MP HC Dismisses GST Writ as Assessee Failed to Reply to Show Cause Notice

Sanjay Paliya Contractor Vs State of Madhya Pradesh and Others (Madhya Pradesh High Court)

The Madhya Pradesh High Court disposed of a batch of writ petitions through a common order, as identical questions of fact and law were involved. For the purpose of adjudication, the Court considered the facts of Writ Petition No. 18150 of 2023.

The petitioner, a proprietorship firm engaged in the business of construction and registered under the GST regime, challenged the order-in-original dated 28.07.2022 passed in relation to the financial year 2020-21. Following scrutiny of the petitioner’s returns, the Assistant Commissioner of State Tax, Itarsi Circle, noticed certain discrepancies and issued GST ASMT-10 dated 20.04.2022, requiring the petitioner to explain why tax amounting to ₹5,75,712 along with interest and penalty should not be recovered.

According to the petitioner, a summary of GSTR-2 (Auto-draft) was submitted before the Assistant Commissioner. However, no detailed explanation regarding the discrepancies was furnished. Subsequently, a show cause notice dated 07.06.2022 was issued under Section 73 of the GST Act alleging wrongful availment and utilisation of input tax credit. The petitioner was directed to submit a reply by 06.07.2022. It was undisputed that the petitioner did not file any reply to the show cause notice. Consequently, the Assistant Commissioner passed a final order confirming tax, interest and penalty amounting to ₹5,57,469.

Instead of preferring an appeal under the statutory framework, the petitioner approached the High Court by way of a writ petition, contending that the impugned order had been passed in violation of Section 75(4) of the GST Act and Rule 142 of the CGST Rules. The petitioner argued that no opportunity of personal hearing had been granted as mandated under Section 75(4), resulting in violation of principles of natural justice. It was further contended that Rule 142 required uploading of the summary order in Form GST DRC-07 specifying the amount of tax, interest and penalty payable, and that the impugned order could not be treated as a valid order-in-original under Section 73, thereby depriving the petitioner of an appellate remedy.

The respondents opposed the writ petition on the ground that an effective alternative remedy of appeal was available under Section 107 of the GST Act. It was submitted that the petitioner had allowed the period of limitation for filing an appeal to expire and had approached the High Court only to avoid the consequences of delay and the statutory requirement of pre-deposit. The respondents also denied any violation of Section 75(4) or Rule 142, asserting that the petitioner had been given adequate opportunity but had chosen not to participate in the proceedings.

After examining the material on record, the High Court noted that the petitioner had admittedly received the show cause notice issued under Section 73 of the GST Act. Even if the petitioner disputed the nature or validity of the notice, it was incumbent upon him to respond before the authority concerned. The Court observed that the petitioner had failed to file any reply to the show cause notice.

On the issue of personal hearing, the Court interpreted Section 75(4) to mean that the petitioner was required to seek or demand such hearing. Since no reply had been filed to the show cause notice, the competent authority could not be expected to presume that the petitioner intended to avail the opportunity of personal hearing. The Court held that an opportunity of personal hearing is ordinarily granted upon request, and in the absence of any response from the petitioner, there was no violation of Section 75(4).

The Court further observed that the impugned order itself described the decision as a summary order issued under Section 73 in Form DRC-07. Therefore, the legal grounds advanced by the petitioner could appropriately be raised before the appellate authority. The Court noted that the petitioner had failed to avail the appellate remedy for more than one year and had approached the writ court only after the limitation period had expired.

Distinguishing the judgments cited by the petitioner, the Court held that those decisions concerned situations where assessees had filed replies to show cause notices and had nevertheless been denied personal hearing. In the present case, however, the petitioner neither filed a reply nor sought a personal hearing. The Court observed that where no reply has been submitted, there can be no occasion for oral submissions in defence of the case.

Accordingly, the High Court declined to entertain the writ petition and dismissed it. However, the petitioner was granted liberty to file an appeal before the appellate authority along with an application for condonation of delay and, thereafter, avail further remedies before the GST Tribunal. The connected writ petitions involving identical issues were also dismissed.

FULL TEXT OF THE JUDGMENT/ORDER OF MADHYA PRADESH HIGH COURT

Since identical questions of fact and law are involved in these Writ Petitions, all these matters are being decided by this common order. For the sake of convenience, to decide the controversy involved therein, the facts are being taken from Writ Petition No.18150/2023.

2. The petitioner has filed this present petition, being aggrieved by the order-in-original dated 28.07.2022 passed by the respondent No.2, pertaining to the year 2020-21. The petitioner is a proprietorship firm and registered with the GST department. The petitioner is engaged in the business of construction. After scrutiny of the return submitted by the petitioner, the Assistant Commissioner of State Tax, Itarsi Circle, noticed certain discrepancies, and issued GST ASMT-10 dated 20.04.2022 calling upon the petitioner to explain why the amount of Tax of Rs. 5,75,712/- with interest, and penalty be recovered.

3. The petitioner submitted a summary of GSTR-R2 (Auto-draft) before the Assistant Commissioner without any detailed explanation about the alleged discrepancy. Thereafter, the petitioner was served with the show-cause notice under Section 73, dated 07.06.2022, alleging the wrong availment/utilisation of input tax credit. The petitioner was called upon to submit a reply on 06.07.2022. Admittedly, the petitioner did not submit the reply; therefore, the Assistant Commissioner passed a final order confirming the demand and interest penalty total to the tune of Rs. 5,57,469/-. Instead of preferring an appeal against the aforesaid order, the petitioner has approached this Court by way of a writ petition alleging the violation and contravention of the provisions of the GST Act while passing the impugned order dated 28.07.2022.

4. Learned counsel for the petitioner submits that the petitioner was not given an opportunity of personal hearing as provided under Section 75(4) of the Act. Therefore, there is a complete violation of the principle of natural justice; the impugned order is unsustainable.

5. Learned counsel for the petitioner further submits that there is a violation of Rule 142 of the CGST Rules, which mandates uploading the summary order in FORM GST DRC-07 specifying therein the amount of tax, interest, and penalty payable by the person chargeable. The order dated 28.07.2022 cannot be said to be an Order-in-Original passed under Section 73 of the GST Act, therefore no appeal could be filed before the Appellate Authority.

6. In support of this contention, learned counsel has placed reliance on the judgment passed by the Division Bench of this Court in which the impugned order in the Order-in-Original has been quashed for want of giving an opportunity of personal hearing as contemplated under Section 75(4) the GST Act.

7. The learned counsel for the petitioner has supplied the compilation of the photocopy of the orders passed by this Court as well as by other High Courts, in support of above submissions, which are as under:

Respondent’s Submissions

8. Learned counsel appearing for the respondent opposes the aforesaid submissions by arguing that the writ petition is not maintainable as the petitioner has a remedy of appeal under Section 107 of the GST Act. Since the said remedy has become time-barred and the petitioner was required to deposit the 10% of the demand, the petitioner has filed this writ petition, which is not maintainable and liable to be rejected. There is no violation of Section 75(4) of the GST Act and Rule 142 of the GST Rules. In this case, the opportunity of a hearing was granted to the petitioner, but he did not avail himself. Hence, he cannot blame the authorities for not providing him with a personal hearing.

Appreciation & Conclusions

9. The petitioner was initially served with the GST ASMT-10 dated 20.04.2022, pointing out certain discrepancies in the GST paid in the FY 2020-2021. According to the petitioner, he submitted a chart (Annexure P/3), but there is no receipt/acknowledgement in it. Thereafter, the petitioner was served a show-cause notice dated 07.06.2022. This notice specifically provides that it is issued under Section 73 of the GST Act, calling upon the petitioner to submit a reply on 06.07.2022. The petitioner is not disputing the fact of receiving this notice, but the petitioner is not treating this notice as under Section 73 of the GST Act. Even if that be so, the petitioner was required to file a reply to the said notice challenging its validity before the authority that issued the same.

10. So far, the question of non-grant of personal hearing is concerned, as per the language of 75(4) of the GST Act, the petitioner was required to demand the personal hearing. The petitioner, who did not submit a reply to the show-cause notice, cannot expect the opportunity of a personal hearing will be given to him. The opportunity of a personal hearing is always granted by the competent authority upon request. Since the petitioner did not file a reply to the show cause notice, the proper officer cannot assume that the petitioner is interested in availing a personal hearing. Hence, there is no violation of the provisions of Section 75(4) of the GST Act.

11. The petitioner is also not disputing the Order-in-original passed by the authority. The order describes that it is a summary order issued under Section 73 of the GST Act in DRC-07. Therefore, all these legal grounds taken in the petition are liable to be raised by way of an appeal before the Appellate Authority. But for one year, the petitioner did not prefer any appeal, and once the limitation to file an appeal had expired, and beyond that, it is not condonable, hence the petitioner has approached this Court by way of a writ petition challenging the order on merit as well as on technical grounds.

12. Therefore, the writ petition cannot be entertained in a situation where the petitioner did not choose to participate in the inquiry u/s 73 of the GST Act by filing a reply; secondly, he cannot allege a violation of principles of natural justice because the opportunity of a personal hearing was not granted because he did not demand specifically after filing reply to the show cause notice. Had he submitted a reply and demanded the opportunity of hearing, and if the authority fails to give, then certainly the writ petition would have been liable to be entertained, and the matter could have been remanded. The judgments on which the petitioners are placing reliance on a different set of circumstances where the reply to the show cause notice was filed, but an opportunity of personal hearing was not given to the assessee therein, but in the present case, the petitioner did not even respond to the show cause notice by filing a reply and claiming a personal hearing. If the reply itself has not been filed, then there cannot be oral submissions to defend a case.

13. Accordingly, the writ petition is hereby dismissed. The petitioner may prefer an appeal before the appellate authority along with an application for condonation of delay before the Appellate Authority, after which the petitioner will have a remedy to approach the GST tribunal.

14. In view of the above order, the other writ petitions i.e., W.P. No.18151/2023, W.P. No.18152/2023 and W.P. No.20383/2023, are also dismissed.

15. A copy of this order be also placed in W.P. No.18151/2023, W.P. No.18152/2023 and W.P. No.20383/2023.