Delhi HC in the case of Back Office IT Solutions Private Limited Versus Union of India

Case Covered:

Back Office IT Solutions Private Limited

Versus

Union of India

Facts of the Case:

Mr. Puneet Agrawal, who appears on behalf of the petitioner company, says that, although several grievances and resultant reliefs have been sought, in the instant writ petition, for the moment, the grievance and consequent relief sought, is confined to the failure on the part of the contesting respondents [i.e., respondent nos. 2, 4, and 5] to scrupulously adhere to the provisions of the instruction dated 21.12.2015 bearing F. No. 1080/09DLA/MISC/15/757 [in short “2015 instruction”] and the Master Circular dated 10.03.2017 [in short “2017 Master Circular”], issued by Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India [presently, known as “Central Board of Indirect Taxes & Customs”]

According to Mr. Puneet Agrawal, the impugned show cause notice cannot survive given the provision contained in paragraph 5 of the 2017 Master Circular [and the pari materia provision made in the 2015 instruction] for mandatory consultation with the assessee before issuance of a show-cause notice.

Observations:

The moot point over which the petitioner-company and the contesting respondents are at cross purposes is: as to whether the services offered by the petitioner-company to two entities located outside India fall within the ambit of Section 65B (44) Explanation-3(b) of the Finance Act. According to the contesting respondents, the recipients of the services are associate concerns and the aforementioned services are provided through a computer network, i.e., the internet from a taxable territory to a non-taxable territory.

The Decision of the Court:

Thus, having regard to the foregoing, we are of the view that the contesting respondents were mandatorily required to have a pre-show cause notice consultation with the petitioner-company and that having not being done in the instant matter, the proceedings initiated by the contesting respondents via the impugned show cause notice are non-est in law. That being said, the only issue, which remains to be addressed, is concerning limitation. This aspect is pending consideration before the Supreme Court i.e. as to the date when the limitation will commence.

Thus, having regard to the foregoing, the matter is remanded to the contesting respondents with the following directions:

(i) The contesting respondents will serve an appropriate communication on the petitioner-company indicating therein, the date, time, and venue at which they intend to convene a meeting for holding the pre-show cause notice consultation.

(ii) The concerned officer will accord a personal hearing to the authorized representative of the petitioner-company.

(iii) The concerned officer would allow the authorized representative of the petitioner-company to make submissions on the merits of the matter including the aspect concerning jurisdiction. The concerned officer will, after hearing the authorized representative of the petitioner-company, pass an order as to whether or not it is a fit case for continuing with the proceedings in accordance with the mandate of the law including the Finance Act.

(iv) If the concerned officer concludes that it is a fit case in which proceedings should continue against the petitioner-company, then, he/she would decide as to whether or not the impugned show cause notice should be revived or a fresh show-cause notice should be issued in consonance with the decision that would be rendered by the Supreme Court in SLP (Civil) Diary No. 35886/2019.

The writ petition is disposed of in the aforesaid terms. Pending application(s) shall also stand closed.

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