M/S Praudhi Property Management PVT. LTD vs. The Additional Commissioner Of Central Tax

Facts

M/s Praudhi Property Management Pvt. Ltd. (Petitioner) filed a writ petition before the Telangana High Court challenging an ex-parte Order-in-Original dated April 29, 2022, passed by the Additional Commissioner of Central Tax (Respondent No. 1). The Petitioner contended that this order was passed in violation of the principles of natural justice, as neither a show cause notice nor a notice for personal hearing was served upon them. The impugned order imposed service tax, interest, and penalties totaling Rs. 86,27,273/- plus other penalties under Sections 77 and 78 of the Finance Act, 1994. The Petitioner sought to declare the order illegal and sought a stay on its recovery. The Revenue, represented by the Additional Commissioner, stated that the show cause notice was affixed at the last known business premises of the Petitioner, but the whereabouts of the Petitioner were unknown for the past five years.

Held

The High Court held that there was a prima facie violation of the principles of natural justice. While a show cause notice was issued on December 21, 2020, and affixed at the Petitioner's last known business premises, the Court found no record of any notice being served upon the Petitioner regarding the personal hearings scheduled on various dates, including September 15, 2021, January 21, 2022, March 1, 2022, and April 29, 2022. Consequently, the Court set aside the impugned Order-in-Original dated April 29, 2022. The Court directed that the set-aside order be treated as a show cause notice to the Petitioner, who was granted three weeks to file a reply. Upon receipt of the reply, the Respondent No. 1 was directed to pass a fresh order in accordance with the law after granting the Petitioner an opportunity of hearing, including personal hearing. If no reply was filed, Respondent No. 1 was at liberty to pass an appropriate order. The Court did not relegate the Petitioner to the appellate forum, deeming it appropriate to remand the matter to the primary authority.

Key Issues

1. Whether the ex-parte Order-in-Original No. 02/2022-23-SEC-AADJ N-ADC(ST) dated April 29, 2022, passed by the Additional Commissioner of Central Tax, is illegal and void for non-compliance with the principles of natural justice, specifically the non-service of a show cause notice and notice of hearing upon the petitioner, thereby violating Article 14 and Article 19(1)(g) of the Constitution of India? Petitioner's Arguments: The Petitioner argued that the impugned order was passed ex-parte and in complete contravention of the principles of natural justice, as neither the show cause notice nor the notice for personal hearing was served upon them. This violation renders the order illegal, arbitrary, and unsustainable in law. Respondents' Arguments: The Revenue contended that the show cause notice was issued on December 21, 2020, and was affixed at the Petitioner's last known business premises as per a Panchanama dated December 31, 2020. However, they admitted that the Petitioner had not replied to the show cause notice or the notices for personal hearings. The Revenue also stated that the Petitioner's whereabouts were unknown for the last five years.