2025 (9) TMI 1087 - HC - Service Tax

Earlier nonspeaking order set aside for breaching natural justice; case remanded for fresh hearing and full adjudication

HC set aside the nonspeaking order of the Appellate Tribunal, finding it failed to consider merits and violated principles of natural justice and fair ... Violation of principles of natural justice, equity, fair play and good conscience - Appellate Tribunal passed a nonspeaking order without considering the submissions on merits - HELD THAT:- It is found that the merits of the matter have not been touched at all by the Tribunal. In fact, the merits of the matter have been set out in great detail not only in the Appeal filed before the Tribunal but also in the written submissions filed before the Tribunal. Though the Tribunal notes that written submissions were filed by the Appellant/Assessee, there are no findings given by the Tribunal in relation to the merits of the matter. This is apart from the fact that the counsel appearing for the Appellant was before another bench of the Tribunal and therefore could not attend the matter. The impugned order deserves to be set aside and the matter be remanded back to the Customs, Excise and Service Tax Appellate Tribunal for a fresh consideration - CESTAT shall hear the Appellant/Assessee in Service Tax Appeal No. 88114 of 2018 afresh, after giving an opportunity to the Appellant to appear in the above matter. Appeal disposed off by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the Appellate Tribunal was justified in passing an ex parte and non-speaking order without addressing merits and without affording the assessee a last opportunity to be heard, thereby violating principles of natural justice, equity, fair play and good conscience. 2. Whether the Appellate Tribunal's order, insofar as it upheld demands, correctly applied the limitation provisions governing issuance of show-cause notices under Section 73 of the Finance Act, 1994 (normal period of 18 months) and correctly separated time-barred and time-barred-excluded portions of demand. 3. Whether the Appellate Tribunal was obliged to follow or consider binding judicial precedent invoked by the assessee (reference to J K Synthetics) when adjudicating the appeal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of ex parte / non-speaking order and breach of principles of natural justice Legal framework: Principles of natural justice require that an adjudicatory body consider the party's submissions and afford an opportunity to be heard; an order must ordinarily be speaking so as to show that the tribunal has considered the contentions and evidence presented. Precedent Treatment: The Tribunal noted the existence of written submissions and the appellant's earlier appearance but issued a short, non-speaking order. The appellant contended this contravened established principles (including reliance on earlier favourable tribunal decisions). The judgment does not expressly cite or overrule specific precedents but applies general principles of natural justice to the facts. Interpretation and reasoning: The Court examined the record and found that the Tribunal acknowledged written submissions but did not record or address the merits; counsel's non-attendance before that particular bench (because counsel appeared before another bench) was a relevant factual circumstance. Given the absence of any findings on merits despite filed written submissions and noted appearance, the Tribunal's order failed to engage with the contested issues and therefore amounted to a non-speaking order which did not satisfy natural justice obligations. Ratio vs. Obiter: Ratio - A tribunal that issues a final adjudicatory order must consider and record reasons on the merits when the party has placed written submissions on record and sought to be heard; failure to do so warrants setting aside and remand for fresh consideration. Obiter - Observations about the counsel's attendance before another bench are factual and explanatory rather than establishing new law. Conclusions: The Court set aside the impugned non-speaking order insofar as merits were unaddressed and remanded the matter to the Appellate Tribunal with a direction to hear the appellant afresh after giving an opportunity to appear and be heard. No costs were imposed. Issue 2 - Application of limitation provisions (Section 73 Finance Act, 1994) and separation of time-barred demand Legal framework: Section 73 (Finance Act, 1994) governs the normal period for issuance of demand/show-cause notice (18 months during the relevant period). Where a show-cause notice is issued after the expiry of the normal period, the demand is time-barred unless a reason exists for extension under statutory exceptions. Precedent Treatment: The Tribunal identified and applied the statutory limitation period to the dates in issue; it concluded that a portion of the demand was time-barred while another portion fell within time because the service tax on output services remained unpaid. Interpretation and reasoning: The Court noted the Tribunal's specific finding that some demand was raised after lapse of 18 months and therefore hit by limitation; the Tribunal set aside the impugned order to the extent of the time-barred demand (amount specified), while upholding the portion that fell within the normal period and confirming penalties for that portion. The Court did not disturb the Tribunal's limitation calculation or its separation of time-barred and non-time-barred components, observing that limitation was correctly applied in respect of the identified sums. Ratio vs. Obiter: Ratio - A tribunal may separate and allow relief for portions of demand barred by limitation while upholding and adjudicating portions within the limitation period; such differential treatment is permissible where dates and taxable events support it. Obiter - No broader pronouncements on extension/condonation of limitation were made beyond application to facts. Conclusions: The Tribunal's conclusion on limitation - that a specified portion of demand was time-barred and must be set aside while another portion is maintainable - was accepted by the Court; however, because the Tribunal failed to consider merits, the entire matter was remitted for fresh hearing on merits, with the limitation position preserved as recorded. Issue 3 - Duty to consider invoked precedent (reference to J K Synthetics) Legal framework: Appellate tribunals are required to consider and, where applicable, follow binding judicial precedent or distinguish it by reasoned discussion. When an appellant specifically relies on a precedent, the tribunal should indicate whether it follows or distinguishes that precedent and why. Precedent Treatment: The appellant contended that the Tribunal failed to follow the Supreme Court decision in J K Synthetics. The impugned order does not contain any reasoning addressing that precedent; the Tribunal confined itself to short findings on limitation and did not engage with other substantive submissions or precedents relied upon. Interpretation and reasoning: The Court observed that because the Tribunal did not address merits it necessarily did not consider or apply the precedent invoked by the appellant. The failure to discuss or distinguish precedents relied upon is one facet of the non-speaking order and reinforces the requirement for re-adjudication so that the Tribunal can consider the appellant's authorities and render reasoned conclusions. Ratio vs. Obiter: Ratio - When a tribunal is presented with an argument based on precedent, it must either apply, distinguish, or explain its non-application; absence of such engagement can vitiate the order and justify remand. Obiter - The Court did not decide the applicability of J K Synthetics to the substantive issues, leaving that determination to the Tribunal on fresh hearing. Conclusions: The Court remanded the matter for fresh adjudication, directing that the Tribunal consider all written submissions and precedents (including J K Synthetics) and render a speaking decision addressing the merits; the Court did not decide the substantive applicability of the cited precedent. Cross-references and Practical Outcome The Court affirmed the Tribunal's computation on limitation insofar as it found a portion of demand to be time-barred, but because the Tribunal failed to consider merits and failed to address precedents relied upon, the entire appeal was remitted for fresh hearing. The Tribunal is directed to hear the appellant afresh, afford an opportunity to appear and to produce a reasoned (speaking) order dealing with both limitation and merits, and to address applicable precedents or explain their non-application.