M/S Prachin Foundation vs. The Commissioner Of Central Tax

Facts

The petitioner, M/s Prachin Foundation, challenged an Order-in-Original dated March 2, 2022, passed by the Commissioner of Central Tax, Respondent No. 1. This order confirmed a demand of service tax amounting to Rs. 3,56,65,742.00 under Section 73(12) of the Finance Act, 1994, along with interest and penalty. The petitioner contended that neither the show cause notice nor the notice for personal hearing were served upon them. The respondents, represented by the Commissioner and Superintendent of Central Tax, initially sought time to obtain instructions. Subsequently, the respondents' counsel conceded that the notices were not served, as indicated in paragraph 5 of the impugned order itself, which stated that the personal hearing intimation was returned undelivered.

Held

The Court held that the impugned Order-in-Original dated March 2, 2022, passed by Respondent No. 1, was unsustainable due to the admitted non-service of the show cause notice and the personal hearing notice upon the petitioner. The Court noted that paragraph 5 of the order itself confirmed that the personal hearing intimation was returned undelivered. This failure to serve the notices constitutes a violation of the principles of natural justice, as it denied the petitioner an opportunity to respond to the allegations and be heard. Consequently, the Court found it necessary to set aside the impugned order and remand the matter back to Respondent No. 1 for fresh adjudication. The petitioner was granted a period of three weeks to file a reply to the show cause notice. If a reply is filed, Respondent No. 1 is to pass a fresh order after providing due opportunity of hearing, including personal hearing. If no reply is filed, Respondent No. 1 can proceed as deemed fit. The issue of the merits of the demand, interest, and penalty was not decided.

Key Issues

1. Whether the Order-in-Original No. 26/2021-22-Adjn (Commr)-ST dated March 2, 2022, passed by the Commissioner of Central Tax, Respondent No. 1, is legally valid and sustainable, considering the petitioner's claim of non-service of the show cause notice and personal hearing notice? (Question of law) Petitioner's contention: The petitioner argued that the impugned order is vitiated by a fundamental procedural flaw, namely, the non-service of crucial notices, which deprived them of an opportunity to present their case. This violates principles of natural justice. Respondents' contention: Initially, the respondents sought time to respond. Subsequently, their counsel admitted that the notices were not served on the petitioner, as evidenced by paragraph 5 of the impugned order.