Natural justice in service tax proceedings requires prior notice and hearing before adverse liability orders are passed.

An order directing a taxpayer to determine service tax liability and discharge tax, interest and returns without prior notice was held unsustainable because no notice had been served before the adverse decision. The court applied the principle that an order carrying civil consequences cannot stand unless the affected person is given an opportunity of hearing and the prescribed procedure is followed. The order was therefore vitiated by breach of natural justice and the applicable rules, and was set aside with a direction to issue a show cause notice and decide the matter afresh in accordance with law.

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Issues: Whether the order directing the petitioner to determine service tax liability and discharge tax, interest, and returns without prior notice was liable to be set aside for breach of natural justice.

Analysis: The record did not show service of any notice on the petitioner before the adverse order was passed. An order having civil consequences cannot be sustained when passed without affording the affected person an opportunity of hearing and without compliance with the prescribed procedure.

Conclusion: The order was vitiated by violation of natural justice and the applicable rules, and was therefore set aside with a direction to issue a show cause notice and decide the matter afresh in accordance with law.

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