2023 (6) TMI 1249 - HC - Service Tax

Principles of natural justice - proper application of mind by adjudicating authority or not - Levy of service tax - Business Auxiliary Service - Retention of Freight - service charges, for services provided by the petitioner to its client for transportation of goods by the airlines - HELD THAT - It appears to be quite peculiar that initially the adjudication of the show cause notices was taken up by respondent no. 3, however, in view of the order passed by respondent no. 5, the same was transferred/assigned to respondent No. 2, as the incumbent who was earlier holding the post of respondent no. 3-Commissioner of CGST, during the pendency of adjudication of the show cause notices, was promoted to the post of Principal Commissioner. It also appears that the additional written submissions, which were quite material on law and facts, were in fact placed on record by the petitioner inadvertently before respondent no. 3, hence, the same could not be taken into consideration by respondent No. 2 when he passed the impugned orders. Thus certainly on such premise, there was a prejudice which was suffered by the petitioner in non-consideration of such submissions. Any breach of the principles of natural justice would be required to be attributed as an incurable defect qua the impugned order. It would be appropriate in the facts and circumstances of the present case that respondent No. 2 takes a holistic view of the matter considering the decision of the tribunal in EMU Lines Pvt. Ltd. vs. Commissioner of CGST and Central Excise, Belapur 2023 (6) TMI 64 - CESTAT MUMBAI , which considers a prior decision of the tribunal in Greenwich Meridian Logistics (I) Pvt. Ltd. 2016 (4) TMI 547 - CESTAT MUMBAI . On a perusal of the impugned order, it appears that such decision has not been considered. Respondent No. 2 needs to hear the petitioner afresh on the show cause notices, and after taking into consideration the facts of the case - the impugned order dated 29 May, 2019 passed by respondent No. 2 is required to be quashed and set aside relegating the petitioner to the jurisdictional Commissioner as may be intimated by the respondents to the petitioner at least two weeks in advance, for an appropriate order to be passed in accordance with law - Petition allowed.

Summary

Issues Involved:
1. Validity of the demand of service tax.
2. Constitutionality of Section 174 of the CGST Act, 2017.
3. Validity of specific notifications and orders under the CGST Act, 2017.
4. Constitutionality of Section 35F of the Central Excise Act, 1944.
5. Alleged breach of principles of natural justice.

Summary:

1. Validity of the Demand of Service Tax:
The petitioner challenged the demand of service tax made vide Order-in-Original dated 29.05.2019, arguing it was violative of Articles 14, 19, and 265 of the Constitution. The petitioner contended that the adjudicating authority did not consider additional written submissions due to a mistaken belief about the adjudicating officer's identity. The court found merit in this argument, noting that the additional submissions were material and their non-consideration constituted a breach of natural justice.

2. Constitutionality of Section 174 of the CGST Act, 2017:
The petitioner sought a declaration that Section 174 of the CGST Act, 2017 was ultra vires the Constitution (101st) Amendment Act, 2016, and violative of Articles 14, 19, and 265. However, the court did not provide a detailed ruling on this issue, instead focusing on the procedural lapses in the adjudication process.

3. Validity of Notifications and Orders:
The petitioner also sought to quash specific notifications and orders, arguing they were ultra vires Section 3 of the CGST Act, 2017, and violative of Articles 14 and 19. The court did not delve into the merits of these claims, emphasizing the need for a fresh adjudication process that considers all relevant submissions and legal precedents.

4. Constitutionality of Section 35F of the Central Excise Act, 1944:
The petitioner challenged Section 35F of the Central Excise Act, 1944, as being arbitrary and violative of Articles 14 and 19. The court did not specifically address this issue, focusing instead on the procedural deficiencies in the adjudication of the service tax demand.

5. Alleged Breach of Principles of Natural Justice:
The court found that the petitioner suffered prejudice due to the non-consideration of additional written submissions, which were inadvertently placed before the wrong adjudicating authority. The court emphasized that any breach of natural justice principles is an incurable defect and necessitated a fresh hearing.

Conclusion:
The court quashed the impugned order dated 29 May 2019 and directed the adjudicating authority to hear the petitioner afresh, considering all relevant submissions and legal precedents. The court kept all contentions of both parties open and directed the Commissioner to expedite the hearing and pass an appropriate order within ten weeks. The petition was disposed of with no order as to costs.