SHEESHA SKY LOUNGE HOSPITALITY AND SERVICES PVT LTD. vs UNION OF INDIA (THROUGH CHAIRMAN C.B.I.C.) AND ANR.

Digitally signed
by PRAJAKTA
SAGAR
VARTAK
Date:
2026.03.17
21:18:02
+0530
2026:BHC-OS:6749-DB
PRAJAKTA
SAGAR
VARTAK
905-WP 2574-24.DOC
Prajakta Vartak

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2574 OF 2024
M/s. Sheesha Sky Lounge Hospitality
And Services Pvt. Ltd. ...Petitioner
Versus
Union of India & Anr. ...Respondents
_________
Mr. Bharat Raichandani with Ms. Bhagrati i/b. UBR Legal Advocates for
Petitioner.
Mr. Karan Adik with Mr. S. D. Deshpande for Respondents.
__________
CORAM: G. S. KULKARNI &
AARTI SATHE, JJ.
DATE: 12 MARCH 2026
Oral Judgment (Per: - G. S. Kulkarni, J.)
1. Rule. Rule made returnable forthwith. With the consent of the parties,
taken up for final hearing.
2. A short question which raises for consideration in this petition under
Article 226 of the Constitution of India is “as to whether the impugned show
cause notice dated 30 December 2020 could have been issued by respondent
no.2, bypassing the mandatory requirements prescribed under Sections 37B and
37C of the Central Excise Act, 1944, read with Circular No. 1053/2/2017-CX
dated 10 March 2017 issued by the Government of India, Ministry of Finance
(Department of Revenue), Central Board of Excise & Customs, New Delhi,
(CBEC) and subsequent Circular No.1076/02/2020-Cx dated 19 November
2020 stipulating issuance of a notice in regard to a pre-show cause consultation.
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3. The facts lie in a narrow compass:- The petitioner is a company, inter alia ,
engaged in running two non-air-conditioned rooftop restaurants at Andheri and
Lower Parel in Mumbai. It is the petitioner’s case that on 01 July 2012, the
Government granted exemption to restaurants having air-conditioning and a
licence to serve liquor vide Notification No.25/2012-ST (at serial no.19).
Thereafter, by a further notification dated 01 March 2013 bearing No.03/2013-
ST, the earlier Notification No.25/2012-ST (supra) was amended and the
condition regarding licence to serve liquor was omitted. It is the petitioner’s
contention that indisputedly the petitioner’s restaurants do not have air-
conditioning or central heating during any period of the year.
4. It is the petitioner’s case that there was a clarificatory Circular
No.173/8/2013-ST dated 07 October 2013 issued by the CBEC wherein it was
clarified that services provided by non-air-conditioned or non-centrally air-heated
restaurants are exempt from service tax.
5. It is on such backdrop, the petitioner contends that on 29 December 2020,
the petitioner’s Chartered Accountant received an e-mail from respondent No.2
with the subject ‘ Service Tax inquiry in respect of income declared in ITR/TDS
vis-a-vis Taxable Service Value and short payment of Service Tax for the period
October 2014 to June 2017 ’, calling upon the petitioner to submit certain
information within three days. It is stated that immediately on the next day, the
impugned show cause notice dated 30 December 2020 was issued by respondent
no.2 demanding service tax of Rs.1,26,03,575/- along with a proposal to recover
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interest and impose penalty. It is on such backdrop, the present petition has been

filed.
6. Mr. Raichandani, learned counsel for the petitioner, at the outset would
submit that the impugned action on the part of respondent no.2 in issuing the
show cause notice is illegal, as it clearly breaches the mandate of Section 37-C of
the Central Excise Act, 1944, The reason being that it is evident from the show
cause notice that the provisions invoked are Section 73/72 of the Finance Act,
1994, as made applicable in terms of Section 174 of the Central Goods and
Services Tax Act, 2017 (CGST Act). It is Mr. Raichandani’s contention that apart
from the breach of the provisions of the Central Excise Act, the impugned action
is also contrary to the circulars dated 10 March 2017 and 19 November 2020
issued by the CBEC. He has drawn our attention to the relevant clauses of the
said circulars, and more importantly paragraph 5 of the circular dated 10 March
2017, which reads thus:-
“5.0 Consultation with the noticee before issue of Show Cause
Notice: Board has made pre show cause notice consultation by the
Principal Commissioner/Commissioner prior to issue of show cause
notice in cases involving demands of duty above Rs. 50 lakhs (except for
preventive/ offence related SCN’s) mandatory vide instruction issued
st
from F. No. 1080/09/DLA/MISC/15, dated 21 December 2015. Such
consultation shall be done by the adjudicating authority with the assessee
concerned. This is an important step towards trade facilitation and
promoting voluntary compliance and to reduce the necessity of issuing
show cause notice.”
7. Our attention is also drawn to a similar condition required to be followed
by the Department, which has been made mandatory by the circular dated 19
November 2020 with regard to holding pre-show cause notice consultations.
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Clause 4 of the said circular reads thus:-

“4. Due to the above change in monetary limits of adjudication and
to lend clarity on this issue, it is hereby clarified that “Pre-show cause
notice consultation with assessee, prior to issuance of SCN in case of
demands of duty is above Rupees 50 Lakhs (except for preventive/
offence related SCN’s), is mandatory and shall be done by the Show
Cause Notice issuing authority.”
8. It is therefore his submission that the circulars, which are binding on the
Department, have been completely overlooked while issuing the impugned show
cause notice. Mr. Raichandani submits that a similar issue had fell for
consideration before this Court in a batch of writ petitions in Rochem Separation
1
Systems (India) Pvt. Ltd. Versus The Union of India & Ors. , wherein the co-
ordinate Bench of this Court, considering the position in law in regard to the said
circulars as well as several decisions of different High Courts, quashed and set
aside similar actions on the part of the Department. He therefore submits that on
this ground alone, the petition deserves to be allowed.
9. On the other hand, Mr. Adik, learned counsel for the Revenue, has drawn
our attention to the reply affidavit justifying the issuance of the show cause notice.
It is his contention that sufficient intimation was issued to the petitioner,
including by issuance of a summons; however, the petitioner avoided to appear
before respondent no.2, and eventually the impugned show cause notice had to
be issued. Our attention in this regard is drawn to paragraph 11 of the reply
affidavit filed on behalf of the Department by Shri. Jagdish Kumar, Assistant
Commissioner of CGST & Central Excise, Mumbai, the relevant contents of
1 2025 (10) TMI 68 – Bombay High Court
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which are required to be noted which read thus:-

“11. With reference to the contents of paras 4.10 to 4.12 of the
Petition, I say and submit that para 5 of the Board' Circular no
1053/2/2017-CX dated 10.03.2017 which requires pre show cause
notice consultation is reproduced as under:-
'Board has made pre-show cause notice consultation by the
principal commissioner / commissioner prior to issue of show
cause notice in cases involving demands of duty above Rs.50
lakhs (except for preventive/offence related SCN's)
mandatory vide instruction issued from
F.No.1080/09/DLA/MISC/15 dated 21st December, 2015.
Such consultation shall be done by the adjudicating authority
with the assessee concerned. This is an important step
towards voluntary compliance and reduces the necessity of
issuing SCN.' [Emphasis added]
In the present case, the petitioner, on being telephonically
contacted by the jurisdictional officers informed that their C.A
could appear only after 7th January 2021. Thus, the petitioner did
not exhibit any willingness to voluntarily comply before the last
date of issuance of SCN. Had the petitioner appeared in response
to the summons dated 29.12.2021 and offered satisfactory
clarification before the last date of issuance of SCN, possibly the
SCN would not have been issued. In absence of cooperation on the
part of the Petitioner it became necessary for the department to
issue SCN to protect Government revenue. With regard to the case
laws cited by the Petitioner it is submitted that the facts of these
cases are at variance from the facts of the present case such viz. (i)
the Petitioner did not present himself in response to summons
dated 29.12.2020, (ii) the Petitioner informed that his C.A could
appear on or after 07.01.2021 only i.e. 7 days after the last date of
issuance of SCN. Therefore, ratio of the cited case law is not
applicable to the present case.”
10. It is Mr. Adik’s contention to the effect that once sufficient notice was
issued to the petitioner by issuance of summons, hence it was not necessary for
respondent no.2 to issue a notice for a pre-show cause consultation, prior to
issuing the impugned show cause notice to the petitioner.
11. On such premise, we have heard the learned counsel for the parties and
perused the record.
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12. At the outset, we may observe that the provisions of the Central Excise

Act, 1944, stand attracted being made applicable by the provisions of the Section
83 of the CGST Act. In the present circumstances, since the issue concerns a
demand of service tax, Section 37B of the Central Excise Act becomes relevant,
which provides for “Instructions to Central Excise Officers”, making it mandatory
for such officers to observe and follow the directions of the Board. Section 37-B
reads thus:-
“37B. Instructions to Central Excise Officers.--The Central Board of
Excise and Customs constituted under the Central Boards of Revenue
Act, 1963 (54 of 1963), may, if it considers it necessary or expedient so
to do for the purpose of uniformity in the classification of excisable goods
or with respect to levy of duties of excise on [such goods or for the
implementation of any other provision of this Act], issue such orders,
instructions and directions to the Central Excise Officers as it may deem
fit, and such officers and all other persons employed in the execution of
this Act shall observe and follow such orders, instructions and directions
of the said Board:
Provided that no such orders, instructions or directions shall be
issued-
(a) so as to require any Central Excise Officer to make a
particular assessment or to dispose of a particular case in a particular
manner; or
(b) so as to interfere with the discretion of the [Commissioner of
Central Excise (Appeals) in the exercise of his appellate functions.”
13. Also Section 37-C, which provides for the ‘Service of decisions, orders,
summons, etc.’, is required to be strictly followed. The said provision also needs
to be noted which reads thus:-
“37C. Service of decisions, orders, summons, etc.--(1) Any decision or
order passed or any summons or notices issued under this Act or the
rules made thereunder, shall be served,-
(a) by tendering the decision, order, summons or notice, or sending it by
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registered post with acknowledgment due [or by speed post with proof of
delivery or by courier approved by the Central Board of Excise and
Customs constituted under the Central Boards of Revenue Act, 1963
(54 of 1963)], to the person for whom it is intended or his authorised
agent, if any;

(b) if the decision, order, summons or notice cannot be served in the
manner provided in clause (a), by affixing a copy thereof to some
conspicuous part of the factory or warehouse or other place of business
or usual place of residence of the person for whom such decision, order,
summons or notice, as the case may be, is intended;
(c) if the decision, order, summons or notice cannot be served in the
manner provided in clauses (a) and (b), by affixing a copy thereof on the
notice-board of the officer or authority who or which passed such
decision or order or issued such summons or notice.
(2) Every decision or order passed or any summons or notice issued
under this Act or the rules made thereunder, shall be deemed to have
been served on the date on which the decision, order, summons or notice
is tendered or delivered by post [or courier referred to in sub-section (1)]
or a copy thereof is affixed in the manner provided in sub-section (1).]”
14. The CBEC in exercise of the powers conferred under Section 37-B, issued
a Master Circular dated 10 March 2017, the contents of which have been noted
hereinabove, providing for a mandatory requirement of a pre-show cause notice
consultation. This position has been reiterated in the subsequent Circular dated
19 November 2020 (supra). Thus, there is substance in the contentions as urged
on behalf of the petitioner that such legal requirements could not have been
forgone. In the present case, it is quite clear that the mandate of the said circular
has been completely breached, as no notice for a pre-show cause consultation was
issued by Respondent No. 2 prior to the issuance of the impugned show cause
notice. Clearly, in view of the mandatory nature of the circulars, a notice
requiring pre-show cause consultation was an essential prerequisite. The
contentions as urged on behalf of the respondents that a prior intimation in view
of a summons being issued, would suffice, hence, a notice for a pre-show cause
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consultation was not required to be issued, cannot be accepted, as such

submission militates against the mandatory requirements stipulated under the
said circulars.
15. The legal position in such context has also been considered by this Court
in the case of Rochem Separation Systems (India) Pvt. Ltd. (supra). In the said
decision, the Division Bench of this Court, after referring to several earlier
judgments passed by the following order:-
“ORDER
(a) The impugned show cause notices are hereby quashed and
set aside.
(b) The Revenue is given the opportunity to carry out the pre-
consultative process by issuing a pre-consultation notice within
four weeks from the date this order is uploaded.
(c) If such a pre-consultation notice is issued, the Assessees
must file their replies within two weeks of their receipt.
(d) The pre-consultation process must be completed one way
or the other, in accordance with law, within a period of a further six
weeks from the date of receipt of the Assessees' replies.
(e) Depending on the outcome of the pre-consultation process,
the Revenue would be entitled to issue fresh show-cause notices.
(f) The period of limitation from 30 January 2023 until the
fresh show cause notices are issued (if at all), within the timeline
indicated above, shall not be counted for the purpose of limitation.
(g) The exclusion of limitation which we have directed above
shall be in addition to any other exclusion or extension that the
Revenue can claim under the law. This includes exemptions or
extensions granted due to the COVID-19 pandemic.”
16. In the light of the above discussion, we are of the clear opinion that the
petition needs to be allowed by setting aside the impugned show cause notice.
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Hence the following order:-

ORDER
i. The impugned show cause notice dated 30 December 2020 issued by
respondent no.2 is quashed and set aside.
ii. Respondent no.2 is directed to grant to the petitioner an opportunity of a
hearing by adopting a pre-consultation process, before issuing any show cause
notice. A notice for such pre-consultation shall be issued to the petitioner within
a period of three weeks from today.
iii. The pre-consultation process shall be completed in accordance with law
within a period of six weeks from the date of receipt of the notice by the
petitioner. Respondent no.2 shall thereafter take necessary steps based on the
outcome of the pre-consultation process, i.e. to take a decision whether the facts
and circumstances warrant issuance of a fresh show cause notice.
iv. Needless to observe that insofar as limitation is concerned, as the
petitioner was bonafide pursuing the present petition, the period of limitation
from the date of institution of the petition on 28 July 2021 shall not be
counted, in the event a fresh show cause notice is to be issued.
v. It is also clarified that the exclusion of limitation as directed, shall be
in addition to any other exclusion or extension that the Revenue can claim
under the law, which includes exemptions or extensions granted during the
Covid-19 pandemic.
vi . All contentions of the parties on such hearing are expressly kept
open.
vii. Rule is made absolute in the aforesaid terms. No costs.
(AARTI SATHE, J.) (G. S. KULKARNI, J.)
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