2025 (4) TMI 451 - HC - Service Tax

Violation of the principles of natural justice - alleged failure to consider the petitioner s reply to the show cause notice - HELD THAT - The impugned order as contained in Annexure P4 suffers from violation of Principles of Natural Justice. The reply submitted by the petitioner seems to have been forgotten and not taken note of and thereby obviously not considered by the competent authority while passing the impugned order as contained in Annexure P4 . The impugned order dated 18.07.2024 passed by the Joint Commissioner CGST and Central Excise Patna-I (Annexure P4) set aside on this ground alone and the matter remitted back to the competent authority who shall consider the reply submitted by the petitioner give an opportunity of personal hearing and shall pass order afresh taking into account all the points which are open to the petitioner in accordance with law. Petition allowed by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment include:

1. Whether the Order-In-Original issued by the Joint Commissioner of CGST and Central Excise was passed in violation of the principles of natural justice due to the alleged failure to consider the petitioner's reply to the show cause notice.

2. Whether the adjudication proceedings were initiated after an unreasonable delay, thereby violating the statutory mandate under sub-section (4B) of Section 73 of Chapter V of the Finance Act, 1994.

3. Whether the petitioner was denied a fair opportunity to present their case, including the submission of supplementary documents and personal hearings.

ISSUE-WISE DETAILED ANALYSIS

1. Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that a party must be given a fair opportunity to present their case, and any decision must be made after considering all relevant materials and submissions. This principle is fundamental in administrative law to ensure fairness and transparency in decision-making.

Court's Interpretation and Reasoning: The Court noted that the petitioner's reply to the show cause notice, submitted on 23.11.2021, was not considered in the impugned order. The order erroneously stated that no defense reply was submitted, which was contrary to the evidence presented by the petitioner.

Key Evidence and Findings: The petitioner provided evidence of their reply to the show cause notice and subsequent communications, including an email dated 12.12.2023 requesting additional time to submit supplementary documents. These were not acknowledged in the impugned order.

Application of Law to Facts: The Court applied the principles of natural justice and found that the failure to consider the petitioner's reply constituted a jurisdictional error, rendering the order legally infirm.

Treatment of Competing Arguments: The respondents argued that the petitioner failed to submit necessary documents and did not appear for hearings. However, the Court found these contentions unsupported by the record, as the petitioner's submissions were documented but ignored.

Conclusions: The Court concluded that the impugned order violated the principles of natural justice by failing to consider the petitioner's reply and submissions.

2. Delay in Adjudication Proceedings

Relevant Legal Framework and Precedents: Sub-section (4B) of Section 73 of Chapter V of the Finance Act, 1994, mandates timely initiation and completion of adjudication proceedings to ensure procedural fairness and efficiency.

Court's Interpretation and Reasoning: The Court observed that the proceedings were initiated significantly after the issuance of the show cause notice, with the first personal hearing granted over two years later. This delay was contrary to the statutory mandate.

Key Evidence and Findings: The timeline of events, including the issuance of the show cause notice on 23.10.2021 and the first personal hearing on 11.12.2023, indicated a substantial delay.

Application of Law to Facts: The Court applied the statutory requirements and found that the delay in proceedings was unjustified and procedurally improper.

Treatment of Competing Arguments: The respondents did not provide a satisfactory explanation for the delay, and the Court found no justification for the extended timeline.

Conclusions: The Court determined that the delay in adjudication proceedings violated the statutory mandate and contributed to procedural unfairness.

3. Opportunity to Present Case

Relevant Legal Framework and Precedents: The right to a fair hearing includes the opportunity to present evidence and arguments, which is a cornerstone of procedural fairness.

Court's Interpretation and Reasoning: The Court found that the petitioner was not given a fair opportunity to present their case, as their requests for additional time and supplementary submissions were not adequately addressed.

Key Evidence and Findings: The petitioner's email communication requesting additional time and the record of personal hearings demonstrated their intent to engage with the proceedings.

Application of Law to Facts: The Court applied the principles of fair hearing and concluded that the petitioner was denied a reasonable opportunity to present their case.

Treatment of Competing Arguments: The respondents' claims of non-cooperation by the petitioner were contradicted by the documented evidence of the petitioner's attempts to participate in the process.

Conclusions: The Court concluded that the petitioner was denied a fair opportunity to present their case, further invalidating the impugned order.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The reply submitted by the petitioner seems to have been forgotten and not taken note of and thereby obviously not considered by the competent authority while passing the impugned order."

Core Principles Established: The judgment reinforces the importance of adhering to the principles of natural justice and procedural fairness in administrative proceedings. It also underscores the necessity of timely adjudication in compliance with statutory mandates.

Final Determinations on Each Issue: The Court set aside the impugned order due to violations of natural justice and procedural delays, remitting the matter back to the competent authority for reconsideration with a directive to provide the petitioner a fair opportunity to present their case.