S.33A of Central Excise Mandates Three Personal Hearings with Adequate Gaps: Patna HC Remands Matter [Read Order]

In a recent judgment, the Patna High Court set aside a service tax demand order for failing to comply with the requirement of granting three personal hearings under Section 33A of the Central Excise Act, 1944.

The case involved a dispute over tax liability on public drinking water supply projects executed by the petitioner under contracts awarded by the Public Health Division, Jamui, Bihar. The petitioner argued that the services rendered were exempt from service tax under Entry 12(e) of the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012.

Surya CEF JV, the petitioner challenged an order dated 29.02.2024 issued by the Commissioner, CGST and Central Excise (Audit), Patna, which raised a service tax demand of Rs. 3.54 crore, along with interest and penalties under Sections 75, 77, and 78 of the Finance Act, 1994.

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The petitioner submitted that although a show cause notice had been issued on 13.10.2021, no adjudication took place for over two and a half years. When a personal hearing was finally scheduled for 11.01.2024, the petitioner sought additional time, which was granted with a new hearing date set for 14.02.2024. No further hearing was scheduled thereafter, and the final order was passed 15 days later without giving the petitioner a third opportunity to be heard or to submit documents in support of the exemption claim.

The petitioner argued that this procedure violated Section 33A of the Central Excise Act, which, under Section 83 of the Finance Act, 1994, applies to service tax adjudications. The petitioner also relied on CBEC Circular No. 1053/2/2017-CX dated 10.03.2017, which specifically mandates at least three opportunities for personal hearing with sufficient intervals.

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The counsel further submitted that the long delay in adjudication without justification breached the time limits under Section 73(4B) and cited the Delhi High Court's decision in Shyam Indus Power Solutions Pvt. Ltd., which held that financial adjudications cannot be kept pending indefinitely.

The two-judge bench comprising Justice Rajeev Ranjan Prasad and Justice Ashok Kumar Pandey observed that the adjudicating authority failed to schedule a third hearing or issue a notice giving a clear opportunity to submit documents.

The court set aside the order and remanded the matter back to the Commissioner, CGST and CX (Audit), Patna. The court directed that a fresh date of hearing be fixed with at least four weeks' notice, and that the petitioner be allowed to submit relevant documents and make written submissions. The adjudicating authority was instructed to pass a fresh, reasoned order within two months from the date of the hearing. The writ petition was allowed to the extent indicated.

To Read the full text of the Order CLICK HERE

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