2025 (4) TMI 249 - HC - Service Tax

Excise orders quashed for violating natural justice principles under Section 33 Central Excise Act

Kachhadiya Vijaybhai Kalubhai Versus Union Of India & Ors.

Gujarat HC quashed excise orders dated 26/05/2022 and appellate order dated 24/02/2023 for violating principles of natural justice. The adjudicating ... Violation of principles of natural justice - due service of SCN or not - opportunity of hearing granted or not - HELD THAT:- Considering the submissions made by both the sides and on perusal of the material on record, it appears that the petition can be disposed of without considering the merits of the case in view of the fact that no notice or opportunity of hearing as contemplated under the provisions of Section 33 of the Central Excise Act which are required to be applied to the Finance Act, 1994 as per the provisions of Section 83 of the said Act was issued. In similar facts, this Court in case of Regent Overseas Pvt. Ltd. and another vs. Union of India [2017 (3) TMI 557 - GUJARAT HIGH COURT] it was held that 'apart from the fact that the notice of hearing has not been served in the manner contemplated under section 37C of the Act, the notice itself suffers from a legal infirmity inasmuch as it fixes three dates of hearing at a time, which is not in consonance with the proviso to section 33A of the Act.' Thus, without entering into the merits of whether notice for personal hearing was served upon the petitioner or not, it is natural that no one could remain present for personal hearing on behalf of the petitioner on the dates specified in the notice and respondent no. 2 could not have proceeded on the footing that three adjournments have been granted so as to pass an ex-parte order. Conclusion - Such order is clearly in breach of the principles of natural justice warranting interference of this Court in exercise of extra ordinary jurisdiction vested under Articles 226 and 227 of the Constitution of India. Impugned order dated 26/05/2022 as well as order in appeal dated 24/02/2023 passed by respondent no. 2 and respondent no.3 respectively are hereby quashed and set aside and the matter is restored to the file of the adjudicating authority respondent no. 2 to decide the same in accordance with law after affording adequate opportunity of hearing to the petitioner - Petition allowed by way of remand. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the petitioner was duly served with the show cause notice and granted an opportunity for a hearing as required under the Finance Act, 1994.Whether the order in original and the appellate order were passed in violation of the principles of natural justice due to alleged procedural irregularities.Whether the delay in filing the appeal and the failure to make the pre-deposit justified the dismissal of the appeal by the Commissioner (Appeals).Whether the reliance on Form-26AS data from the Income Tax Department without verification constituted a valid basis for the service tax demand.2. ISSUE-WISE DETAILED ANALYSISService of Notice and Opportunity for HearingRelevant Legal Framework and Precedents: Section 33 of the Central Excise Act, as applied to the Finance Act, 1994, requires that a notice of hearing be served and that reasonable opportunity be provided to the affected party. The judgment references a precedent where a consolidated notice fixing multiple hearing dates was deemed improper.Court's Interpretation and Reasoning: The Court found that the petitioner was not properly served with the notice of hearing, as the notice contained three dates of hearing in one communication, contrary to legal requirements. This procedural irregularity was noted as a breach of natural justice.Key Evidence and Findings: The Court noted the absence of a date on the RPAD acknowledgment and the procedural error of issuing a single notice with multiple hearing dates.Application of Law to Facts: The Court applied the principles of natural justice and the requirement for proper notice, concluding that the adjudicating authority erred in its procedure.Treatment of Competing Arguments: The respondents argued that the petitioner was served notice and failed to appear, but the Court found the service improper due to the manner of notice issuance.Conclusions: The Court concluded that the order in original was passed in violation of natural justice principles, warranting its quashing.Delay in Appeal and Pre-deposit RequirementRelevant Legal Framework and Precedents: Section 85(3A) of the Finance Act, 1994, prescribes a time limit for filing appeals, and Section 35FF of the Central Excise Act mandates a pre-deposit for appeals.Court's Interpretation and Reasoning: The Court acknowledged the procedural requirements but focused on the procedural irregularities in the initial order rather than the appeal's dismissal for delay and pre-deposit issues.Key Evidence and Findings: The petitioner claimed a technical glitch prevented timely pre-deposit, which was made shortly after the portal became operational.Application of Law to Facts: While the appeal was dismissed for delay and non-compliance with pre-deposit requirements, the Court prioritized addressing the foundational procedural error in the original order.Treatment of Competing Arguments: The respondents emphasized procedural compliance failures by the petitioner, but the Court found the initial procedural errors more compelling.Conclusions: The Court set aside the appellate order due to the underlying procedural issues in the original order.Reliance on Form-26AS DataRelevant Legal Framework and Precedents: The Finance Act, 1994, and associated rules govern the assessment and demand of service tax, requiring proper verification of alleged taxable services.Court's Interpretation and Reasoning: The Court did not delve deeply into the merits of the tax demand based on Form-26AS but highlighted the need for proper procedural adherence.Key Evidence and Findings: The petitioner argued that the data was unverified and that their services were exempt under a specific notification.Application of Law to Facts: The Court focused on procedural fairness rather than the substantive validity of the tax demand.Treatment of Competing Arguments: The respondents justified the demand based on available data, but the Court prioritized procedural justice.Conclusions: The Court remanded the matter for reconsideration, emphasizing proper procedural conduct.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'It is not permissible for the adjudicating authority to issue one consolidated notice fixing three dates of hearing, whether or not the party asks for time, as has been done in the present case.'Core Principles Established: The judgment reinforces the principle that proper notice and opportunity for hearing are fundamental to upholding natural justice in tax proceedings.Final Determinations on Each Issue: The Court quashed the orders due to procedural irregularities, remanding the matter for a fresh decision with due adherence to procedural requirements.