2025 (2) TMI 13 - HC - Service Tax

Service tax order set aside due to jurisdictional error when lower officer decided case initiated by higher officer

Joint Commissioner, Office of the Commissioner of CGST & Central Excise, Madurai Versus Aravind Eye Hospital, (Run by the Govel Trust), Represented by Mr. G. Srinivasan

The Madras HC dismissed an appeal concerning service tax liability for paid courses. The original show cause notice was issued by the Commissioner but the ... Failure to pay service tax for certain courses conducted by them on payment for certain assessment years - whether the Joint Commissioner had the jurisdiction to pass the final order without issuing a fresh show cause notice after the case was transferred from the Commissioner of Central Excise? - HELD THAT:- On perusal of the show cause notice, we find that the show cause notice was issued by the Commissioner while the final order was passed by the Joint Commissioner. On that ground, the impugned order was set aside and the matter was remitted back to the Joint Commissioner for fresh consideration. On perusal of the original impugned order passed by the Joint Commissioner, it is found that the very same point was agitated by the respondent herein (writ petitioner) and in the original impugned demand order was confirmed under Section 73(2) of the Finance Act, 1994 and appropriate interest was levied under Sections 75, 78, 77(1)(c) and 77(2) of the Finance Act, 1994. As against that order, the appeal lies to the Commissioner of Central Excise (Appeals), Coimbatore at Madurai. When a show cause notice has been issued by the higher officer and after entering the appearance and after commencing the enquiry, in the middle of the enquiry, the matter has been made over to the lower officer, who had passed an order, here in this case, the Joint Commissioner. As against that order, appeal lies to the Commissioner of Central Excise (Appeals), Coimbatore at Madurai. As submitted by the learned Senior Standing Counsel, that the officer is also below the rank of the officer had issued the show cause notice, which is impermissible both under the administrative law as well as under the Finance Act. Conclusion - Since the impugned order was set aside only on the technicalities, it is not proposed to delving into details as to whether the alleged service is said to have been rendered by the respondent to attract the GST or not, which is left open to be decided by the competent authority and hence, there is no positive reason to interfere with the order passed by the learned Single Judge. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered by the Court was whether the Joint Commissioner had the jurisdiction to pass the final order without issuing a fresh show cause notice after the case was transferred from the Commissioner of Central Excise. Additionally, the Court examined whether the procedural requirements under the relevant circulars and notifications were complied with, particularly the necessity of issuing a corrigendum when there is a change in the adjudicating authority.ISSUE-WISE DETAILED ANALYSISJurisdiction and Procedural ComplianceThe relevant legal framework involved the Finance Act, 1994, particularly Sections 73, 75, and 78, which deal with the adjudication of service tax liabilities. The Court also considered Circular No. 1053/2/2017-CX, which outlines the procedural requirements when there is a change in the adjudicating authority.The Court's interpretation focused on the procedural irregularity arising from the change in the adjudicating authority. The initial show cause notice was issued by the Commissioner of Central Excise, but the final order was passed by the Joint Commissioner without issuing a fresh show cause notice or a corrigendum, as required by the circular.Key evidence included the notifications and circulars filed by the appellant, particularly the extract from Circular No. 1053/2/2017-CX, which mandates the issuance of a corrigendum when there is a change in the adjudicating authority.The Court applied the law to the facts by determining that the failure to issue a corrigendum constituted a procedural lapse, rendering the Joint Commissioner's order invalid. The Court noted that the appellate authority mentioned in the original order was lower in rank than the officer who issued the show cause notice, which is impermissible under administrative law and the Finance Act.Competing arguments were addressed by the Court, with the appellant arguing that the procedural lapse did not affect the validity of the order, while the respondent contended that the lack of a fresh show cause notice or corrigendum deprived them of a fair opportunity to present their case.The Court concluded that the procedural lapse was significant enough to warrant setting aside the Joint Commissioner's order and remitting the matter for fresh consideration.Substantive Tax LiabilityWhile the substantive issue of whether the respondent's services were taxable was not directly addressed due to the procedural focus, the Court noted the respondent's contention that the training courses conducted were not recognized by any statutory authority and were therefore treated as commercial courses subject to service tax.The Court left the determination of the substantive tax liability to the competent authority, emphasizing that the procedural issue was the primary basis for its decision.SIGNIFICANT HOLDINGSThe Court preserved the legal reasoning that a change in the adjudicating authority requires a corrigendum to be issued, as per Circular No. 1053/2/2017-CX. This principle ensures that parties have a fair opportunity to present their case to the appropriate authority.The core principle established is that procedural compliance is crucial in tax adjudication processes, and any deviation can render an order invalid.The final determination on the procedural issue was that the Joint Commissioner's order was set aside, and the matter was remitted for fresh consideration with the requirement to issue a proper show cause notice or corrigendum.The Court confirmed the learned Single Judge's order setting aside the impugned order on procedural grounds and dismissed the appeal, emphasizing the importance of adhering to procedural requirements in tax adjudication.