2025 (5) TMI 1533 - HC - Service Tax

Principles of natural justice - Rule of Audi alteram partem - Compliance with Statutory Provisions with respect to appeal are found in Sections 84 and 85 of the Finance Act 1994 - discretion in granting adjournments and passing reasoned orders - challenging the non speaking order passed by the Assessing Authority - Validity of short notice given for the personal hearing via video conferencing - consideration received on account of rendering technical support and consultancy service to the overseas customers - fall within the connotation of export of service as envisaged under Rule 6A of the Service Tax Rules 1994 - HELD THAT - Conjoint reading of sub-section (3) of Section 84 and sub-section (5) of Section 85 of the Finance Act 1994 read with Section 35(1A) of the Central Excise Act 1944 it is manifest that the Appellate Authority is empowered to consider the petition for adjournment of hearing on being satisfied with respect to sufficient cause at any stage of hearing of appeal. However as proviso to sub-section (1A) of Section 35 of the Central Excise Act 1944 the Authority can grant not more than three adjournments to a party during the hearing of the appeal. In the present case after service of copy appeal petition on two occasions with short notice the petitioner was directed to appear for hearing. It is trite that without disposing of petition for adjournment the Appellate Authority could not have proceeded to pass order finally disposing of the appeal. There was no refutal by the Senior Standing Counsel with respect to genuineness of submission of the lawyer against the factual details contained in the petition for adjournment. This Court thus finds the submission of Sri Chittaranjan Das learned Advocate as genuine and plausible. It is by now a well-settled proposition in law that the Appellate Authority while deciding the appeal is duty bound to consider the grounds of challenge. The Appellate Authority is also required to pass a reasoned and speaking order considering and dealing with those grounds. The impugned Order in the instant case which is the order passed by the Appellate Authority seems to be more of an administrative order than that of an Appellate Order passed by a quasi judicial Authority sitting in appeal in seisin of grounds taken by the Revenue. In the opinion of this Court the Appeal has not been justifiably decided and therefore the same deserves to be remitted to the Appellate Authority for passing a reasoned and speaking order dealing with the grounds raised in the Appeal challenging the order passed by the Assessing Authority. With the enunciation of principles of audi alteram partem with reference to prayers made for adjournments and legal position surfaced through different judicial pronouncements with respect to significance of passing of reasoned order it is perceived that the Appellate Authority has failed to discuss the fact and the law with respect to each ground taken in the appeal petition of the Revenue. Since the appeal order does not emanate reason for the conclusion this Court is constrained to observe that absence of reason in the Appellate Order do tantamount to negating the purpose of hearing in appeal and right to know the reason as to why the view expressed in Order-in-Original has been reversed and viewed as flawed. Furthermore short notice fixing date of personal hearing and/or hearing through video conferencing mode added to consider sustainability of Appellate Order. Though this Court is conscious about existence of alternative remedy to assail the Appellate Order having regard to the material on record and taking note of undisputed factual position as emanated from the submissions advanced by the counsel for both the parties finding that there is violation of basic tenets of natural justice and assignment of reason much less plausible this Court entertained this writ petition. Having thus entertained the writ petition it is to impress upon that reasons as soul of the decision the exercise of discretion by the Appellate Authority demonstrated non-application of mind inasmuch as the Appellate Order revealed mere affirmation of view expressed in the Review Order against the Order-in-Original. Thus proper and sufficient opportunity being not afforded to the petitioner and/or its representative and the impugned Order dated 24.02.2025 sans reason the same becomes vulnerable and liable to be impeached. Therefore the Appellate Order is liable to be set aside. The Order-in-Appeal Nos.313-323/ST/RKL-GST/2024 dated 24.02.2025 passed by the Commissioner (Appeals) Goods and Service Tax Central Excise Customs Bhubaneswar-opposite party No. 1 is hereby set aside and the matter is remitted to the said Authority for consideration of appeal on its merits afresh. For availing opportunity of hearing the petitioner is directed to appear before the Appellate Authority not later than 16.05.2025 with the copy of this Order. It is clarified that this Court has not expressed any view or opinion on the merit of the appeal. The facts narrated and the observations made herein are for the purpose of considering the aspect of adherence to the principles of natural justice. As a result writ petition disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

- Whether the Appellate Authority violated the principles of natural justice, specifically the audi alteram partem rule, by disposing of the appeal without affording the petitioner a reasonable opportunity of personal hearing.

- Whether the Appellate Order dated 24.02.2025 suffers from non-assignment of reasons and is therefore non-speaking, cryptic, and liable to be set aside.

- Whether the short notice given for the personal hearing via video conferencing was reasonable and adequate to satisfy the requirements of natural justice.

- Whether the appellate proceedings complied with the statutory provisions under Sections 84 and 85 of the Finance Act, 1994 and Section 35 of the Central Excise Act, 1944, particularly regarding the exercise of discretion in granting adjournments and passing reasoned orders.

- Whether the writ petition was maintainable despite the availability of alternative statutory remedies.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice-Audi Alteram Partem

The petitioner contended that the Appellate Authority passed the impugned order without affording a proper opportunity of personal hearing. Notices for hearings were served at short notice, and the petitioner's counsel was unable to appear due to preoccupation and insufficient time to prepare. A petition for adjournment was filed on 30.11.2024 but was neither disposed of nor explicitly rejected before the final order was passed on 24.02.2025. The petitioner argued that this course of action was arbitrary and violated the audi alteram partem principle.

The opposing party submitted that multiple adjournments had been sought by the petitioner and that the Appellate Authority had exercised discretion by fixing a hearing via video conferencing on 02.12.2024. The petitioner's failure to appear left the Authority no choice but to dispose of the appeal based on available material.

The Court referred to the statutory framework under Sections 84 and 85 of the Finance Act, 1994, and Section 35 of the Central Excise Act, 1944, which empower the Appellate Authority to grant adjournments for sufficient cause but limit the number of adjournments to three. The Court emphasized that the discretion must be exercised judiciously, guided by law and reason, not arbitrarily.

It was noted that the petitioner was not served with the appeal petition until 15.10.2024 and that the hearing notices on 29.10.2024 and 26.11.2024 were served at short notice. The Court found that the Appellate Authority failed to consider the adjournment petition dated 30.11.2024 before passing the final order. The Court held that without disposing of the adjournment petition, the Authority could not have proceeded to final disposal, thereby violating the audi alteram partem rule.

Issue 2: Non-Assignment of Reasons and Non-Speaking Order

The petitioner argued that the Appellate Order was cryptic, bald, and non-speaking, lacking any discussion on the merits of the appeal or the grounds raised by the Revenue. The order merely affirmed the Review Order without independent application of mind or consideration of the petitioner's submissions.

The Court extensively reviewed judicial precedents emphasizing the requirement of reasoned orders as a fundamental principle of natural justice and good administration. It cited authoritative rulings establishing that reasons are the "heartbeat" or "soul" of every judicial or quasi-judicial conclusion, necessary to demonstrate proper application of mind, ensure transparency, enable judicial review, and uphold fairness.

The Court observed that the impugned order failed to address the nature of the services rendered, the classification under service tax law, or the merits of the appeal. Instead, it mechanically endorsed the Review Order and disposed of eleven appeals collectively without individualized reasoning. Such an approach was held to be arbitrary and legally unsustainable.

The Court underscored that the Appellate Authority's jurisdiction is coextensive with that of the Assessing Authority and that the appeal is a continuation of the assessment process requiring an independent and reasoned adjudication on the grounds raised.

Issue 3: Reasonableness of Short Notice for Hearing via Video Conferencing

The petitioner's counsel contended that the short notice for the hearing fixed on 02.12.2024 via video conferencing was insufficient to enable adequate preparation and representation. The Court agreed that reasonableness of time granted is a critical factor in affording a fair opportunity, more so when the hearing is virtual and documents need to be collated.

The Court found that the Appellate Authority ought to have granted reasonable time or considered the adjournment petition before proceeding. The failure to do so further compounded the violation of natural justice.

Issue 4: Compliance with Statutory Provisions on Adjournments and Appeals

The Court analyzed the statutory provisions governing appeals and adjournments. Sections 84 and 85 of the Finance Act, 1994, empower the Commissioner (Appeals) to hear and determine appeals and allow adjournments for sufficient cause, subject to a maximum of three adjournments under Section 35(1A) of the Central Excise Act, 1944.

The Court held that the Appellate Authority failed to exercise discretion properly by not disposing of the adjournment petition and then passing a final order without hearing the petitioner. The order was therefore contrary to the procedural safeguards embedded in the statute.

Issue 5: Maintainability of Writ Petition Despite Alternative Remedy

Though alternative statutory remedies were available, the Court chose to entertain the writ petition due to the absence of factual disputes and the fundamental violation of natural justice principles. The Court relied on precedent holding that writ jurisdiction can be invoked where orders are ultra vires or violate natural justice, and where the issue is primarily one of law and interpretation.

3. SIGNIFICANT HOLDINGS

The Court held:

"It is trite that without disposing of petition for adjournment, the Appellate Authority could not have proceeded to pass order finally disposing of the appeal."

"The Appellate Authority hearing an appeal has to be cautious that his decision is not influenced by factors reflected in any other's opinion. The merit of each case under appeal vis-`a-vis assessment depends on the nature of transactions entered into between parties."

"The Appellate Authority is required to pass a reasoned and speaking order considering and dealing with those grounds."

"Absence of reasons either in the order passed by the authority or in the record contemporaneously maintained is clearly suggestive of the order being arbitrary, hence, legally unsustainable."

"Reason is the heartbeat of every conclusion. Without the same it becomes lifeless."

"The principle of natural justice has twin ingredients; firstly, the person who is likely to be adversely affected by the action of the authorities should be given notice to show cause thereof and granted an opportunity of hearing and secondly, the orders so passed by the authorities should give reason for arriving at any conclusion showing proper application of mind."

"The requirement of indicating reasons has been judicially recognised as imperative. ... Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the 'inscrutable face of the sphinx', it can, by its silence, render it virtually impossible for the courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision."

"It is not number of adjournments granted but reasonableness of time granted which is determinative factor for consideration of grant of opportunity in adherence of principles of natural justice."

"The Appellate Authority having not disposed of the petition for adjournment of hearing in consonance with the manner projected in Section 84 (3) and Section 85(5) of the Finance Act, 1994 read with Section 35(1A) of the Central Excise Act, 1944, particularly when the statute permits the Appellate Authority to exercise his discretion to grant reasonable opportunity, this Court cannot countenance the Appellate Order."

Accordingly, the Court set aside the Order-in-Appeal dated 24.02.2025 and remitted the matter for fresh adjudication on merits after affording the petitioner a reasonable opportunity to be heard. The petitioner was directed to appear before the Appellate Authority by 16.05.2025 and was permitted to file responses and pleadings as per law. The Court clarified that no unnecessary adjournments shall be granted and expressly refrained from expressing any opinion on the merits of the appeal.