Facts of the Case

The petitioner, Menlo Technologies India Private Limited, challenged the legality and validity of the Order-in-Original dated 04.03.2022 passed by the Commissioner of Central Tax. The petitioner contended that the adjudication order had been passed without serving the notice of personal hearing and without providing an effective opportunity to submit its reply to the show cause notice.

The impugned order itself recorded that the petitioner had neither submitted a reply to the show cause notice nor attended the personal hearing because the hearing intimation sent through post had been returned undelivered. Consequently, the adjudicating authority proceeded to decide the matter on the basis of the records available. The petitioner approached the Telangana High Court under Article 226 of the Constitution seeking quashing of the order for violation of the principles of natural justice.

Issues Involved

  1. Whether an adjudication order can be sustained when the notice of personal hearing was never effectively served upon the assessee.
  2. Whether passing an Order-in-Original without providing a reasonable opportunity of hearing amounts to violation of the principles of natural justice.
  3. Whether the matter should be remanded to the adjudicating authority for fresh adjudication after granting due opportunity to the petitioner.

Petitioner's Arguments

  • The petitioner submitted that the Order-in-Original dated 04.03.2022 had been passed in violation of the principles of natural justice.
  • It was argued that no effective opportunity had been provided to respond to the show cause notice or to participate in the personal hearing.
  • The petitioner pointed out that even the impugned order acknowledged that the personal hearing notice had been returned undelivered by the postal authorities.
  • Therefore, the order deserved to be quashed and the matter required reconsideration after granting proper opportunity of hearing.

Respondent's Arguments

  • The respondents admitted before the High Court that the departmental records did not disclose effective service of notice upon the petitioner.
  • It was also acknowledged that the notice of personal hearing had been returned undelivered by the postal authorities.
  • The respondents accordingly placed the factual position before the Court regarding non-service of notice.

Court Order / Findings

The Telangana High Court observed that the records clearly established that the notice of personal hearing had not been served upon the petitioner and had been returned undelivered.

The Court held that the Order-in-Original had been passed without effective service of notice and without granting the petitioner a reasonable opportunity of hearing. Such action constituted a clear violation of the principles of natural justice.

Accordingly, the High Court:

  • Set aside the Order-in-Original dated 04.03.2022.
  • Directed that the impugned order shall be treated as a notice to show cause.
  • Granted the petitioner three weeks' time to submit its reply.
  • Directed the adjudicating authority to pass a fresh order strictly in accordance with law after granting due opportunity of hearing, including personal hearing.
  • Clarified that if the petitioner failed to submit its reply within the prescribed period, the adjudicating authority would be at liberty to proceed and pass an appropriate order.
  • Disposed of the writ petition without costs.

Important Clarification

  • Mere issuance of a notice is not sufficient; effective service of notice is an essential requirement before adjudication.
  • An adjudication order passed without proper service of notice and reasonable opportunity of hearing violates the principles of natural justice.
  • Where such violation is established, the appropriate remedy is to set aside the adjudication order and remand the matter for fresh consideration.
  • The adjudicating authority must provide an effective personal hearing before passing a fresh order.

Sections

  • Article 226 of the Constitution of India
  • Principles of Natural Justice (Audi Alteram Partem)
  • Adjudication Proceedings under the Central Excise/GST Laws relating to Show Cause Notice and Personal Hearing

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785400201_2358compressed.pdf

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