2018 (10) TMI 1561 - AT - Service Tax

Rejection of Refund claim without issuing show cause notice - refund claimed on the ground that they have not provided any service to M/s Generic Partners, Australia but only provided documents to them - refund rejected on the ground of time limitation - section 11B of CEA - unjust enrichment - Waiver of SCN by the appellant- Principles of Natural Justice. Held that - A consistent view taken by this Tribunal is that there has to be issuance of show cause notice, since it is mandatory and if the same has not been issued, then it is contrary to law and such proceedings have to be quashed. The lacunae of non issue of show cause notice is not curable and such proceedings are not sustainable. Even if a party has waived the show cause notice, it will not absolve the department s statutory liability to issue show cause notice under the relevant provision. Mere presence of the appellant before the Adjudicating Authority during the course of hearing does not authorise the department to encroach upon the right of the appellant to have a fair the opportunity of placing his defence before the adjudicating authority. The presence of the appellant before the Adjudicating Authority, without issuance of show cause notice, cannot lead to the conclusion that the appellant had a fair opportunity to defend the case. Otherwise also principle of natural justice requires issuance of show cause notice before the adjudication proceedings. There is no doubt that the principle of natural justice has been violated in the present matter - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim of service tax, Rejection of refund claim, Violation of principle of natural justice, Non-issuance of show cause notice

Refund claim of service tax:
The appellant filed a refund claim of service tax amounting to ?3,51,117, stating they did not provide any service to M/s Generic Partners, Australia, but only supplied documents to assist in obtaining marketing authorization. The appellant argued that since the amount received was not for any service provided, they were eligible for a refund. The claim was rejected by the adjudicating authority as time-barred under Section 11B. The appellant contended that no show cause notice was issued, and the Commissioner (Appeals-III) dismissed the appeal without addressing the violation of natural justice. The appellant challenged the order on various grounds, including the non-applicability of the time limit under Section 11B for refund of non-service tax amounts. The Authorized Representative for the Revenue maintained that the appeal should be dismissed. The Tribunal found that the appellant's claim was rejected without a show cause notice, violating the principle of natural justice. It held that the absence of a show cause notice denied the appellant a fair opportunity to defend the case, leading to the quashing of the proceedings. The Tribunal ruled in favor of the appellant, setting aside the impugned order due to the violation of natural justice.

Violation of principle of natural justice:
The Tribunal focused on the non-issuance of a show cause notice to the appellant, emphasizing the mandatory nature of such notice for a fair opportunity to defend the case. It noted that the appellant's presence before the Adjudicating Authority did not substitute the requirement of a show cause notice. The Tribunal reiterated that the principle of natural justice necessitates the issuance of a show cause notice before adjudication proceedings. It emphasized that the revenue cannot bypass this legal requirement, and the absence of a show cause notice renders the proceedings unsustainable. The Tribunal concluded that the violation of natural justice in not issuing a show cause notice warranted setting aside the impugned order and allowing the appeal filed by the appellant.

This judgment highlights the significance of adherence to procedural fairness and the mandatory requirement of issuing show cause notices in adjudication proceedings to uphold the principles of natural justice. The Tribunal's decision underscores the importance of providing parties with a fair opportunity to present their defense and the consequences of failing to comply with procedural safeguards in legal proceedings.