2021 (11) TMI 602 - HC - Service Tax

Violation of principles of natural justice - procedure for hearing appeals through video conferencing during the Covid-19 pandemic, not followed - HELD THAT - The procedure for maintaining a record of personal hearing was created by the 3rd respondent to ensure compliance with the principles of natural justice during hearings undertaken through video conferencing. The procedure so created was based upon the guidelines laid down by the Supreme Court in its order dated 27.04.202 in suo motu WP(C) No.5/2020. The measures directed by the 3rd respondent as per its instructions bearing No.F.No.390/MISC/3/2019-JC lays down the various instructions for conduct of virtual hearing through the facility of video conferencing. The Appellate Authority has infracted the procedure laid down for hearing appeals through video conferencing methods. The impugned order is therefore found to be issued in violation of the principles of natural justice and is liable to be set aside and fresh orders are required to be passed - the 2nd respondent Appellate Authority is directed to pass fresh orders after complying with the procedure and after hearing the petitioners - petition allowed.

Summary

Issues:
Claim for refund of service tax under Section 104 of the Finance Act, 1994 rejected by 1st respondent; rejection upheld by appellate authorities; violation of principles of natural justice alleged in the appellate process.

Analysis:
The writ petitioner's claim for refund under Section 104 of the Finance Act, 1994, following the introduction of Section 104 to the Act, was dismissed by the 1st respondent. Section 104(1) exempts service tax on one-time upfront amounts related to long-term leases of industrial plots by State Government Industrial Development Corporations. The petitioner, registered under the Central Excise Act and the Finance Act, filed an appeal against the rejection of the refund claim, citing violation of natural justice principles by the appellate authority.

The petitioner opted to file a writ petition under Article 226, alleging that the appellate authority's order was flawed due to a breach of natural justice principles. The petitioner argued that the procedure for conducting video conferencing appeals during the pandemic, as outlined by the 3rd respondent, required maintaining a record of personal hearings, which was not adhered to in the impugned order. The petitioner referred to a previous judgment highlighting the importance of complying with such procedures.

In response, the Standing Counsel for the respondents contended that the absence of a recorded personal hearing did not invalidate the order, as the petitioner had been given a fair opportunity to present their case. The Court examined the guidelines set by the 3rd respondent for virtual hearings via video conferencing, emphasizing the importance of maintaining a record of personal hearings and providing the same to the appellant for verification and modification within a specified timeframe.

The Court noted that the appellate authority had failed to comply with the prescribed procedure for maintaining a record of personal hearings, as mandated by the guidelines. Referring to a previous judgment in similar cases, the Court held that the failure to adhere to the video conferencing hearing procedures constituted a violation of natural justice principles. Consequently, the Court quashed the appellate authority's order and directed a fresh hearing, instructing the authority to pass new orders within three months in compliance with the prescribed procedure. The writ petition was allowed accordingly.