Facts of the Case

M/s Prachin Foundation, an educational trust in Ranga Reddy district, challenged an Order-in-Original dated 02.03.2022 passed by the Commissioner of Central Tax, Ranga Reddy GST Commissionerate, confirming a demand of Service Tax amounting to Rs.3,56,65,742/- under Section 73(2) of the Finance Act, 1994, along with interest and penalty.

The challenge was on the ground that neither the show-cause notice preceding the order, nor the notice of personal hearing, was ever served on the petitioner. When the matter came up, counsel for the respondents sought time to obtain instructions, and subsequently fairly conceded — as was itself recorded in paragraph 5 of the impugned order-in-original — that the notices had not been served, since the personal-hearing intimation sent to the petitioner had been returned undelivered by postal authorities, and the adjudication had proceeded ex parte on available records.

In view of this admitted non-service, the Court set aside the Order-in-Original, granting the petitioner three weeks to submit a reply, after which the Commissioner was to pass a fresh order following due opportunity of hearing; if no reply was filed, the authority was free to proceed and pass such order as deemed fit.

Issues Involved

  1. Whether the Order-in-Original dated 02.03.2022, confirming a Service Tax demand of Rs.3,56,65,742/-, could stand when the underlying show-cause notice and personal-hearing notice had not been served on the petitioner.

Petitioner's Arguments

  • Neither the show-cause notice preceding the Order-in-Original, nor the notice of personal hearing, was served on the petitioner, and the ex parte adjudication of a demand exceeding Rs.3.5 crore violated principles of natural justice.

Respondent's Arguments

  • Counsel for the respondents, after seeking time to obtain instructions, fairly conceded that the notices had not been served on the petitioner, as recorded in the order-in-original itself, since the personal-hearing intimation had been returned undelivered.

Court Order / Findings

  • The Court accepted the Department's own concession that the notices were not served on the petitioner, confirming the natural-justice violation.
  • The Order-in-Original dated 02.03.2022 was set aside, with the petitioner granted three weeks to submit a reply to the original show-cause notice.
  • If a reply was filed within that period, the Commissioner was directed to pass a fresh, reasoned order after granting due opportunity of hearing, including personal hearing; if no reply was filed, the authority remained free to pass such order as deemed fit.

Important Clarification

This is a pre-GST Service Tax (Finance Act, 1994) ruling on the requirement of proper service of a show-cause notice and hearing intimation before a demand can be confirmed — the 'GST Commissionerate' designation reflects the department's current name after reorganisation, not that the underlying levy is GST. The principle — that an ex parte demand cannot stand where notices were never actually served — mirrors similar safeguards under GST adjudication provisions, but this order itself decides only the Service Tax demand.

Sections Involved

  • Finance Act, 1994 — Section 73(2) (Service Tax demand and adjudication, pre-GST regime)

Decision – In Favour of

Decided in the petitioner's favour to the extent that the Order-in-Original was set aside for non-service of notice, with the matter remanded for a fresh reply and hearing — the merits of the Service Tax demand itself were not decided.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No.10378 of 2023
  • Coram: Hon'ble The Chief Justice Ujjal Bhuyan and Hon'ble Sri Justice N. Tukaramji
  • Date of Order: 25.04.2023

Link to Download the Order

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