Order Quashed Due to Breach of Natural Justice; Case Remanded for Fresh Hearing on Service Tax Under Finance Act, 1994.

The HC quashed the impugned order dated 14th July 2023, which held the petitioner liable for service tax and penalties under the Finance Act, 1994, due to a breach of natural justice principles. The court found merit in the petitioner's argument regarding the applicability of service tax on legal services and determined that the petitioner was not given an opportunity for a hearing. The case was remanded for a fresh order to be passed after a proper hearing of the petitioner's contentions.

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Issues:
The challenge in this petition is to the impugned order dated 14th July 2023 by which respondent no. 1 held that the petitioner, a practicing advocate, is liable to pay service tax and penalties under Sections 77(1)(a) and 77(1)(c) of the Finance Act, 1994.

Natural Justice:
The primary contention raised is that the impugned order was passed without according the petitioner an opportunity of a hearing, thus breaching the principles of natural justice.

Levy of Service Tax:
The petitioner argued that service tax is not leviable on legal services provided by advocates, citing Department's Notification No. 25/2012 Service Tax dated 20th June 2012, which provides for a reverse charge mechanism in case of an Advocate. The petitioner also referred to relevant case laws to support this contention.

Court's Decision:
The High Court found merit in the petitioner's argument and held that respondent no. 1 needs to hear the petitioner on all contentions before passing a fresh order in accordance with law. Consequently, the impugned order dated 14th July 2023 was quashed and set aside, and the proceedings were remanded for a fresh order to be passed after hearing the petitioner.

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