Revenue Cannot Adjudicate Decade-Old SCNs On NPV Sales Tax Retention: Bombay High Court

The Bombay High Court at Goa has set aside two show cause notices issued to a manufacturer seeking to levy central excise duty on the differential amount of sales tax/VAT retained by it under a Net Present Value (NPV) incentive scheme, holding that the Revenue cannot be permitted to adjudicate stale notices after an unexplained and inordinate delay. A Division Bench of Justice Bharati Dangre and Justice Ashish S. Chavan allowed the writ petitions filed by the assessee, quashing show cause notices, which were sought to be adjudicated after a lapse of nearly nine and eight years, respectively. The Bench stated that in any case, as we find that the determination of the show cause notices shall defeat its purpose, on account of lapse of time as it will pose difficulty for the Revenue as well as the Assessee to track the necessary material, which will be necessary for effective adjudication and hence, according to us, the show cause notices cannot be adjudicated and are liable to be quashed and set aside only on the ground of gross delay in not adjudicating them, despite lapse of period of 9 and 8 years respectively. The assessee, Computer Graphics Private Limited, engaged in the manufacture of excisable goods, had availed the benefit of an NPV-based sales tax/VAT deferment scheme floated by the State Government. In 2002, the scheme was amended to allow premature discharge of the deferred liability by paying only the Net Present Value (NPV) of the total deferred sales tax. The assessee had discharged its sales tax liability, under the scheme at a discounted NPV amount and retained the balance. The Revenue alleged that such retained amount constituted additional consideration and ought to have been included in the transaction value under Section 4(3)(d) of the Central Excise Act, 1944, read with Rule 6 of the Central Excise Valuation Rules, 2000, and accordingly issued show cause notices. Aggrieved by the show cause notices the assessee preferred a writ petition arguing that the delay in adjudication vitiated the proceedings, apart from the issue having already been settled on merits by judicial pronouncements. The Revenue argued that the matters were transferred to the “Call Book” due to the pendency of appeals before the Supreme Court in Union of India v. Uttam Galva Steels Ltd. Civil Appeal No. 7272 of 2005, and that adjudication was withheld awaiting the outcome of the said proceedings. The Bench following its earlier decisions in Sanghvi Reconditioners Pvt. Ltd. v. Union of India 2017 SCC Online Bom 9781 and ATA Freight Line India Pvt. Ltd. v. Union of India 2022 SCC Online Bom 648, reiterated that even in the absence of a statutory limitation period, show cause notices must be adjudicated within a reasonable time. The Bench observed that the issue on merits stood concluded by the Supreme Court's decision in Uttam Galva Steels, and that even thereafter, the Revenue failed to take any steps for adjudication despite the lapse of over a year after the disposal of the connected proceedings. The Bench held that permitting adjudication after such an extraordinary delay would prejudice both the assessee and the Revenue. In view of the above, the Bench allowed the writ petition in favour of the assessee holding that the proceedings could not be sustained on account of gross delay, without entering into the merits of the demand. Case Title: Computer Graphics Private Limited v. Union of India & Ors. Case Nos.: Writ Petition Nos. 2052 & 2054 of 2025 (F) Appearance for Petitioner/Assessee: Mr. Bharat Raichandani with Mr. Vibhav R. Amonkar and Mr. Raj Chodankar Appearance for Respondent: Ms. Asha Desai, Standing Counsel Click Here To Read/Download Order

Revenue Cannot Adjudicate Decade-Old SCNs On NPV Sales Tax Retention: Bombay High Court

Rajnandini Dutta

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