Sakiluzzaman Khan @ Shakiluzzaman Khan vs. Union Of INDIA, Through The Secretary, Ministry Of Finance, Department Of Revenue

Held

The Court held that the petitioner had made out a case for an additional opportunity due to the peculiar facts of the case, particularly the petitioner's offer to pay Rs. 8,00,000/- without prejudice. The Court found a failure of natural justice because there was an issue regarding the correct address for service of notices and no proper proof of service of the assessment order dated December 26, 2018, upon the petitioner. The Court noted that a copy of the order was annexed to the recovery notice dated January 7, 2025. Consequently, the impugned order and recovery notice were set aside. The respondents were permitted to appropriate Rs. 8,00,000/- from the petitioner's frozen bank account, or the petitioner was to pay this amount by February 27, 2026. Upon appropriation or payment, the freezing of the bank account would be lifted. The petitioner was directed to appear before the Assistant Commissioner on March 10, 2026, for a hearing, with proceedings to be disposed of within two months. The Court clarified that failure to pay Rs. 8,00,000/- would result in the petition being dismissed with costs and potential contempt proceedings. All contentions on merits were left open. The ratio decidendi is that a failure of natural justice, evidenced by non-service of orders and notices, warrants interference by the High Court, even if an alternative remedy exists, especially when the petitioner shows bona fide by offering partial payment.

Facts

The petitioner, Sakiluzzaman Khan, challenged an order dated December 26, 2018, which imposed a service tax demand of Rs. 16,04,689/- and an equal penalty. The petitioner claimed he never received this order, only becoming aware of it upon receiving a recovery notice dated January 7, 2025, on January 8, 2025. The impugned order, according to the petitioner, falsely stated that notices were served. The petitioner's savings bank account was frozen. To demonstrate good faith, the petitioner offered to pay approximately 50% of the service tax demand, Rs. 8,00,000/-, from his frozen account, without prejudice to his contentions. The respondents argued that the petitioner was granted full opportunity and has an appeal remedy, and that freezing the account was necessary due to non-payment.

Key Issues

1. Whether the impugned order dated December 26, 2018, and the subsequent recovery notice dated January 7, 2025, are liable to be set aside on the grounds of failure of natural justice, particularly concerning the alleged non-service of the order and notices on the petitioner, as contemplated under the principles of natural justice and relevant provisions of the CGST Act, 2017? Petitioner's arguments: The petitioner contended that the impugned order was never served upon him, and he only came to know about it through a recovery notice received on January 8, 2025. He asserted that no prior notices were received, constituting a failure of natural justice, which is an exception to the rule of availing alternative statutory remedies. He also offered to pay Rs. 8,00,000/- from his frozen bank account as a show of bona fide. Respondents' arguments: The respondents argued that the petitioner was granted full opportunity and has an adequate remedy of appeal. They maintained that the bank account was frozen due to the petitioner's failure to honor the service tax demand, and the demand was correctly determined, thus no relief should be granted.