2025 (11) TMI 306 - HC - Service Tax

Orders quashed for breach of natural justice where service unproved and Section 33A adjournment counting defective; matter remanded

HC held the Order-in-Original and Order-in-Appeal were passed in breach of natural justice because service was not proved and the petitioner was not ... Breach of principles of natural justice - multiple contrary dates of issuance of order - no proof of service by the department indicating the date on which the Order-in- Original was served to the petitioner - Adjournment of the case - the three dates scheduled for hearing, were sufficient as contemplated under proviso to Sub-section (2) of Section 33A of Finance Act or not - HELD THAT:- It has been categorically observed by this Court in the case of Regent Overseas Pvt Ltd [2017 (3) TMI 557 - GUJARAT HIGH COURT] that when three dates had been granted, it would tantamount to adjournments. However, the provisions of Sub-section (2) of Section 33A of the Act provides for three adjournments, therefore, that would amount to 4 days and 3 adjournments. In the present case, the Order-in- Original is passed against the settled legal position and in breach of principles of natural justice. It is not in dispute that the petitioner was not heard before passing of the Assessment Order. It is fundamental proposition of law that other side should be heard before any order is passed. The maxim of Audi Alteram Partem is broad enough to include the rule against bias since a fair hearing is must for it to be unbiased hearing. The essential ingredients of fair hearing is that a person should be served with a proper notice and should be given a right to hearing. The impugned Order-in-Original dated 31.03.2023 passed under the Finance Act, 1994, as well as the Order-in-Appeal dated 25.06.2024 is hereby quashed and set aside and the matter is remanded back to the Adjudicating Authority to de novo hear the petition and decide the same in accordance with law after affording adequate opportunity of hearing to the petitioner - Petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether an appellate order dismissing an appeal as time-barred can stand where the date of service of the adjudicating order is disputed and there is no proof of service on record. 2. Whether fixation of three hearing dates in a notice/adjournment sequence satisfies the proviso to Section 33A(2) of the Act permitting up to three adjournments, and whether treatment of three fixed dates as three adjournments complies with principles of natural justice. 3. Whether an ex parte adjudication and consequent adjudication/appeal orders made without giving a person a proper opportunity of hearing (audi alteram partem) warrant quashing and remand for de novo hearing, notwithstanding non-consideration of merits by the Court. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of dismissal of appeal as time-barred where date of service is disputed Legal framework: Time for filing an appeal runs from the date of service/receipt of the adjudicating order; proof of service is a necessary record to establish commencement of limitation. Principles of limitation and service govern admissibility of an appeal. Precedent Treatment: The Court relied on its earlier treatment in Regent Overseas (as reproduced and followed) concerning adjournments/notice and service-related infirmities; no contrary precedent was overruled. Interpretation and reasoning: The Court found no conclusive proof on record of the date on which the Order-in-Original was served on the petitioner; the department's communication supplying the order only occurred later (14.03.2024) and the appeal was filed the next day (15.03.2024). Where service is disputed and the department has not proved valid service, limitation cannot be mechanically applied to dismiss an appeal. The appellate authority's dismissal on limitation overlooked the absence of proof of service and the factual circumstance that the appellant received the order only upon specific departmental communication. Ratio vs. Obiter: Ratio - an appeal cannot be dismissed purely on limitation when the date of service of the impugned order is not proved; absence of service negates application of limitation. Obiter - none additional on alternative limitation doctrines. Conclusion: Dismissal of the appeal on the ground of limitation was impermissible in circumstances where service of the Order-in-Original was not proved; the issue of limitation did not preclude adjudication on the appeal after proper service/notice. Issue 2: Whether three fixed hearing dates satisfy proviso to Section 33A(2) and compliance with natural justice Legal framework: Proviso to Section 33A(2) permits grant of not more than three adjournments; granting three adjournments entails in practice four dates for personal hearing (initial plus three adjournments). Principles of natural justice (audi alteram partem) require proper notice and adequate opportunity to be heard. Precedent Treatment: The Court expressly followed the reasoning in Regent Overseas that three dates mentioned in a notice do not equate to the three adjournments contemplated under the proviso; rather, three adjournments require four hearing dates. Regent Overseas was applied, not distinguished or overruled. Interpretation and reasoning: The Court analyzed para 9 of the Order-in-Original which specified three hearing dates (18.01.2023, 24.01.2023 and 30.01.2023). It held that treating those three dates as three adjournments misconstrues the proviso; at most they represent two adjournments if the initial date is counted appropriately. Further, because the notice for personal hearing was not shown to have been validly served, absence at those dates cannot fairly be treated as seeking or obtaining adjournments by the petitioner. Proceeding to pass the Order-in-Original on the footing that three adjournments had been granted thus amounted to denial of a fair hearing and contravened audi alteram partem. Ratio vs. Obiter: Ratio - three fixed hearing dates in a notice do not satisfy the statutory scheme permitting three adjournments (which presupposes four hearing dates), and an adjudicating authority cannot treat non-attendance on such unproved/invalid notices as valid adjournments for purposes of ex parte adjudication. Obiter - explanatory remarks on the arithmetic of dates and adjournments as applied to the section. Conclusion: The fixation/consideration of only three dates, without proven valid service, did not comply with the proviso to Section 33A(2) and led to a breach of the principles of natural justice; the adjudicating authority erred in treating those dates as constituting three adjournments. Issue 3: Necessity to quash and remit for de novo hearing due to breach of audi alteram partem Legal framework: Fundamental rule that a person must be heard before an adverse order is passed (audi alteram partem); remedy for breach is interference under judicial review powers (Article 226) - typically quash and remand for fresh decision after affording opportunity to be heard. Courts ordinarily do not go into merits where procedural infirmity vitiates the order. Precedent Treatment: The Court relied on the established principle (as in Regent Overseas) that ex parte orders passed without proper service/notice and in breach of natural justice warrant quashing and remand. No contrary authority was departed from. Interpretation and reasoning: Given the admitted lack of service and the adjudicating authority's treatment of the three dates as adjournments culminating in an ex parte Order-in-Original, the Court concluded there was a fundamental breach of natural justice. The appropriate corrective is to quash both the Order-in-Original and the appellate order (which dismissed appeal on limitation without resolving the service issue) and remit the matter for de novo adjudication with an adequate opportunity of hearing. The Court expressly refrained from deciding on merits. Ratio vs. Obiter: Ratio - breach of audi alteram partem by proceeding to adjudicate without valid service/notice and by misconstruing adjournment provisions necessitates quashing and remand for fresh hearing; appellate dismissal on limitation without resolving service dispute is impermissible. Obiter - timeframe for compliance (the Court directed completion within 12 weeks) is incidental to the remedial direction. Conclusion: Both the adjudicating order and the appellate order were quashed and the matter remitted to the Adjudicating Authority for de novo hearing after affording adequate opportunity of hearing, to be completed within a specified period; the Court did not decide merits and imposed no cost order.