2024 (9) TMI 1085 - HC - Service Tax

Violation of principles of natural justice - petitioner was not issued the show cause notice - territorial jursidiction of respondent No. 2 - jurisdiction in view of the fact that the petitioner or his proprietorship concern do not come within the jurisdiction of the Commissionerate of Dibrugarh - no taxable event had taken place within the said Commissionerate - HELD THAT - The service of notice ought to have been made by way of registered post with acknowledgement due or by speed post with proof of delivery or by duly approved courier. The question, however, arises that can it be said that Sub-Clause (a) of Section 37C (1) of the Act of 1944 have been complied with if the decision, order, summons or notice has been sent not to the proper address, inasmuch as, there is no denial to the averments made in the writ petition or any materials placed showing that the petitioner had/has any office at the place where the show cause notice was addressed. The answer has to be in the negative. Under such circumstances, this Court is of the opinion that the recourse to Sub-Clauses (b) (c) of Clause 37C (1) of the Act of 1944 is not permissible if the show cause notice was not sent at the proper address. In the instant case, it would be seen from a perusal of paragraph 1.15 of the impugned order that recourse to Sub-Clause (c) of Section 37C (1) of the Act of 1944 was resorted to on the ground that the service of the show cause notice could not be effected at No. 1 Ghilamara, North Lakhimpur which from the materials placed before this Court do not seem to be the address of the petitioner. This Court, therefore, is of inhesitant view that the impugned order dated 25.11.2022, was passed without affording due opportunity to the petitioner and as such, the same violates the principles of natural justice which is a facet of Article 14 and 21 of the Constitution. The consequential effect of the above opinion of this Court is that this Court can invoke its jurisdiction under Article 226 of the Constitution in the present facts. Whether the Office of the Commissionerate, Central Goods and Service Tax, Dibrugarh Division, would have the jurisdiction over the petitioner? - HELD THAT - The petitioner did not register himself or for that matter do not have a registration under the Finance Act, 1994. The question whether the petitioner had carried out any activities liable for payment of service tax within the jurisdiction of the respondent No. 2 is a question of fact which in the opinion of this Court can be very well adjudicated upon by the jurisdictional Officer. Taking into consideration that the impugned order is held to be bad in law for violation of the Principles of Natural Justice, the petitioner herein would be at liberty to take his defence on the questions as to whether the petitioner would be liable to pay service tax as well as to whether the respondent No. 2 shall have the jurisdiction. Taking into account that the petitioner does not hold any registration under the Finance Act of 1994, and the registration under the CGST Act of 2017 have no relevance, this Court is of the opinion that the issue pertaining to territorial jurisdiction should be decided by the respondent No. 2, provided the respondent No. 2 decide to issue a fresh show cause notice to the petitioner at his proper address. The impugned order dated 25.11.2022 is set aside and quashed on the ground that the same has been passed in violation to the Principles of Natural Justice - Petition disposed off.

Issues Involved:

1. Jurisdiction under Article 226 of the Constitution.
2. Non-service of show cause notice and opportunity of hearing.
3. Territorial jurisdiction of the respondent.

Issue-wise Detailed Analysis:

1. Jurisdiction under Article 226 of the Constitution:

The court considered whether it should exercise jurisdiction under Article 226 of the Constitution despite the availability of an alternative remedy in the form of an appeal before the Custom Excise and Service Tax Appellate Tribunal. The court referred to the Supreme Court judgment in M/s. Godrej Sara Lee Ltd. Vs. Excise and Taxation Officer cum Assessing Authority and Ors, which identified exceptions to the rule of exhausting alternative remedies before approaching the writ court. These exceptions include violations of fundamental rights, principles of natural justice, orders or proceedings being wholly without jurisdiction, challenges to the vires of an Act, and pure questions of law requiring legal determination by the High Court. The court deferred its decision on this issue pending analysis of the other issues.

2. Non-service of show cause notice and opportunity of hearing:

The petitioner argued that the impugned order dated 25.11.2022 violated principles of natural justice as the show cause notice was not served at the correct address. The petitioner's registered address was in Naharlagun, Arunachal Pradesh, but the notice was sent to an address in North Lakhimpur, Assam, where the petitioner had no office. The court noted that Section 37C of the Central Excise Act, 1944, as incorporated into the Finance Act, 1994, prescribes the manner of serving notices, which includes sending by registered post with acknowledgment due or by speed post with proof of delivery. The court found that the notice was not served at the correct address and that the recourse to alternative service methods under Section 37C(1)(b) and (c) was not permissible. The court concluded that the impugned order was passed without affording due opportunity to the petitioner, violating principles of natural justice.

3. Territorial jurisdiction of the respondent:

The petitioner contended that the respondent No. 2 did not have territorial jurisdiction as the petitioner's business was registered in Naharlagun, Arunachal Pradesh, and not within the jurisdiction of the Dibrugarh Commissionerate. The respondent's counsel argued, based on verbal instructions, that the petitioner conducted business within the jurisdiction of the Dibrugarh Commissionerate. However, no documentary evidence was provided to support this claim. The court noted that the petitioner did not have a service tax registration under the Finance Act, 1994, and that the question of whether the petitioner conducted taxable activities within the jurisdiction of respondent No. 2 was a factual matter to be adjudicated by the jurisdictional officer. The court held that the issue of territorial jurisdiction should be decided by respondent No. 2 if a fresh show cause notice is issued to the petitioner at the correct address.

Conclusion:

(I) The impugned order dated 25.11.2022 and the corrigendum dated 16.12.2022 were set aside and quashed due to violation of principles of natural justice.

(II) The respondent authorities, particularly respondent No. 2, may initiate fresh steps under the law, ensuring the show cause notice is sent to the petitioner's correct address in Naharlagun, Arunachal Pradesh.

(III) The period from the issuance of the show cause notice on 16.11.2022 until the certified copy of the judgment is served on respondent No. 2 is excluded from the limitation period for initiating a de novo process.

(IV) The issue of territorial jurisdiction is remitted back to respondent No. 2 for determination, with the petitioner allowed to raise all permissible defenses.

The writ petition was disposed of with these observations and directions.

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