2022 (3) TMI 1260 - HC - Service Tax

Rectification of mistake - error apparent on the face of record or not - it is the stand that the orders rejecting the applications for rectification failed to consider the binding judgments of the jurisdictional High Court - opportunity of hearing was granted or not - Time Limitation - HELD THAT - The normal statutory remedy against an order-in-original as contemplated under the Act is to prefer an appeal under section 84 or section 85 or section 86 of the Act, as the case may be. The orders-in-original, involved in the present dispute were both issued by the Assistant Commissioner of the Central Tax and Central Excise and hence the appeal ought to be preferred under section 85 of the Act. As per section 85 of the Act, the appeals were to be presented within a period of three months from the date of receipt of the order and a further period of three months is available, if there is proof of sufficient cause for not presenting the appeal within the time limit. In the instant case, admittedly, petitioner had not preferred any appeal against the two orders-in-original, which were dated 18-12-2018 and issued on 19-12-2018. Instead of preferring an appeal, petitioner has preferred rectification petitions separately for the two assessment years, invoking the provisions of section 74 of the Act. The applications for rectification are seen to have been filed on 14-09-2021. The period stipulated for filing an application for rectification is two years from the date on which the order was passed. Though the respondents have taken a specific contention that the applications for rectification is not maintainable since the same do not satisfy the ingredients of section 74, as what is sought to be projected under the rectification petitions, is in effect a rehearing or reconsideration of the order-in-originals, the said issue need not be considered. Opportunity of hearing - HELD THAT - Indubitably an opportunity of hearing was not granted by the assessing officer while rejecting the applications for rectification. Though the statutory requirement of granting an opportunity of hearing is prescribed as one available only when there is an order enhancing the liability of the assessee or reducing a refund due to the assessee, in cases where the assessee had specifically sought for an opportunity of hearing, the situation assumes a different colour. It is crystal clear that there cannot be any doubt, that any decision rendered adversely affecting the rights and interest of a party, without hearing him, is not liable to be sustained. However, in the instant case, the provisions of the statute has incorporated a specific clause that compels the grant of an opportunity of hearing only when the order in rectification enhances the liability of the assessee or when refund is reduced. Since the statute has incorporated specific instances when there is a mandatory requirement of providing an opportunity of hearing, the legislative intention is clear that in other instances an opportunity of hearing is not required to be granted - A perusal of the application for rectification reveals that petitioner had specifically sought for an opportunity of hearing. Respondents have no case that such an opportunity was refused by any order in writing and intimated to the petitioner. In such circumstances, it was incumbent upon the assessing officer to grant an opportunity of hearing before issuing the orders of rectification. Thus there is a clear instance of violation of the principles of natural justice. Ext.P5 and Ext.P6 are liable to be set aside on that reason itself. The first respondent is therefore directed to grant an opportunity of hearing to the petitioner. The first respondent is thus directed to consider the applications for rectification filed by the petitioner afresh and as expeditiously as possible - Petition allowed.

Summary

Issues:
Challenge to rejection of rectification applications under Article 226 - Consideration of binding judgments and lack of hearing.

Analysis:
1. The petitioner, a primary agricultural co-operative society, contested being under the purview of the Finance Act, 1994, due to mutuality principles and member-confined activities. Allegations of providing services led to tax imposition for 2013-14 and 2014-15, prompting rectification applications under section 74 of the Act, which were rejected. The challenge raised concerns about non-consideration of High Court judgments and absence of a hearing opportunity.

2. Respondents argued for appeal under section 85(1) of the Act, highlighting the absence of timely appeals and the nature of rectification applications. The contention emphasized that rectification should address apparent mistakes, not serve as a full appeal. They asserted no hearing was necessary as rectification wouldn't increase liability, per section 74(4) of the Act.

3. The Court noted the statutory appeal remedy under section 85 of the Act, requiring appeals within three months of order receipt, extendable with cause. The petitioner's failure to appeal the original orders of 2018 led to rectification petitions in 2021, within the extended limitation due to the pandemic, following a Supreme Court judgment.

4. Despite the respondent's argument against the maintainability of rectification, the Court focused on the lack of hearing opportunity in the rectification process. Citing legal precedents emphasizing fair hearing as a fundamental principle, the Court stressed the importance of granting a hearing when requested, even if not mandatory under the Act.

5. The Court highlighted the necessity of a hearing when an adverse decision impacts a party's rights, as seen in the petitioner's specific request for a hearing in the rectification applications. Failure to grant this opportunity constituted a violation of natural justice principles, leading to the setting aside of the rectification orders.

6. Consequently, the Court set aside the rectification orders due to the violation of natural justice principles and directed the respondent to provide a hearing opportunity to the petitioner. The respondent was instructed to reconsider the rectification applications promptly, within a three-month period from the judgment's receipt.

This detailed analysis of the judgment addresses the issues raised, the legal arguments presented, and the Court's decision based on statutory provisions and principles of natural justice.