Non-Service of SCN: Gauhati HC Sets Aside ₹16.37 Lakh Service Tax Demand, Orders Fresh Adjudication [Read Order]

In a recent judgment, the Gauhati High Court set aside an Order-in-Original that had confirmed a service tax demand of ₹16,37,501 for the financial year 2016-17.

The Court found that there was no material evidence to establish that the show-cause notice preceding the demand had been duly served upon the petitioner, thus violating the principles of natural justice.

The petitioner, Dhanjit Kumar Pathak, challenged the order issued by the Deputy Commissioner, CGST and Central Excise, on the ground that the demand and penalty were imposed without the issuance or service of a show-cause notice and without providing a proper opportunity for hearing.

The demand was raised under Section 73(2) of the Finance Act, 1994, along with interest, while penalties were imposed under Sections 77(1)(c) and 78(1) of the Act.

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Upon perusal of the Order-in-Original, the Court noted that the order referred to a demand-cum-show-cause notice dated 22 October 2021. However, the record did not contain any proof of its service on the petitioner.

Earlier, the Court had directed the learned Standing Counsel for the CGST authorities to place on record materials demonstrating that the notice had indeed been served. Despite this direction, no evidence was submitted by the respondents to establish such service.

In the absence of proof of service, the petitioner’s contention that the order was passed ex parte gained significance.

The High Court observed that the service of a show-cause notice is not a mere procedural formality but a substantive requirement, ensuring that the affected party has an opportunity to contest the allegations before any adverse order is passed. The failure to demonstrate proper service, therefore, amounted to a denial of reasonable opportunity, vitiating the entire proceedings.

During the hearing, both counsels, for the petitioner and Counsel for GST, jointly submitted that the impugned order may be set aside, and the matter remanded to the adjudicating authority for fresh consideration after serving the show-cause notice and granting a fair hearing.

Accepting the joint submission, the single bench of Justice N. Unni Krishnan Nair proceeded to quash the Order-in-Original and directed that the petitioner appear before the Deputy Commissioner, CGST and Central Excise. The adjudicating authority was instructed to furnish, with acknowledgement, a copy of the show-cause notice dated 22 October 202,1 along with its enclosures.

The petitioner was given 15 days thereafter to file a reply, following which the authority shall proceed in accordance with law and pass a fresh order.

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