Ex parte service tax adjudication set aside and remitted where chargeability, exemption and limitation objections remained undecided.

Ex parte service tax adjudication without effective participation of the noticee was not allowed to stand where no reply to the show-cause notice had been filed or considered. The High Court noted that the petitioner's objections on chargeability, exemption or negative-list treatment, and limitation remained undecided and required examination by the proper authority. In line with earlier connected matters and the stated post-show-cause adjudication mechanism, the order-in-original was set aside and the matter remitted to the stage of reply, with all contentions kept open.

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Issues: Whether the ex parte order-in-original passed in service tax proceedings, without effective participation of the petitioner, required to be set aside and the matter remitted to the stage of reply to the show-cause notice.

Analysis: The proceedings were founded on information received from the tax department and the order-in-original was passed without the benefit of a reply from the petitioner. The Court noted that in earlier connected matters involving the same class of disputes, similar orders had been relegated for reconsideration, and that the authorities had themselves indicated a mechanism for post show-cause notice adjudication by designated officers. The Court also recorded that the petitioner's substantive objections, including whether the activity fell within the charging provisions, whether any exemption or negative-list treatment applied, and whether limitation barred the demand, had not been finally adjudicated and required consideration by the proper authority. In these circumstances, the ex parte adjudication could not be allowed to stand and the matter had to be restored for fresh consideration at the reply stage.

Conclusion: The order-in-original was set aside and the matter was remitted to the stage of reply to the show-cause notice, with all contentions kept open.

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