.
Patna High Court CWJC No.9317 of 2024 dt.15-04-2025
17/17
28. In result, the impugned order is liable to be set aside
on this ground alone. We, therefore, set aside the impugned order
(Annexure-P4). The matter is remitted to the Respondent No. 3 for
fixing a date of hearing giving at least four weeks’ time to the
petitioner to produce the documents and submit a written
submission in support of its contention.
29. The petitioner must co-operate in conclusion of the
proceeding as early as possible. The Respondent No. 3 shall pass a
fresh reasoned order considering all aspects of the matter which
would be brought to his notice by the petitioner within a period of
two months from the date of receipt/production of a copy of this
order.
30. This writ application is allowed to the extent
indicated hereinabove.
(Rajeev Ranjan Prasad, J)
(Ashok Kumar Pandey, J)
lekhi/-
AFR/NAFR CAV DATE Uploading Date 19.04.2025 Transmission Date
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