Facts of the Case

The Petitioner, Roots Education Pvt. Ltd., engaged in providing coaching services, was registered under Service Tax for taxable services including “Commercial Coaching or Training Service” and “Franchisee Service”.

Between 2013 and 2018, multiple Show Cause Notices (SCNs) were issued alleging non-payment of service tax on study material supplied by the Petitioner. The demands covered financial years from 2007–08 to June 2017.

Despite replies being filed promptly and even personal hearings being conducted (notably in December 2016), the adjudication was completed only in June 2024, resulting in confirmation of service tax demands, interest, and penalties.

The Petitioner challenged:

  • Order-in-Original dated 27.06.2024
  • Order-in-Appeal dated 31.01.2025
  • Underlying SCNs

on the ground of inordinate delay and violation of natural justice.

Issues Involved

  1. Whether inordinate delay (6–11 years) in adjudication of SCNs renders the proceedings invalid.
  2. Whether the phrase “where it is possible to do so” under Section 73(4B) of the Finance Act, 1994 allows indefinite delay.
  3. Whether such delay violates principles of natural justice and constitutional fairness.

Petitioner’s Arguments

  • The adjudication delay of 7 to 12 years is arbitrary and unconstitutional.
  • Section 73(4B) prescribes adjudication within 6 months / 1 year, and such timelines cannot be ignored.
  • Delay deprived the Petitioner of a fair opportunity to defend.
  • The department failed to provide any valid or justified reason for delay.
  • Reliance placed on precedents:
    • Vos Technologies India (P) Ltd. v. Director General
    • National Building Construction Co. Ltd. v. Union of India
    • Commissioner vs Shree Baba Exports

Respondent’s Arguments

  • Delay occurred due to:
    • Complexity of tax adjudication
    • COVID-19 pandemic disruptions
  • Section 73(4B) uses the phrase “where it is possible to do so”, indicating flexibility and no strict limitation.
  • No statutory bar exists preventing adjudication after delay.
  • Reliance on Supreme Court rulings:
    • CCE vs Bhagsons Paint Industry (India)
    • Commissioner vs Swati Menthol & Allied Chemicals Ltd. 

Court’s Findings / Order

The Delhi High Court held:

  • Inordinate and unexplained delay in adjudication is impermissible.
  • The phrase “where it is possible to do so” does not grant unlimited discretion or justify administrative lethargy.
  • Authorities must demonstrate “insurmountable circumstances” to justify delay — which was absent in this case.
  • Keeping proceedings pending for years together violates fairness and natural justice.
  • Prior judgments (especially Vos Technologies) clearly establish that:
    • Adjudication must be completed within a reasonable period
    • Delay alone can be a ground to quash proceedings

Final Order:

  • SCNs, OIO, and OIA were quashed and set aside.
  • Petition allowed in favour of the assessee.

Important Clarification

  • The Court clarified that:
    • The expression “where it is possible to do so” ≠ unlimited time
    • It applies only in cases of genuine impossibility or exceptional circumstances
  • Administrative delay, workload, or procedural inefficiencies cannot justify prolonged adjudication
  • Authorities are under a legal obligation to act with reasonable expedition 

Sections Involved

  • Section 73(4B), Finance Act, 1994 – Time limit for adjudication of service tax notices
  • Section 65 & 65(105), Finance Act, 1994 – Taxable services definitions
  • Principles of Natural Justice
  • Related references:
    • Section 28, Customs Act, 1962
    • Section 73 & 74, CGST Act, 2017

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/68022042025CW40842025_101357.pdf

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