Mr. R.Karunakar Reddy vs. The Commissioner Of Central Tax

Facts

The petitioner, Mr. R. Karunakar Reddy, challenged an Order-in-Original dated 02.11.2022, passed by the Commissioner of Central Tax (1st Respondent). This order confirmed a demand of Rs. 2,04,86,250.00 as service tax for the period 2016-17, along with interest and penalty, under the Finance Act, 1994. The petitioner was served the impugned order on 18.02.2023. The petitioner contended that a proper show cause notice and notice for personal hearing were not served upon him, violating principles of natural justice. The respondents, through their counsel, initially stated that the show cause notice was served via the petitioner's brother and the personal hearing notice was sent by registered post to his principal place of business.

Held

The Court held that neither the show cause notice nor the notice for personal hearing was properly served upon the petitioner. Regarding the show cause notice, the Court found that service upon the petitioner's brother, for an individual dealer, did not constitute proper service. Concerning the notice for personal hearing, the Court noted the absence of any record or acknowledgment of service by the respondents. Consequently, the Court concluded that the impugned Order-in-Original dated 02.11.2022 suffered from a violation of the principles of natural justice. The Court set aside the Order-in-Original and remanded the matter back to the file of the first respondent for a fresh decision in accordance with law. The petitioner was directed to file a reply to the show cause notice and the Order-in-Original within three weeks, after which the respondent would proceed with the hearing and pass a fresh order.

Key Issues

1. Whether the show cause notice dated 18.10.2021 was properly served upon the petitioner, thereby complying with the principles of natural justice, in light of Section 73(2) of the Finance Act, 1994? Petitioner's argument: The petitioner argued that the show cause notice was not properly served. While the respondents claimed service through the petitioner's brother, this was not considered proper service for an individual dealer. Furthermore, there was no record or acknowledgment of service for the notice of personal hearing. Revenue's argument: The respondents contended that the show cause notice dated 18.10.2021 was served upon the petitioner through his brother. They also submitted that the notice for personal hearing was sent by registered post to the address provided by the Income Tax Department, which was also the petitioner's principal place of business as per GST registration.