Shri M N Kumar vs. The Principal Commissioner Of Central Tax

This intra-court appeal under Section 4 of the Karnataka High Court Act, 1961, is filed by the petitioner– appellant, arising out of WP No.6856/2025, calling in question the order dated 09.07.2025. The respondent had passed an order dated 17.12.2021 determining the service tax liability. The said order was challenged in Writ Petition No.8093/2022 on HC-KAR NC: 2026:KHC:3595-DB the ground of violation of the principles of natural justice and on other grounds.

1 The learned Single Judge, by order dated 16.09.2022, set aside the order dated 17.12.2021 and remanded the matter for fresh consideration. Pursuant to the remand, the respondent passed a fresh order dated 24.04.2024 determining the service tax liability along with penalty and interest. The said order was challenged before the Customs, Excise and Service Tax Appellate Tribunal, Bengaluru (CESTAT).

2 In the appeal before the CESTAT, an application seeking stay of the demand was filed. However, the appeal came to be rejected on the ground of non-payment of the mandatory pre-deposit of 7.5% of the service tax demand, as required under Section 35F of the Central Excise Act, 1944 (for short, 'the Act').

3 Aggrieved by the said order, Writ Petition No.6856/2025 was preferred. In the writ petition, the appellant contended that, pursuant to the remand by this Court, no HC-KAR NC: 2026:KHC:3595-DB further notice was issued and that the petitioner was not afforded an opportunity to participate in the proceedings after remand. The learned Single Judge rejected the said contention, observing that the address of the petitioner mentioned in the writ petition and in the impugned order was the same, and therefore, it could not be held that notice was not served. Accordingly, the writ petition came to be rejected.

Smt. Jinita Chatterjee, learned counsel appearing for the appellant, submits that even prior to the order of remand passed by this Court in Writ Petition No.8093/2022, the appellant had shifted his residence. It is submitted that, due to a bona fide mistake, the address mentioned in the earlier writ petition continued to be reflected in Writ Petition No.6856/2025. Learned counsel further submits that, as on the date of presentation of the writ petition, the appellant was residing at a different address.

1 It is further submitted that the appellant, in anticipation of a notice from the respondent, did not participate in the proceedings. Learned counsel would contend that, in the absence of the appellant’s participation, the respondent HC-KAR NC: 2026:KHC:3595-DB proceeded to consider all the credits reflected in the bank account and levied service tax thereon, which is unsustainable in law. Hence, it is submitted that the order dated 24.04.2024 is in violation of the principles of natural justice.

Per contra, Sri Aravind V. Chavan, learned Senior Standing Counsel appearing for the respondent, submits that, pursuant to the remand, notice was issued to the address available in the records. It is contended that the appellant deliberately avoided service of notice and, having no other alternative, the respondent proceeded to adjudicate the matter ex parte.

1 It is further submitted that the direction of the Tribunal requiring deposit of 7.5% of the demand is a statutory precondition for maintaining an appeal under Section 35F of the Act. The order passed by the Tribunal is in consonance with the provisions of the Act and does not call for any interference. Hence, it is submitted that no interference is warranted.

Having considered the submissions of learned counsel for the parties and upon perusal of the record, we note HC-KAR NC: 2026:KHC:3595-DB that the address mentioned in the impugned order, to which notice was issued, and the address mentioned in Writ Petition No.6856/2025 are one and the same. Learned counsel for the appellant submits that the appellant continued to mention the address reflected in the earlier writ petition, notwithstanding the fact that his residence had been shifted. It is contended that, on account of the change of address, the notice issued by the respondent was not served.

Learned counsel further submits that the respondent has taken into consideration the entire credits reflected in the bank account and that the entire amount so considered is not liable to service tax. These submissions pertain to the merits of the matter, which we are not inclined to examine in the present proceedings, having regard to the order that we propose to pass.

We are inclined to entertain this appeal only on the ground of violation of the principles of natural justice. The order dated 24.04.2024 has been passed without affording the appellant, an opportunity to be heard. The respondent is unable HC-KAR NC: 2026:KHC:3595-DB to dispute the fact that the appellant had shifted his residence as on the date on which notice was issued to the appellant.

Without expressing any opinion on the merits of the case, we deem it appropriate to set aside the order dated 24.04.2024 and remit the matter to the respondent for fresh adjudication, after affording due opportunity of hearing to the appellant.

The order of the earlier remand was within the knowledge of the appellant. The appellant did not exercise due diligence in pursuing the proceedings after remand. It was incumbent upon the appellant to update the address for service of notice, particularly when the remand proceedings were within his knowledge.

The setting aside of the earlier order dated 17.12.2021 and the remand of the proceedings to the respondent were at the instance of the appellant and were within the knowledge of the appellant. Though, prima facie, we are of the view that the order dated 24.04.2024 is in violation of the principles of natural justice, the remand is required to be made conditional. HC-KAR NC: 2026:KHC:3595-DB

Accordingly, the order dated 24.04.2024 is set aside and the matter is remanded to the respondent for fresh consideration, subject to the appellant depositing a sum of Rs.75,00,000/- before the respondent within a period of four weeks, in two installments. The appellant shall appear before the respondent on 25.02.2026 without awaiting any further notice.

Accordingly, the appeal stands partly allowed and remanded. (S.G.PANDIT) JUDGE (K. V. ARAVIND) JUDGE