Facts of the Case

M/s Vishnupriya Constructions was assessed to service tax by a best-judgment order dated 03.03.2022, passed under Section 73 of the Finance Act, 1994, read with Rule 142, in proceedings before the Commissioner of Central Tax, Ranga Reddy District.

The firm filed WP No. 44514 of 2022 before the Telangana High Court challenging this order, contending it had not been given adequate opportunity of hearing, including personal hearing, and that this violated CBIC's own master circular (No. 1053/02/2017-CX) which mandates at least three personal hearing opportunities before an adjudication order is passed.

The firm also argued that similar proceedings on the same subject matter had earlier been initiated against it in Maharashtra by a different jurisdictional officer, who had accepted its defence and closed the matter, and it should not be subjected to a second round of proceedings on the same issue by a Telangana officer.

This is a pre-GST Service Tax matter under the Finance Act, 1994; it does not concern the GST law.

Issues Involved

  1. Whether the impugned best-judgment assessment order was vitiated for failure to grant the petitioner adequate opportunity of personal hearing, as mandated by the department's own master circular.
  2. Whether initiation of proceedings by two different jurisdictional officers on the same subject matter was impermissible.

Petitioner's Arguments

  • The petitioner had not been granted the minimum of three personal hearing opportunities mandated by CBIC master circular No. 1053/02/2017-CX before the best-judgment order was passed.
  • Since a jurisdictional officer in Maharashtra had already examined and accepted its defence on the same subject matter and closed those proceedings, the petitioner could not be subjected to fresh proceedings for the same liability by an officer in Telangana.

Respondent's Arguments

  • The department's counsel conceded, on instructions, that only one notice for personal hearing had in fact been issued to the petitioner, and that since the petitioner did not respond to the show-cause notice or the hearing notice, the officer had no option but to proceed and pass the impugned order presuming the petitioner did not intend to contest.

Court Order / Findings

  • The Court noted the department's own concession that only one personal hearing notice had been issued, against the master circular's requirement of at least three opportunities with sufficient intervals, and held that the petitioner had been denied a fair and reasonable opportunity of hearing.
  • On this ground alone, it held the impugned proceedings unsustainable and quashed the order dated 03.03.2022.
  • It directed the petitioner to appear before the respondent authority by a specified date, without any further notice being required, and permitted the petitioner to make a fresh representation, including on jurisdictional aspects, with the authority to decide the matter afresh strictly on merits and in accordance with law.
  • The writ petition was allowed without costs; the Court did not go into or decide the separate jurisdictional-overlap argument about the Maharashtra proceedings.

Important Clarification

This ruling turns entirely on denial of natural justice (inadequate personal hearing) in a pre-GST Service Tax assessment under the Finance Act, 1994; it establishes no GST proposition. The service tax liability itself remains open and will be decided afresh by the department after giving the petitioner a proper hearing.

Sections Involved

  • Finance Act, 1994 – Section 73 (best-judgment assessment of service tax)
  • Central Excise Rules, 2002 – Rule 142 (as applied to service tax adjudication)
  • CBIC Master Circular No. 1053/02/2017-CX (mandating personal hearing opportunities)

Decision – In Favour of

Decided in the petitioner's favour — the best-judgment assessment order was quashed for denial of a fair hearing, and the matter was remanded for a fresh decision after affording the mandated personal hearing opportunities.

Case Details

High Court for the State of Telangana at Hyderabad, Special Original Jurisdiction. WP No. 44514 of 2022 (M/s Vishnupriya Constructions v. Union of India and Others). Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty. Order dated 11.08.2023.

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