Facts of the Case

This is a writ petition before the Telangana High Court challenging an Order-in-Original confirming a substantial service tax demand under the erstwhile Finance Act, 1994. This is a Service Tax matter for the tax period 01.04.2016 to 30.06.2017 — a pre-GST liability period — and does not involve any question of GST law, even though the respondent authority is designated as the "Commissioner of Central Taxes, Ranga Reddy GST Commissionerate."

The petitioner, M/s Sri Jayanth Engineering Company, challenged the Order-in-Original dated 01.11.2022 (received on 19.01.2023) passed by the Commissioner of Central Tax, which confirmed a service tax demand of Rs. 2,13,62,311/-, along with equivalent penalty and interest, invoking the Finance Act, 1994 for the period 01.04.2016 to 30.06.2017. The petitioner contended that this order had been passed without service of the show cause notices dated 16.07.2021, 08.09.2021 and 14.09.2021, or the connected e-mails dated 11.02.2021, 17.07.2021 and 20.09.2021, and without any opportunity of personal hearing.

Issues Involved

  1. Whether the impugned Order-in-Original confirming the service tax demand, penalty and interest could be sustained when the show cause notices and personal hearing notice had not been served on the petitioner.
  2. Whether the order was liable to be set aside as violative of natural justice, Articles 14, 19(1)(g) and 265 of the Constitution, and the provisions of the Finance Act, 1994.

Petitioner's Arguments

  • The impugned order was passed without a fair and reasonable opportunity of hearing, as the show cause notice itself was never served upon the petitioner, preventing him from responding to it.
  • The demand was consequently arbitrary, without authority of law and jurisdiction, and contrary to the Finance Act, 1994 and constitutional guarantees, warranting that it be set aside.

Respondent's Arguments

  • On instructions sought by the Court on the previous hearing date, learned counsel for the Department fairly conceded that the show cause notice had in fact not been served on the petitioner, and that the notice for personal hearing was also not served on him.
  • Learned counsel for the Department did not oppose the petitioner's proposal to remand the matter to the adjudicating authority for a fresh personal hearing and appropriate orders in accordance with law.

Court Order / Findings

  • The Court found support for the petitioner's contention in the impugned order itself, where the Commissioner had recorded (in paragraph 5) that the service provider had neither replied to the show cause notice nor attended the personal hearing, and that the intimation for personal hearing sent to the petitioner had been returned undelivered by the postal authorities — evidence that no real opportunity of hearing had been afforded.
  • The Court noted that it had, in similar circumstances in other cases, remanded such matters to the original adjudicating authority, treating the impugned order itself as a fresh show cause notice for personal hearing — an approach the Department's counsel did not oppose here either.
  • Holding that the impugned order was passed without granting an opportunity of personal hearing, the Court set aside the Order-in-Original dated 01.11.2022.
  • It directed that the set-aside order itself be treated as notice for personal hearing, with the petitioner to appear before the original adjudicating authority on 08.09.2023, with liberty to file a reply to the show cause notice; the authority was thereafter to pass appropriate orders in accordance with law after affording a hearing.
  • The writ petition was allowed on this natural-justice ground; the Court did not examine the merits of the Rs. 2.13 crore service tax demand itself.

Important Clarification

This order turns entirely on a clear breach of natural justice — undisputed non-service of the show cause notice and hearing notice, even acknowledged in the impugned order itself — and results in a remand for fresh adjudication rather than a final ruling on the petitioner's service tax liability. It concerns the pre-GST service tax regime for the period up to June 2017 and does not decide any GST-law question.

Sections Involved

  • Finance Act, 1994 — Levy and recovery of service tax
  • Articles 14, 19(1)(g) and 265, Constitution of India
  • Article 226, Constitution of India — Writ jurisdiction

Decision – In Favour of Petitioner (Assessee)

The Telangana High Court allowed the writ petition, set aside the Order-in-Original confirming the Rs. 2,13,62,311/- service tax demand for want of proper notice and hearing, and remanded the matter for fresh adjudication — without deciding the demand on merits.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No. 9513 of 2023
  • Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice N. Tukaramji
  • Date of Order: 28 July 2023

Link to Download the Order

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