Facts of the Case

This case, despite arising in a GST Commissionerate and being adjudicated by "Central Tax" officers, actually concerns a pre-GST Service Tax demand, not GST itself — the impugned order carries an "-ST" (Service Tax) suffix. Apple Tree Educational Society filed Writ Petition No. 27457 of 2023 before the High Court for the State of Telangana at Hyderabad, challenging Order-in-Original No. 54/2021-22-Adjn(Commr)-ST dated 08.03.2022, issued by the Commissioner of Central Tax, Ranga Reddy GST Commissionerate, imposing a service tax demand of Rs. 4,14,88,480 on the petitioner's establishment, along with a consequential demand letter dated 04.09.2022 issued by the Superintendent of Central Tax.

The petitioner's central grievance was that the notice for personal hearing, issued prior to passing the Order-in-Original, had not actually been served on it, depriving it of any opportunity to explain or defend itself before the adjudicating authority. It was also contended that, as an educational institution, the petitioner fell under an exempted category as per a Master Circular dated 10.06.2011.

Issues Involved

  1. Whether the Order-in-Original imposing service tax was validly passed when the notice for personal hearing was never actually served on the petitioner.
  2. Whether the petitioner's claimed exemption as an educational institution under the Master Circular required examination.
  3. What consequence should follow from a breach of natural justice caused by non-service of the hearing notice.

Petitioner's Arguments

  • The notice for personal hearing was never served upon the petitioner, denying it any opportunity to explain or defend itself before the tax authority passed the impugned order.
  • The petitioner, being an educational institution, fell under the exempted category as per the Master Circular dated 10.06.2011 and should not have been subjected to service tax at all.

Respondent's Arguments

  • The impugned order itself recorded, in paragraph 5, that the service provider had neither submitted a reply to the show cause notice nor attended the personal hearing, and that the intimation of personal hearing sent to the service provider had been returned undelivered by the postal authorities.
  • Adjudication had therefore proceeded on the basis of the data/documents available on record, since the notice could not be served despite being dispatched.

Court Order / Findings

  • The Court noted the Department's own admission, recorded in the impugned order, that the personal hearing intimation was returned undelivered by postal authorities.
  • Since the notice for personal hearing was admittedly undelivered, the Court held there was no occasion for the petitioner to have submitted its explanation or defence.
  • The Court set aside the Order-in-Original dated 08.03.2022 solely on this ground of non-service, and remitted the matter back to the adjudicating authority.
  • The Court directed that the set-aside order itself be treated as the fresh notice for personal hearing, with the petitioner required to submit its reply on or before 30.10.2023, after which the authority was to proceed and pass an appropriate order in accordance with law.
  • The Court expressly clarified that the order was set aside only on the ground of non-service of hearing notice, without examining the merits of the tax demand or the educational-institution exemption claim.

Important Clarification

Although the demand runs into over Rs. 4 crore and the case appears in GST commissionerate records, this order does not decide any GST issue — it deals with a Service Tax demand (a pre-GST levy) and turns entirely on a breach of natural justice caused by an undelivered hearing notice. The petitioner's argument about educational-institution exemption was neither accepted nor rejected; that question, along with the underlying tax liability, remains open for the fresh adjudication that the Court has directed. Businesses receiving similar notices should always verify actual delivery/service of any personal hearing intimation, since non-service alone can be enough to have an otherwise-completed adjudication order set aside.

Sections Involved

  • Finance Act, 1994 — the statute under which Service Tax (a pre-GST levy on services) was demanded via the impugned Order-in-Original.
  • Section 151, Code of Civil Procedure, 1908 — invoked for the interim applications seeking stay of the impugned order and restraint on tax collection.
  • Article 226, Constitution of India — writ jurisdiction invoked before the High Court.
  • Principles of Natural Justice — the core ground on which the order was set aside, for want of a genuine opportunity of hearing.

Decision – In Favour of

Decided in favour of the petitioner, but only on the narrow ground of non-service of the hearing notice — the Order-in-Original was set aside and the matter remitted for a fresh, reasoned order after giving the petitioner an actual opportunity to be heard. The tax demand itself, and the exemption claim, were left open for the fresh proceedings.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad (Special Original Jurisdiction)
  • Case No.: Writ Petition No. 27457 of 2023
  • Coram: Justice P. Sam Koshy and Justice Laxmi Narayana Alishetty
  • Date of Order: 6 October 2023

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.