2026 (3) TMI 986 - HC - Service Tax

Right to fair hearing requires fresh adjudication where territorial nexus, exemption, limitation and double taxation defences were not considered.

Order and rectification were set aside because the adjudicating authority relied on outside information without independent inquiry into whether contested ... Failure to make independent inquiry - determination of tax liability was initiated based on data received from the Central Board of Direct Taxes - violation of principles of natural justice - exemption under Notification No. 25/2012-ST - territorial nexus - double taxation. Failure to make independent inquiry - violation of principles of natural justice - remand for fresh adjudication - HELD THAT:- The Court held that the Adjudicating Authority proceeded to quantify service-tax liability on the basis of information received from the Income Tax Department without independently enquiring whether the amounts related to works executed within the State of Odisha; that factual finding was perverse. The Court also found that the petitioner was not afforded adequate opportunity of hearing (one show-cause notice was unserved and requested documents were not considered), thereby infringing principles of natural justice. Applying the principle that an assessment/order must be made after giving a reasonable opportunity to set out the case (as reflected in Tin Box Co.[2001 (2) TMI 13 - SUPREME COURT]), the Court set aside the impugned Order-in-Original and the order rejecting rectification and remitted the matter to the Adjudicating Authority to afford the petitioner one opportunity to place evidence, including material filed in this Court, and to decide the matter afresh within the directed time-frame. [Paras 7, 8, 10] The Order-in-Original dated 04.07.2024 and the rectification order dated 23.06.2025 are set aside and the matter is remitted for fresh adjudication after affording the petitioner an opportunity to place evidence; the Adjudicating Authority is directed to complete the exercise within the time specified by the Court. Final Conclusion: The writ petition is allowed to the extent that the impugned adjudication order and the rectification rejection are set aside and remitted for fresh adjudication; the petitioner is granted one opportunity to place evidence and the Adjudicating Authority is directed to decide afresh within the period prescribed by the Court. Issues: Whether the Order-in-Original dated 04.07.2024 and the Rectification Order dated 23.06.2025 are sustainable in view of lack of adequate opportunity to the petitioner, absence of independent inquiry into territorial nexus of the considered receipts (State of Odisha), potential double taxation, and limitation; and whether the impugned orders should be set aside and the matter remanded for fresh adjudication.Analysis: The adjudicating authority proceeded on information from the Income Tax Department without conducting an independent inquiry to determine whether the amounts treated as consideration related to works executed within the State of Odisha. The petitioner did not have adequate opportunity before that authority to place documents and to rely upon exemption under Notification No. 25/2012-ST dated 20.06.2012 or to raise limitation and double taxation defences. Subsequent orders by other authorities (including the Principal Commissioner, Ranchi, and appellate decision) have deleted or held demands unsustainable for overlapping periods or on limitation grounds, which the petitioner could not invoke before the impugned order. Principles requiring a reasonable opportunity of being heard and prevention of double taxation justify revisiting the adjudication where procedural infirmity is shown.Conclusion: The Order-in-Original dated 04.07.2024 and the Rectification Order dated 23.06.2025 are set aside and the matter is remitted to the adjudicating authority for fresh adjudication after affording the petitioner a single opportunity to place all relevant documents and contentions, including those relating to exemption, territorial nexus, double taxation and limitation; the fresh adjudication to be completed within six weeks from receipt of this order.