Kachhadiya Vijaybhai Kalubhai Vs Union of India & Ors. (Gujarat High Court)
Gujarat High Court has quashed an ex parte Service Tax demand order and the subsequent appellate order that upheld it, citing a fundamental flaw in the notice issued for personal hearing by the tax authorities. The case, involving petitioner Kachhadiya Vijaybhai Kalubhai and the Union of India along with tax officials, underscores the necessity for strict adherence to procedural norms and principles of natural justice in tax adjudication.
The dispute arose from a show cause notice dated August 17, 2020, issued by the Deputy Commissioner GST, Bhavnagar, demanding Service Tax amounting to Rs. 6,80,434, including Swachh Bharat Cess (SEZ – likely a typo in the source, meant to be SBC or other cess) for the financial years 2014-2015 and 2016-2017, along with interest and penalty. The basis for the demand was information received from the Income Tax Department, specifically Form 26AS, which indicated that the petitioner had received income from services categorised under various heads like Contractors, IT-enabled services, Professionals, Software Development, and Commission Agents, where tax had been deducted at source under Sections 194C, 194H, 194I, and 194J of the Income Tax Act, 1961.
According to the authorities, despite being issued the show cause notice and granted opportunities for hearing on March 24, March 29, and March 31, 2022, the petitioner neither appeared nor submitted any written defence. Consequently, the Deputy Commissioner passed an ex parte order on May 26, 2022, confirming the Service Tax demand, interest, and an equal amount of penalty, based solely on the information from Form 26AS.
