No Violation of Natural Justice Principles as three opportunities was given: Kerala HC upheld Demand for Service Tax [Read Order]

The Kerala High Court upheld the demand for service tax and held that there was no violation of natural justice principles as three opportunities were given. The whole effort of the petitioner was to postpone the finalisation of the order. 

M/S Bright Communications, the petitioner challenged the order passed by the 1st respondent under the provisions of Finance Act, 1994 (‘the Act’) assessing the service tax liability of Rs. 64,52,336/- and Rs. 1,335/- CESS payable by the petitioner on remitting the advertising agency service for the period from 2012-13 to 2016-17 and Legal Consultancy Services as recipient of service, under the reverse charge mechanism for period from 2014-15 to 2016-17 in terms of the proviso to Section 73(1) of the Act as amended from time to time.

The petitioner is an assessee for service tax under the category of ‘Advertising Agency Service’.  The petitioner is providing services of ‘Advertising Agency’, ‘services related to making/releasing of advertisements in Print Media, Visual Media etc.’ and other advertisement and related services like ‘wall painting’, ‘editing’, ‘dubbing’, ‘theatre advertisement’, ‘graphic advertisement’, etc.

During the audit of the records of the petitioner by the Department for the financial year 2012-13 to 2016-17, nonpayment/short payment of service tax was noticed due to the non-inclusion of certain amounts falling under the heads ‘BIZ-show charges’. The petitioner was issued a detailed Show Cause Notice asking the petitioner to show cause as to why the amounts mentioned in the Show Cause Notice should not be confirmed. 

The petitioner did not file any reply to the said Show Cause Notice nor produced the documents required from him for examination. As the petitioner did not file any reply nor did he produce any documents as directed by Show Cause Notice, the order in original has been passed imposing the demand of service tax amounting to Rs. 64,52,336/and Rs. 1,335/- along with a penalty and interest.

The Counsel for the petitioner submitted that the petitioner was not given any opportunity for hearing.  However, the record would suggest that the petitioner was issued a notice for a personal hearing.  Earlier also the petitioner was issued notices requiring the petitioner for personal hearing. On the last date when the hearing was fixed, it appeared that the petitioner sent some communication to the Assistant Commissioner seeking an adjournment of three weeks. There is no definite record of the said request having been received in the Office. 

The petitioner has been granted four opportunities for a personal hearing. In respect of the three opportunities earlier granted there is not even a request for adjournment. It is only on the fourth opportunity i.e. 09.10. 2020 fixing the date for hearing on 16.10.2020, a letter was addressed. Admittedly, the petitioner did not file any reply to the said Show Cause Notice. The whole effort of the petitioner was to postpone the finalisation of the order. 

A single bench of Justice Dinesh Kumar Singh observed that the petitioner himself has not availed the three earlier opportunities of hearing and concerning the fourth opportunity, the petitioner has filed adjournment.

The Court viewed that there has been no violation of the principles of natural justice as alleged.  Moreover, there is a remedy of appeal and this ground also can be taken before the appellate authority.  There is no bar under the statute that the ground of violation of principles of natural justice cannot be taken before the appellate authority and, it can be taken only before the Court. While dismissing the petition, the court upheld the impugned order.

To Read the full text of the Order CLICK HERE

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