2016 (7) TMI 639 - HC - Service Tax

Court sets aside service tax liability for 2009-2014, citing procedural violations and lack of natural justice.

BIJU DANIEL Versus COMMISSIONER OF CENTRAL EXCISE (APPEALS), KOCHI AND OTHERS

The Court allowed the writ petition challenging service tax liability for 2009-2014, citing lack of natural justice in adjudication and disputing ... Construction services - structure predominantly for use as an educational institution or clinical establishments - claim of exemption under Notification No.25/2001 ST dated 20/6/2012 - principles of natural justice - Held that:- Materials relied upon by the petitioner indicate that the petitioner has raised certain valid contentions especially in regard to the penalty that had been imposed under Section 76 as well as under Section 78. That apart, he claims benefit under a notification by which according to him, the work for two specified years are to be exempted. The materials placed on record would already indicate that the petitioner was not given an opportunity for hearing. Under normal circumstances, when a request has been made, the authorities are bound to provide a haring to ventilate his grievance. When such an opportunity has not been given, it amounts to violation of the principles of natural justice and therefore I am of the view that Ext.P4 is liable to be set aside on the ground of violation of the principles of natural justice. Hence a fresh opportunity is to be granted to the petitioner to defend the proceedings pursuant to the show cause notice issued against him. - Decided in favor of petitioner. Issues:Challenge to service tax liability for the period 2009-2010 to 2013-14 based on exemption notification; Violation of principles of natural justice in the adjudication process; Applicability of penalty under Section 76 and Section 78; Maintainability of the appeal due to delay; Entertaining a writ petition when an alternate remedy is available.Analysis:The petitioner, a PWD Electrical contractor, challenged the service tax liability for the period 2009-2010 to 2013-14, citing an exemption notification. The petitioner contended that the service tax was not applicable due to the nature of works undertaken for government entities like educational institutions and clinical establishments. The petitioner raised concerns about the imposition of penalties under Section 76 and Section 78, claiming that the penalty under Section 78 might not be justified if a penalty under Section 76 had already been imposed. The petitioner also highlighted the lack of opportunity for a personal hearing during the adjudication process, citing a violation of natural justice principles.The respondent argued that the writ petition was not maintainable as the petitioner had an alternate remedy of filing an appeal within the specified time limit. The respondent contended that the petitioner had appeared before the authorities but failed to provide adequate documentation to support the exemption claim. The respondent maintained that the adjudicating authority had considered all submissions before passing the impugned order.The Court acknowledged the general rule that a writ petition is not maintainable when an alternate remedy is available but noted exceptions, particularly in cases involving violations of natural justice principles. The Court found merit in the petitioner's contentions regarding the lack of a fair hearing and the imposition of penalties. Citing a judgment from another High Court, the Court emphasized the importance of providing a hearing when requested by the petitioner. Therefore, the Court set aside the impugned orders and directed the reconsideration of the matter by the 2nd respondent after affording the petitioner a proper hearing and the opportunity to submit additional documents.In conclusion, the Court disposed of the writ petition by setting aside the impugned orders and instructing a fresh consideration of the matter with due regard to principles of natural justice. The 2nd respondent was directed to reexamine the case, provide a hearing to the petitioner, and issue necessary orders within four months from the date of the judgment.