Facts of the Case

This is a common order of the Telangana High Court disposing of two connected writ petitions challenging adjudication orders confirming service tax demands under the erstwhile Finance Act, 1994. This is a Service Tax matter relating to the period 2016-17; GST is referenced only because the demand was confirmed by invoking Section 173(2) of the Central Goods and Services Tax Act, 2017 (the transitional/savings provision continuing pending service tax proceedings), and not because any GST liability itself was in dispute.

The petitioner, Surya Rao Arshanapally, challenged two Orders-in-Original dated 31.12.2021 passed by the Deputy/Assistant Commissioner of Central Tax, Kukatpally Division, confirming service tax demands of Rs. 43,49,385/- (and a corresponding amount in the connected matter) on taxable services allegedly provided by him during 2016-17, under Section 73(2) of the Finance Act, 1994 read with Section 173(2) of the CGST Act, 2017. The petitioner's principal grievance was that the show cause notices and proceedings leading up to the impugned orders had never been properly served on him — they were sent to an incorrect postal address (Plot No. 686 instead of his actual address at Plot No. 868, at the same H.No./colony/city) and to his e-mail, without proper service, thereby denying him any real opportunity to respond before the demand was confirmed.

Issues Involved

  1. Whether the impugned service tax adjudication orders were passed without proper service of notice and without affording the petitioner an adequate opportunity of hearing.
  2. Whether such a violation of natural justice warranted setting aside the orders and remanding the matter for fresh adjudication.

Petitioner's Arguments

  • The notices and proceedings preceding the impugned orders were sent to a wrong address (Plot No. 686 instead of the petitioner's actual address at Plot No. 868) and to his e-mail, resulting in non-service.
  • No proper opportunity of hearing was afforded to him at any stage before the demand of Rs. 43,49,385/- (and the connected amount) was confirmed, rendering the orders illegal, arbitrary and violative of Articles 19(1)(g), 20 and 21 of the Constitution.

Respondent's Arguments

  • On instructions, learned counsel for the Department candidly conceded before the Court that the notices issued had not been served upon the petitioner, or that departmental records at least did not reflect any such service.

Court Order / Findings

  • Based on the Department's own concession that service of notice on the petitioner could not be established, the Court held without hesitation that the petitioner had not been given a fair and reasonable opportunity of defence before the impugned orders were passed.
  • The Court allowed the writ petitions and set aside both impugned adjudication orders dated 31.12.2021, remanding the matter to the Deputy/Assistant Commissioner for fresh adjudication after affording a proper opportunity of hearing.
  • The petitioner was directed to appear before the adjudicating authority on 31.10.2023 and file his reply to the proceedings, after which the authority was to proceed afresh in accordance with law.
  • The Court did not examine or decide the substantive question of the petitioner's service tax liability; the matter was remitted purely for a fresh hearing on natural-justice grounds.

Important Clarification

This order turns entirely on a breach of natural justice — non-service of notice at the correct address — and results only in a remand for fresh adjudication, not a final finding either way on the petitioner's service tax liability for 2016-17. It is a Service Tax (Finance Act, 1994) ruling; the reference to Section 173(2) of the CGST Act reflects only the transitional mechanism used to continue a pre-GST proceeding, and the order does not decide any GST-law question.

Sections Involved

  • Section 73(2), Finance Act, 1994 — Recovery of service tax not levied or paid
  • Section 173, Central Goods and Services Tax Act, 2017 — Amendment of Act (transitional continuation of pending proceedings)
  • Articles 19(1)(g), 20 and 21, Constitution of India

Decision – In Favour of Petitioner (Assessee)

The Telangana High Court allowed the writ petitions, set aside the impugned service tax orders for want of proper notice and hearing, and remanded the matter for fresh adjudication — without deciding the underlying service tax demand on merits.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition Nos. 23355 and 23357 of 2023
  • Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty
  • Date of Order: 30 August 2023

Link to Download the Order

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