Court holds dismissal of appeal without hearing violates natural justice; clarifies Commissioner (Appeals) has power to condone delay within prescribed period under Finance Act, 1994
In a landmark judgment delivered on October 28, 2026, the Madhya Pradesh High Court (Division Bench, Jabalpur) overturned the Customs, Excise and Service Tax Appellate Tribunal's (CESTAT) ruling and the Commissioner (Appeals)'s order which had dismissed a service tax appeal filed by Atul Singh Garhi on the ground of delay. The Court held that the appeal was filed within the condonable period as per Section 85(3A) of the Finance Act, 1994, and that dismissal of the appeal without providing the appellant an opportunity to explain the delay contravened the principles of natural justice.
The case arose when the appellant, engaged in construction services, was issued a show cause notice by the service tax department alleging non-payment of service tax amounting to over Rs. 70 lakh for the period 2012-2017. The Order-in-Original (OIO) confirming the demand was dated August 28, 2018, and allegedly served on the appellant on September 22, 2018, a Saturday. The appellant contended that the OIO actually reached him only on October 7, 2018. Subsequently, the appellant filed an appeal on December 24, 2018.
Both the Commissioner (Appeals) and CESTAT held the appeal to be time-barred, calculating the delay from September 22, 2018, and rejecting the appeal as beyond the condonable period of one month after the initial two months allowed for filing appeals. Moreover, the Commissioner (Appeals) dismissed the appeal at the threshold without hearing the appellant on the delay issue.
The High Court scrutinized the statutory provision under Section 85(3A) of the Finance Act, 1994, which prescribes a two-month period for filing appeals and empowers the Commissioner (Appeals) to condone delay up to a further one month if sufficient cause is shown. The Court observed that since September 22, 2018 was a Saturday, the limitation period ended on November 22, 2018, and the condonable period ran from November 23 to December 23, 2018, which was a Sunday. Filing on December 24, 2018, therefore, fell within the condonable period.
Importantly, the Court emphasized that the Commissioner (Appeals) erred in refusing to condone the delay and denying jurisdiction to condone delay of even a day beyond the initial two months. The Court also held that dismissing the appeal without affording the appellant an opportunity to explain the delay violated the principles of natural justice.
Consequently, the High Court allowed the appeal and set aside the orders of the Commissioner (Appeals) and CESTAT. The matter was remanded back to the Commissioner (Appeals) with directions to reconsider the appeal on merits after granting the appellant a fair hearing on the delay issue.
This judgment reinforces the legal position that procedural fairness must be observed in tax appeals and clarifies the scope of powers under Section 85(3A) of the Finance Act, 1994, to condone delays within the prescribed limits.
Bottom Line:
Finance Act, 1994 - Section 85(3A) - Service tax appeal - Where order-in-original was served on Saturday and the last day of condonable period fell on Sunday, appeal filed on next working day was within condonable period - Commissioner (Appeals) erred in treating appeal as beyond condonable period and dismissing it without giving opportunity to explain delay - Violation of principles of natural justice.
Statutory provision(s):
Finance Act, 1994 - Section 85(3A)
Atul Singh Garhi v. Commissioner CGST, (MP)(DB)(Jabalpur) : Law Finder Doc Id # 3011045
