High Court sets aside service tax demand letter for lack of prior notice, emphasizing natural justice principles. Respondents allowed to issue proper notice.

The High Court set aside the demand letter for service tax payment due to lack of prior notice, emphasizing principles of natural justice. However, the respondents were permitted to issue a proper notice and allow the petitioner to present its case, ensuring compliance with the law. The writ petition was disposed of with no costs.

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Issues involved: Demand for payment of service tax without prior notice and principles of natural justice.

Summary:
The petitioner, a Registered Company, entered into a technical knowhow agreement with a Canadian Company for expertise on production and business matters. The services were to be provided outside India, with the petitioner paying technical fees based on exports. The petitioner received a demand letter from the Service Tax Unit without prior notice, calling for payment of service tax. The petitioner contended that the demand was contrary to law and natural justice due to lack of prior notice. The respondents admitted to the absence of prior notice but sought permission to issue a notice for payment in compliance with the law. The High Court held that the demand letter was to be set aside due to the lack of prior notice, but allowed the respondents to initiate proceedings by issuing a proper notice and providing the petitioner with an opportunity to present its case. The writ petition was disposed of with no costs.

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