2016 (6) TMI 725 - HC - Service Tax

Validity of ex-parte order - principles of natural justice - Confirmation of service tax with levy of penalty u/s at the rate of 1% of the demanded service tax on the said amount which was not paid till the date of payment of service tax subject to 50% of the service tax of the said amount - A further penalty of ₹ 10,000/- was also imposed for failure to pay the aforesaid determined amount. Held that - The fact that there was some proceedings pending before the Apex Court filed by the petitioner is also not in dispute. In such circumstances, we find that in case the respondent no.4 felt it expedient to proceed to adjudicate the demand raised by the respondents by rejecting the request of the petitioner to keep the matter in abeyance, it would be appropriate and in the interest of justice to give an opportunity to the petitioner of being heard before proceeding to pass the final order. It is not the contention of the respondents that the petitioner have been deliberately delaying the adjudication of the alleged claim put forward by the respondents. Matter restored before the adjudicating authority subject to payment of costs of ₹ 15,000/-

Summary

Issues: Violation of principles of natural justice in passing the impugned order

The judgment by the Bombay High Court involved a challenge to an order confirming a demand of ?1,86,73,790 under Section 73(1) of the Finance Act, 1994, and imposing penalties. The petitioner argued that the matter was posted for final hearing without adequate opportunity for a personal hearing, violating principles of natural justice. The petitioner also contended that they had strong grounds to oppose the demand as they had paid VAT on a significant portion of the amount demanded. The respondent, on the other hand, argued that the petitioner had forfeited their right to a personal hearing by not remaining present during the final hearing. The Court considered both arguments and found that the impugned order was passed in violation of natural justice due to the lack of a proper opportunity for the petitioner to be heard. The Court noted that the petitioner's application to keep the proceedings in abeyance could be seen as a request for deferring the hearing, and the respondent should have given the petitioner a chance to be heard before passing the final order. As a result, the Court quashed the impugned order, restored the matter to the respondent for fresh adjudication after hearing the petitioner, and imposed costs of ?15,000 on the petitioner to be paid to the respondents and the State Legal Services Authority.

In conclusion, the High Court found that while there was an alternate remedy available, the violation of natural justice warranted intervention under Articles 226 and 227 of the Constitution of India. The Court emphasized the importance of providing a fair opportunity to be heard before passing final orders, even if there were pending proceedings before another court. The judgment highlighted the need for procedural fairness and adherence to principles of natural justice in administrative decisions, ultimately setting aside the impugned order and directing a fresh hearing with proper opportunity for the petitioner to present their case.