CGST Order Imposing Penalty of Rs.9 Cr is Invalid due to violation of Natural Justice Principle: Jharkhand HC [Read Order]

In a recent case, the Jharkahand High Court ruled that central Goods and Service Tax (CGST) Order imposing a huge penalty of Rs.9.01.75,166/- cannot be sustained as being in gross violation of the basic principles of natural justice and fair play. The court quashed and set aside the order and remitted the matter back to the Adjudicating Authority who shall decide the case afresh.

M/S. Kamla Construction & Co. and Swastik Enterprise (Jv), the petitioner filed the writ petition has been filed for grant of the following substantial reliefs for quashing and setting aside the ex-parte Order passed by the Respondent i.e. Principal Commissioner, Central Goods & Service Tax, Ranchi, as the same has been passed in violation of principles of natural justice and the same is without jurisdiction in view of the fact that the said Adjudicating Authority (Respondent), without taking into account/consideration the vital facts of the matter that no Show Cause Notice dated 29.09.2020 as well as none of the subsequent notices issued for personal hearing were served upon the Petitioner to its address.

The above impugned order is also without jurisdiction in view of the fact that no service tax is payable by the petitioner on the work executed by it for the F.Y. 2014-15 and 2015-16, for Strengthening of Road for the Road Construction Department of State of Jharkhand, as the same is exempted under Sl. No. 13 of Notification No. 25/2012-ST dated 20.06.2012 (Annexure-4) and also in view of the fact that the Petitioner is paying Value Added Tax (VAT) over the entire turnover during the period in question and Principal Employer had also made TDS from the payment made to the Petitioner for the work executed, and it is a settled principle of law that VAT and Service Tax are mutually exclusive in nature.

For a declaration that the Petitioner is not liable to pay any service tax during the F.Y. 2014-15 and 2015-16, nor liable to take registration under the provisions of Finance Act, 1994 or to file any return under the said Act, in view of the fact that during the period in question, the Petitioner had paid Value Added Tax (VAT) over the entire turnover and the Principal Employer had also made TDS from the payment made to the Petitioner for the work executed, and it is a settled principle of law that VAT and Service Tax are mutually exclusive in nature and also in view of the fact that the works executed by the Petitioner was fully exempted from the payment of service tax as per Mega Exemption Notification No. 25/2012-ST dated.

When the matter came up for consideration before this Court on 5th of August 2025, we directed the respondents to produce the relevant record. The respondents have produced the record, which is in the nature of dispatch register and we find from the same that that the petitioner, in fact, was not served with any show-cause notice dated 29th of September 2020 so as to enable it to file its reply and supporting documents.

The Chief Justice Tarlok Singh Chauhan And Justice Rajesh Shankar was of view that the impugned order dated 27.03.2023 passed by the Principal Commissioner, CGST and Central Excise, Ranchi, imposing a huge penalty of Rs.9.01.75,166/- cannot be sustained as being in gross violation of the basic principles of natural justice and fair play.

The court quashed and set aside the order and remitted the matter back to the Adjudicating Authority who shall decide the case afresh.

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