Facts of the Case

The petitioner, M/s. Merco Engineers Private Limited, challenged the legality and validity of the Order-in-Original dated 08.03.2022, whereby the Additional Commissioner confirmed a Service Tax demand of ₹1,22,73,120, along with applicable interest and penalty under Section 73(2) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017.

The petitioner contended that neither the show cause notice preceding the Order-in-Original nor the notices for personal hearing were ever served upon it. Consequently, the petitioner was denied an opportunity to submit its defence before the adjudicating authority passed the order.

 

Issues Involved

  1. Whether the Order-in-Original passed without proper service of the show cause notice and hearing notices is legally sustainable.
  2. Whether denial of an opportunity of hearing amounts to violation of the principles of natural justice.
  3. Whether the adjudication order deserves to be quashed where the department is unable to establish service of notices upon the assessee.

 

Petitioner's Arguments

  • The petitioner submitted that the adjudication proceedings were conducted without serving the show cause notice.
  • It was further argued that no notice fixing personal hearing was ever received.
  • Since no opportunity was granted to contest the allegations, the Order-in-Original was passed in complete violation of the principles of natural justice.
  • The petitioner sought quashing of the impugned order and requested an opportunity to submit its reply before the adjudicating authority.

 

Respondent's Arguments

The Department submitted before the High Court that although the office had issued the show cause notice and personal hearing notices, there was no record available to establish that the notices had actually been served upon the petitioner.

 

Court Order / Findings

The Telangana High Court observed that the respondent was unable to produce any record demonstrating service of the show cause notice or hearing notices upon the petitioner.

Considering the absence of proof regarding service of notice, the Court held that the petitioner had been deprived of an effective opportunity of hearing.

Accordingly, the Court held that the ends of justice would be met by granting the petitioner an opportunity to participate in the adjudication proceedings.

The Court therefore:

  • Set aside and quashed the Order-in-Original dated 08.03.2022.
  • Directed that the impugned Order-in-Original shall be treated as the show cause notice.
  • Granted fifteen days to the petitioner to file its reply.
  • Directed the adjudicating authority to pass a fresh order in accordance with law after granting due opportunity of hearing.
  • Disposed of the writ petition without costs.

 

Important Clarification

This judgment reiterates that:

  • Mere issuance of a show cause notice is insufficient unless the department is able to establish its proper service upon the taxpayer.
  • Absence of proof of service constitutes violation of the principles of natural justice.
  • Any adjudication order passed without providing an effective opportunity of hearing is liable to be quashed.
  • The Court may direct that the impugned adjudication order itself be treated as the show cause notice, thereby enabling fresh adjudication after giving adequate opportunity to the assessee.

Sections Involved

  • Section 73(2) of the Finance Act, 1994
  • Section 174 of the Central Goods and Services Tax Act, 2017
  • Article 226 of the Constitution of India
  • Principles of Natural Justice

 

Link to download the order-https://www.mytaxexpert.co.in/uploads/1783931627_191compressed.pdf

 

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