Rajasthan High Court – Jodhpur
M/S. Hazi A.P. Bava And Company vs Commissioner (2026:Rj-Jd:6515-Db) on 5 February, 2026
Author: Yogendra Kumar Purohit
Bench: Yogendra Kumar Purohit
[2026:RJ-JD:6515-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
(1). D.B. Civil Writ Petition No. 17744/2019
M/s. Hazi A.p. Bava And Company, Plot No. 8, Road No. 3, Jain
Colony, New Bhupalpura, Udaipur (Raj.), Through Its Power Of
Attorney Holder Shri Aftab Hussain Siddiki S/o Shri Nisar Ahmed
Siddiki, Aged About 37 Years, Resident Of 08, Road No. 3, Jain
Colony, New Bhupalpura, Udaipur.
----Petitioner
Versus
1. Commissioner, Central Excise And Goods And Service
Tax, Commissionerate, 142-B, Sector-11, Hiran Magri,
Udaipur.
2. Joint Commissioner, Central Excise And Goods And
Service Tax, 142-B, Sector-11, Hiran Magri, Udaipur.
----Respondents
Connected With
(2). D.B. Civil Writ Petition No. 17668/2019
M/s. Hazi A.p. Bava And Company, Plot No. 8, Road No. 3, Jain
Colony, New Bhupalpura, Udaipur (Raj.), Through Its Power Of
Attorney Holder Shri Aftab Hussain Siddiki S/o Shri Nisar Ahmed
Siddiki, Aged About 37 Years, Resident Of 08, Road No. 3, Jain
Colony, New Bhupalpura, Udaipur.
----Petitioner
Versus
1. Commissioner, Central Excise And Goods And Service
Tax, Commissionerate, 142-B, Sector-11, Hiran Magri,
Udaipur.
2. Joint Commissioner, Central Excise And Goods And
Service Tax, 142-B, Sector-11, Hiran Magri, Udaipur.
----Respondents
(3). D.B. Civil Writ Petition No. 17675/2019
M/s. Hazi A.p. Bava And Company, Plot No. 8, Road No. 3, Jain
Colony, New Bhupalpura, Udaipur (Raj.), Through Its Power Of
Attorney Holder Shri Aftab Hussain Siddiki S/o Shri Nisar Ahmed
Siddiki, Aged About 37 Years, Resident Of 08, Road No. 3, Jain
Colony, New Bhupalpura, Udaipur.
----Petitioner
Versus
1. Commissioner, Central Excise And Goods And Service
Tax, Commissionerate, 142-B, Sector-11, Hiran Magri,
Udaipur.
2. Joint Commissioner, Central Excise And Goods And
Service Tax, 142-B, Sector-11, Hiran Magri, Udaipur.
----Respondents
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For Petitioner(s) : Mr. Lokesh Mathur
Mr. Prakash Kumar
For Respondent(s) : Mr. Kuldeep Vaishnav
Mr. Arpit Yoganandi
HON'BLE MR. JUSTICE ARUN MONGA
HON’BLE MR. JUSTICE YOGENDRA KUMAR PUROHIT
Order
Reportable
05/02/2026
Per: Arun Monga, J
1. Above titled three writ petitions are being decided vide
instant common order since a common assessment order dated
24.10.2019 passed by the Joint Commissioner, Central Excise and
Goods and Service Tax qua three financial years i.e. 2007-2008,
2009-2010 and 2010-2011, whereby the additional demand of
sum of Rs. 81,46,056/-, Rs. 1,04,97,017/-, and Rs. 1,03,44,427/-
respectively have been raised, is under challenge therein.
2. Succinctly speaking, the relevant facts of the case, shorn of
unnecessary detail, are as follows:
FACTS
2.1 The petitioner is a proprietorship concern engaged in the
fabrication and erection of structures at the sites of principal
employers using materials supplied by them and is registered
under the Service Tax laws. Pursuant to work orders dated
31.01.2007 issued by M/s Aditya Cement Limited and 06.01.2009
issued by M/s Prism Cement Limited, the petitioner carried out
fabrication and erection works at their respective sites.
2.2 For the period April 2008 to March 2009, a show cause notice
dated 01.10.2009 was issued alleging short payment of service
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[2026:RJ-JD:6515-DB] (3 of 15) [CW-17744/2019]tax amounting to Rs. 42,60,123/- on the premise that fabrication
formed part of “erection, commissioning or installation” and was a
service under Section 65(39a) of the Finance Act, 1994.The
petitioner disputed the said demand.
2.3. While the final decision on the earlier show cause notice
dated 01.10.2009 was still pending, another show cause notice
dated 30.04.2010, for the period April 2007 to March 2008, was
issued alleging short payment of service tax amounting to Rs.
81,46,056/- on the same premise that fabrication formed part of
“erection, commissioning or installation” and thus a service under
Section 65(39a) of the Finance Act, 1994, invoking the extended
period under Section 73(1) and proposing penalties.
2.4. Thereafter, another show cause notice dated 14.09.2010, for
the period April 2009 to March 2010, was issued alleging short
payment of service tax amounting to Rs. 1,04,97,017/- on
identical grounds.
2.5. The show case notice dated 01.10.2009 qua FY 2008-09 was
adjudicated and confirmed vide Order-in-Original dated
15.01.2011 passed by the Adjudicating Authority/Additional
Commissioner of Central Excise.
2.6. Aggrieved thereby, the petitioner preferred an appeal against
the said Order-in-Original dated 15.01.2011 before the Appellate
Authority of the revenue. However, the same was dismissed vide
Order-in-Appeal dated 20.01.2011 and the Order-in-Original
passed by the Addl. Commissioner of Central Excise (Appeals) was
upheld.
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2.7. The petitioner then filed an appeal before the learned CESTAT,
New Delhi against the adjudication and confirmation of the
demand by the revenue.
2.8. While CESTAT appeal filed by the petitioner was pending, yet
another further show cause notice dated 20.09.2011 for the
period April 2010 to March 2011 was issued demanding service
tax of Rs. 1,03,44,427/-.
2.9. Meanwhile, by an order dated 27.12.2011 passed by CESTAT,
the petitioner’s appeal against similar demand for the FY April
2008 to March 2009 was allowed. The learned CESTAT
categorically held that fabrication does not fall within the taxable
entry of “erection, commissioning or installation.”
2.10. Notwithstanding, the Department did not proceed to
adjudicate the pending show cause notices for the FY 2007-08,
2009-10 and 20010-11 in light of the CESTAT order dated
27.12.2011.
2.11. Instead, on 07.03.2012, the three pending notices for the
periods 2007-08, 2009-10 and 2010-11 were transferred to the
Call Book, effectively keeping the proceedings in abeyance for an
indefinite period.
2.12. The Department chose to challenge the Tribunal’s order by
filing D.B. Central Excise Appeal No. 13/2012 before the Rajasthan
High Court on 03.08.2012.
2.13. Even during the pendency of the said High Court appeal, no
steps were taken to progress the adjudication of the pending
notices, resulting in prolonged dormancy attributable solely to the
Department.
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2.14. Ultimately, in view of the Government’s litigation policy and
the Board’s Circular dated 11.07.2018 prescribing monetary limits,
the Department withdrew the appeal from this Court vide an order
dated 06.09.2018.
2.15. As a bolt from the blue, the Department later took the
pending three show cause notices out of the Call Book and
proceeded with adjudication. The Joint Commissioner, Central
Excise & GST, Udaipur, passed the common impugned Order-in-
Original dated 24.10.2019, qua all three notices, holding that
since the Department’s appeal against the Tribunal’s order had
been withdrawn on the ground of monetary limits, the Tribunal’s
order and findings rendered therein carried no precedential value.
On this premise, the authority confirmed the demands along with
interest and penalties.
3. The adjudicating authority (Joint Commissioner) proceeded
to raise the disputed demand as below:-
Sr. PERIOD DEMAND
No.
1. April 2007 - March Demand of Rs. 81,46,056/- by
2008 imposing penalty under Sections
76 and 78
2. April 2009 - March Demand of Rs. 1,04,97,017/- with
2010 penalty under Section 76
3. April 2010 - March Demand of Rs. 1,03,44,427/- with
2011 penalty under Section 76
4. Hence the instant writ petition impugning the aforesaid order
dated 24.10.2019 passed by the Joint Commissioner/Adjudicating
Authority.
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5. In the aforesaid backdrop, we have heard the rival
contentions and perused the case file as well as assessment order
under challenge herein.
SUBMISSIONS ON BEHALF OF THE PETITIONER
6. Learned counsel for the petitioner submits that the issue of
tax liability of fabrication stood conclusively settled by the order of
the Tribunal dated 27.12.2011, wherein it was categorically held
that fabrication does not fall within the ambit of “erection,
commissioning or installation” as defined under Section 65(39a) of
the Finance Act, 1994. The said finding, rendered on the very
same work orders, was never set aside and, therefore, continued
to bind the Adjudicating Authority.
6.1. It is further submitted the High Court’s order dated
06.09.2018 permitting withdrawal of appeal against Tribunal order,
imparted finality to the Tribunal’s decision. In these circumstances,
any attempt to reopen or re-agitate the settled issue was wholly
impermissible in law.
6.2. Counsel contends that the Adjudicating Authority committed a
manifest breach of judicial discipline by disregarding the binding
Tribunal decision on the specious ground that the Department’s
appeal before the High Court had been withdrawn on account of
monetary limits. Such withdrawal, it is urged, in no manner dilutes
or effaces the precedential or binding value of the Tribunal’s order.
6.3. Learned counsel further submits that the resurrection of the
show cause notices dated 30.04.2010, 14.10.2010 and
20.09.2011 after an unexplained lapse of nearly nine years,
notwithstanding the Tribunal’s decision and the High Court’s
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withdrawal order, is arbitrary, oppressive, and vitiated by malice in
law.
6.4. On merits, he argues that fabrication and erection are
distinct and severable activities i.e. fabrication amounting to
manufacture and erection constituting installation. Said position is
expressly clarified by Circular No. 80/10/2004-ST, dated
17.09.2004. The mere use of the expression “whether pre-
fabricated or otherwise” does not, by itself, render the activity of
fabrication taxable.
6.5. It is further submitted that the imposition of penalty under
Section 76 of the Finance Act, 1994 is wholly unsustainable in the
absence of any suppression of facts or intent to evade tax, the
controversy being one of bona fide interpretation of the statutory
provisions.
6.6. Finally, learned counsel submits that the impugned Order-in-
Original dated 24.10.2019 is ex facie without jurisdiction, being
grossly time-barred under Section 73(4B) of the Finance Act,
1994, inasmuch as a show cause notice issued on 14.09.2010
could not, in law, have been adjudicated nearly nine years
thereafter.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS
7. Learned counsel for the respondents would argue that:-
7.1. The contention of the appellant is not tenable inasmuch as
C.E.S.T.A.T Final Order dated 27.12.2011 was never accepted by
the Department on merits. It was duly appealed against before
Rajasthan High Court. The said appeal was withdrawn from this
Court only due the Board’s Circular issued under the Government’s
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[2026:RJ-JD:6515-DB] (8 of 15) [CW-17744/2019]litigation policy bearing F. No.90/Misc/116/2017-JC dated
11.07.2018, since the demand raised was less than Rs.50 lakhs.
7.2. Appeals withdrawn on monetary grounds do not signify
acquiescence qua findings rendered in the orders under challenge,
nor do such orders carry precedent value. This position is fortified
by CBIC Instructions F. No. 390/Misc/116/2017-JC dated
11.07.2018 issued under Section 35R of the Central Excise Act,
1944, made applicable to Service Tax matters by virtue of Section
83 of the Finance Act, 1994, which expressly provides that non-
filing or withdrawal of appeals on monetary limits does not
preclude the Department from contesting the same or similar
issues in other cases.
7.3. The show cause notices specifically alleged that the appellant
was engaged in providing “Erection, Commissioning and
Installation Services” under contracts with M/s Prism Cement Ltd.
and M/s Aditya Cement Ltd. The scope of work included fabrication
of structural components such as steel silos, cyclones, bins, ducts,
chutes, hoppers, stacks, supports, sheds, trestles, galleries,
platforms, hand railings, and town guards, followed by erection
and installation of plant and equipment, whether bought out or
fabricated.
7.4. The appellant undertook fabrication of plate work and
structural components and thereafter erected or installed the
same at designated sites. Such composite activities squarely fall
within the ambit of taxable services, and therefore, the appellant
was liable to pay service tax on the amounts so charged.
DISCUSSION AND ANALYSIS
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8. Having heard, as above, first and foremost, it so transpires
that qua the argument of limitation addressed by learned counsel
for the petitioner, once it is a conceded position that three show
cause notices were issued on 30.04.2010 (F.Y. 2007-2008),
14.09.2010 (F.Y. No.2009-2010) and 20.09.2011 (F.Y. 2010-
2011), whereas the common assessment order having been
passed on 24.20.2019 i.e. after 9 years, on that ground alone the
writ petition deserves to be allowed. Let us see how.
9. First and foremost, reference may be had to Section 73 (4B)
of the Finance (No.2) Act, 2014 was introduced w.e.f. 06.08.2014,
for ready reference, the relevant portion thereof is reproduced
herein under:-
“Section 73. Recovery of service tax not levied or paid or
short-levied or short-paid or erroneously refunded-
(4B) The Central Excise Officer shall determine the amount
of service tax due under sub-section (2)-(a) within six
months from the date of notice where it is possible to do so,
in respect of cases falling under in sub-section (1);
(b) within one year from the date of notice, where it is
possible to do so, in respect of cases falling under the
proviso to sub-section (1) or the proviso to sub-section
(4A).”
10. a perusal of the above reveals that Section 73(4B) of the
Finance Act, 1994 prescribes a time discipline for adjudication of
show cause notices relating to recovery of service tax. It provides
that the Central Excise Officer ‘shall’ determine the tax liability
within six months from the date of notice in normal cases under
Section 73(1), and within one year where the extended period is
invoked under the proviso to Section 73(1) or in cases covered by
the proviso to Section 73(4A), ‘where it is possible to do so’.
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10.1. The provision reflects a legislative intent to ensure
expeditious adjudication and to prevent proceedings from
remaining pending indefinitely. At the same time, the phrase
“where it is possible to do so” indicates that the timelines are
directory rather than mandatory. Nevertheless, the Department is
expected to act within a reasonable period and cannot justify
inordinate or unexplained delays in concluding proceedings.
10.2. In essence, Section 73(4B) operates as a statutory reminder
that recovery proceedings must be pursued with diligence, and
prolonged dormancy or revival after long gaps may be hit with the
vice of arbitrariness, prejudice, and violation of the scheme of
limitation embedded in Section 73, ibid.
11. In light of the aforesaid position of law, learned counsel for the
respondents would submit that assessment order dated
24.10.2019 could not be passed within one year as the show
cause notices were kept pending in the call book category of the
department, awaiting the finality of C.E.S.T.A.T/High Court
proceedings qua previous financial years, wherein similar show
cause notice assailed by the petitioner was under challenge.
12. To test the aforesaid argument, let us see the chronology of
events which is self revealing. Same is as below:-
Sr. Dates Events Nos. 1. 30.04.2010 Show cause notice for financial year 2007-2008 2. 14.09.2010 Show cause notice for financial year 2009-2010 3. 20.09.2011 Show cause notice for financial year 2010-2011 4. 27.12.2011 C.E.S.T.A.T passes order in favour of the
petitioner allowing the appeal against common
assessment order.
5. 07.03.2012 Case placed was under the call book category by
department.
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6. 03.08.2012 Appeal filed before the High Court against
C.E.S.T.A.T order.
7. 06.09.2018 The appeal against C.E.S.T.A.T order was
withdrawn from High Court by the revenue.
8. 24.10.2019 Assessment orders were passed.
13. From the aforesaid chronology, it is borne out that the
assessment orders were passed beyond period of one year after
placing the case of the petitioner in the call book, awaiting the
outcome of the High Court and/or C.E.S.T.A.T proceedings.
13.1. It is clear that while for the assessment years 2007-2008
and 2009-2010, show cause notices dated 30.04.2010 and
14.09.2010 were kept pending without sending the matter to call
book category until 07.03.2012. Therefore, the revenue cannot
take advantage of the period of limitation as the period of
limitation had already expired before they were put in the ‘call
book’ category for the first two financial year.
13.2. Qua the third financial year i.e. 2010-2011, the show cause
notice was issued on 20.09.2011. C.E.S.T.A.T passed order dated
27.12.2011 in favour of the petitioner allowing the appeal against
common assessment order. The proceedings before the High Court
were withdrawn on 06.09.2018. Accordingly, the assessment
orders ought to have been passed within 1 year from the said date
even if the explanation given by the revenue is to be taken as
reasonable ground for keeping the case pending. However,
impugned assessment order qua the said financial year was
passed on 24.10.2019 which is once again beyond the one year
period in terms of Section 73 (4B), ibid.
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14. The sequence of events demonstrates that after issuance of
notices between 2010 and 2011, the Department allowed the
matters to remain pending for more than 9 years by placing them
in the Call Book and by failing to take timely steps even after
withdrawal of its appeal from High Court in 2018. The delay is
entirely attributable to administrative inaction, resulting in revival
of proceedings after an inordinate lapse of time, thereby causing
serious prejudice to the petitioner and rendering the continuation
of proceedings contrary to the principles of certainty, fairness, and
reasonable exercise of statutory power.
15. In somewhat similar circumstances, High Court of Delhi in the
matter of MS L.R. Sharma & Co. vs. Union of India, 1 observed
as under:
“29. This Court is of the view that Section 73(4B) was framed and
introduced in the Finance Act to ensure effective administration of
taxation. While there cannot be denying that the taxation forms the
backbone of a nation’s economy, any inordinate delay by the
Revenue itself in prosecuting its own cases cannot be construed in
their favour by stretching the period of limitation to nine years
especially when the provision requires the proceedings to be
concluded within six months / one year.
30. De hors the aforesaid findings, even if one accepts that the
time period of six months/one year as mentioned in Section 73(4B)
of the Finance Act is only suggestive, it would be unreasonable to
hold that the same can be extended till a period of nine years in the
given facts and circumstances of the case. The Revenue has failed to
explain as to how such a delay in re-initiating the proceedings in
respect of the impugned show cause notice issued in the year 2015
is justified, when under similar facts and circumstances, the
proceedings initiated against the petitioner pursuant to two show
causes notices dated 15.10.2010 and 14.10.2011 itself were dropped
in the year 2012 vide Order-in-Original dated 26.04.2012 and even
the appeal against the same, preferred by the Revenue, had been
dismissed by the learned CESTAT in the year 2022 – about two
years prior to the issuance of impugned hearing notice. Further, it is
the case of Revenue itself that the proceedings in the present case
had been kept in abeyance due to pendency of the appeal before the
learned CESTAT. The decision of the learned CESTAT, concededly,
has been accepted and not challenged by the Revenue.
1 WP(C)13689/2024, decided on 20.12.2024
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31. The Revenue‟s contention that it was justified in keeping the
proceedings in this case, in abeyance because an appeal pertaining
to similar issue was pending before the learned CESTAT, is
unmerited. The filing of an appeal in another case qua the
petitioner, though on identical issue, and its pendency before the
learned CESTAT cannot be held as a valid reason for not
conducting the proceedings in the present case, after a show cause
notice has already been issued, within the time frame as laid down
in Section 73(4B) of the Finance Act. Even if the said appeal was
pending, the proceedings in this case could have continued and
order(s) could have been passed, and if aggrieved, the Revenue
could have again approached the learned CESTAT by way of an
appeal. However, strangely, the Revenue did not proceed with the
case, awaiting the outcome in the appeal pending before the learned
CESTAT, and in the meanwhile, the petitioner was left under the
impression that since he had not received any adverse
communication/order from the Revenue, the proceedings and show
cause notice had been closed.
32. Therefore, in view of the foregoing discussion, we do not find
any reason for the delay caused in the present case in not
concluding the hearing qua the impugned show cause notice dated
21.04.2015 within the stipulated time period, and for issuing the
impugned hearing notice dated 18.09.2024 after a period of nine
years.”
(emphasis is ours)
We are in respectful agreement with the aforesaid view taken by
Delhi High Court.
16. Once a show cause notice is issued, the statute contemplates
that adjudication should be completed within a reasonable and
proximate timeframe. The prescription of six months or one year,
as the case may be, in section 73(4B), ibid, reflects a clear
legislative expectation of procedural timelines to be followed.
Allowing the Revenue to revive proceedings after nine years
defeats the very purpose thereof. Even if the timeline is treated as
directory rather than mandatory, the law does not permit
authorities to act after an inordinate and unexplained delay. The
power vested under the section has to be exercised within a
reasonable period, failing which the action becomes arbitrary and
liable to be set aside.
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17. Where the authority sleeps over the matter for years and
provides no satisfactory explanation, any attempt to resurrect the
proceedings amounts to arbitrary exercise of power. Moreover,
during this long period of silence, the petitioner/assessee was
entitled to proceed on the reasonable belief that the matter had
attained finality, and reopening it after nearly a decade frustrates
legitimate expectations.
CONCLUSION
18. The Revenue cannot justify its inaction by relying on the
pendency of proceedings in another matter involving similar issues
before either the C.E.S.T.A.T on High Court, as the case may be.
Each show cause notice is an independent proceeding, and
nothing prevented the department from continuing adjudication
and passing an order, subject to appellate remedies if necessary.
By choosing to keep the matter in abeyance without any statutory
basis, the department effectively failed in its duty to decide, and
such self-created delay cannot operate to the detriment of the
taxpayer.
RELIEF
19. As an upshot, the writ petitions are allowed. Impugned order
dated 24.10.2019 passed by the Joint Commissioner, Central
Excise and Goods and Service Tax is set aside with consequences
to follow. The issue raised by the revenue in the withdrawn appeal
from High Court i.e. whether fabrication falls within the ambit of
“erection, commissioning or installation” as defined under Section
65(39a) of the Finance Act, 1994 is left open to be decided on
merits in some appropriate proceedings in future.
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20. In the parting, we may hasten to add that reliance placed by
learned counsel for the respondents on judgment passed by this
Court in the case of P.G. Foils Limited vs. The Assistant
Commissioner2is misplaced. Reading thereof clearly reflects that
the opinion rendered by the Division Bench there is also in terms
of the view expressed by the Delhi High Court, ibid. Merely
because certain observations have been made that Section 73
(4B) envisages that tax is to be determined within the time
prescribed “where it is possible to do so”, are of no significance. As
already noted, we do not find the explanation rendered by the
revenue to be reasonable in the present case, since the
assessment orders have been passed effectively more than 9
years of issuance of show cause notice.
21. All pending application(s) including stay petitions stand
disposed of.
(YOGENDRA KUMAR PUROHIT),J (ARUN MONGA),J
115-117-raksha/-
2 D.B. Civil Writ Petition No.14492/2021, Rajasthan High Court
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