2023 (11) TMI 821 - HC - Service Tax

Maintainability of petition - petition dismissed on the ground that the petitioners have approached the court belatedly challenging a demand which was raised in the year 2019 - HELD THAT - The authority has not considered or adjudicated the correctness of the stand taken by the appellant-assessee and continued to issue demand notices alleging default in service tax liability. At that stage, the petitioners had filed the writ petition assuming the audit being of the department had, prima facie, come to a conclusion that there is a default in payment of service tax liability, such audit para will be forwarded to the concerned jurisdictional officer, who, in turn, will put on the assessee on notice to enable the assessee to respond to the allegation. It is thereafter the case will be adjudicated after affording an opportunity to the assessee and an order will be passed by the jurisdictional officer. However, in the instant case such procedure has not been followed. Be that as it may, the assessee is entitled to an opportunity and the assessee should be permitted to place its stand before the jurisdictional officer who has to adjudicate the same and thereafter come to a conclusion by passing a speaking order. This procedure having not been adopted in the instant case, appropriate direction needs to be issued to the authority to do so in the matter. The writ petition is disposed of by directing the petitioners to treat the allegations in para 2 of the Draft Audit Report in Draft Audit Report No.191/ST/DGP Audit/Gr.-02/17-18 which was appended to the notice dated 24.04.2019 as a show cause notice and submit their objections within 30 days from the date of receipt of the server copy of this order.

Summary

Issues involved:
The issue involves a belated challenge to a demand raised in 2019, following a spot memo issued in 2018 regarding service tax liability and Input Service Credit. The case concerns the failure of the authority to consider the appellant's submissions and follow proper adjudication procedures as per Section 72A(4) of the Finance Act, 1994.

Summary of the Judgment:

Issue 1: Belated Challenge to Demand
The intra court appeal was filed against the dismissal of a writ petition challenging a demand raised in 2019, which the Single Bench rejected as belated since the petitioners approached the court after a significant delay following the issuance of the spot memo in 2018.

Issue 2: Failure to Consider Appellant's Submissions
The appellant-assessee contended that they were eligible for Input Service Credit based on the spot memo issued in 2018, but the authority failed to consider their submissions and continued to issue demand notices without proper adjudication of the correctness of the stand taken by the appellant.

Issue 3: Adjudication Procedure
The Court emphasized the importance of following proper adjudication procedures as per Section 72A(4) of the Finance Act, 1994, which mandates affording the assessee an opportunity to present their case before the jurisdictional officer for a speaking order to be passed. The Court found that such procedure was not followed in this case.

Judgment:
The Court allowed the appeal, setting aside the previous order and directing the petitioners to treat the allegations in the Draft Audit Report as a show cause notice. The appellants were instructed to submit their objections within 30 days, after which the jurisdictional officer must provide a personal hearing and pass a speaking order on merits and in accordance with the law. The appellants were also permitted to submit earlier replies along with the new objections.