2021 (3) TMI 913 - HC - Service Tax

Principles of natural justice - no hearing was granted before passing the impugned order - entire matter was regarding the reconciliation between the books of accounts and returns of the writ applicants - HELD THAT - One opportunity should be provided to the writ applicants to make oral submissions and offer appropriate explanation to the various queries raised in the show cause notice. The impugned order dated 11th November 2019 is hereby quashed and set aside and the entire matter is remitted to the adjudicating authority (respondent No.2) for fresh adjudication after giving an opportunity of hearing to the writ applicants on the condition that the writ applicants shall make a pre-deposit of the sum of ₹ 9,21,490/, which is 7.5% of the net tax demand as per the impugned order - application allowed by way of remand.

Summary

Issues:
1. Breach of principles of natural justice in passing the impugned order dated 11.11.2019 without granting a hearing to the writ applicants.
2. Request for quashing and setting aside the impugned order and remitting the matter to the adjudicating authority for fresh adjudication.
3. Determination of pre-deposit amount and conditions for the fresh adjudication process.

Issue 1: Breach of principles of natural justice in passing the impugned order

The writ applicants, engaged in property development, filed returns and paid service tax. Following a show cause notice, they submitted documents and requested a personal hearing to explain the reconciliation between their accounts and returns. Despite assurances, the 2nd respondent passed the impugned order without granting a hearing, confirming the proposed demand due to alleged lack of documentary evidence. The Court found a breach of natural justice principles as no hearing was granted before the order. The impugned order was deemed to be quashed and set aside, with the matter remitted to the adjudicating authority for fresh adjudication.

Issue 2: Quashing and setting aside the impugned order

The writ applicants contended that the impugned order was passed in violation of natural justice principles as no hearing was granted despite their readiness to explain the reconciliation between accounts and returns. The Court, after hearing both parties, decided to quash and set aside the impugned order dated 11.11.2019. The matter was remitted to the adjudicating authority for fresh adjudication, with a condition that the writ applicants make a pre-deposit of 7.5% of the net tax demand as per the impugned order, which would be retained by the respondents pending the final outcome of the fresh adjudication.

Issue 3: Determination of pre-deposit amount and conditions for fresh adjudication

The Court directed the writ applicants to make a pre-deposit of ?9,21,490, calculated based on the net tax demand by deducting admissible credits and self-assessed tax paid from the gross liability as per the impugned order. This amount was set as a condition for the fresh adjudication process. The Court instructed that the entire process, including the deposit and adjudication, should be completed within two months from the date of receipt of the order. The writ application was disposed of following these directions.