Case Law Details
Daksh Enterprise Vs Commissioner Of State Tax (Gujarat High Court)
Introduction: In a recent judgment, the Gujarat High Court addressed a critical issue involving natural justice principles in the context of a Goods and Services Tax (GST) matter. The case, Daksh Enterprise vs. Commissioner of State Tax, highlights the importance of granting an opportunity of hearing before passing an order in Form GST DRC-7.
Background: The petitioner in this case is Daksh Enterprise, a partnership firm with its registered office and principal place of business in Gir Somnath, Gujarat. The case revolves around a notice issued to the petitioner under Section 61 of the Central Goods and Services Tax (CGST) and Gujarat Goods and Services Tax (GGST) Acts.
The Show Cause Notice: On July 5, 2021, the petitioner received a notice under Section 61 of the CGST/GGST Acts. Subsequently, on February 7, 2022, the authorities issued a show cause notice or intimation in Form GST DRC-01. This notice included a demand against the petitioner for the financial year 2019-2020.
Response Filing: The crucial point of contention arises from the timelines provided in the show cause notice. It explicitly stated that the petitioner should submit a reply on or before February 20, 2022. The petitioner contends that it promptly responded to the show cause notice by submitting a detailed reply on February 19, 2022.
The Impugned Order: Despite the petitioner’s timely response, the authorities issued an order in Form GST DRC-7 on June 6, 2022, holding the petitioner liable for the stated amounts. Upon examination of the impugned order, it becomes evident that the authorities wrongly assumed that the petitioner failed to respond by February 14, 2022, based on the incorrect timeline.
Violation of Natural Justice: The Gujarat High Court, in its judgment, ruled that the impugned order violated the principles of natural justice. Specifically, the court noted that the order did not consider the petitioner’s reply filed on February 19, 2022, which was well within the stipulated deadline. As a result, the court quashed and set aside the order dated June 6, 2022.
Fresh Consideration and Hearing: The court clarified that its decision did not delve into the merits of the issue. It emphasized the need for a fresh order, taking into account the response filed by the petitioner on February 19, 2022, and granting the petitioner an opportunity for a personal hearing, starting from the DRC-01 stage.
Conclusion: The judgment in the case of Daksh Enterprise vs. Commissioner of State Tax underscores the significance of adhering to natural justice principles and providing an opportunity of hearing before passing orders in GST matters. It serves as a reminder that procedural requirements and timelines must be followed diligently in tax proceedings. In this instance, the court’s ruling ensures that the petitioner’s response will be duly considered, highlighting the importance of fairness and transparency in tax matters.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Rule returnable forthwith. Ms. Shrunjal Shah, learned AGP, waives service of notice of rule on behalf of the respondent – State. With consent of the learned advocates appearing for the respective parties, the matter is taken up for final hearing today.
2. The petition is taken up for hearing only as, the issue involved is whether an opportunity of hearing was given to the petitioner before passing an order in Form GST DRC-7.
3. Heard Mr. Avinash Poddar, learned counsel for the petitioner and Ms. Shrunjal Shah, learned Assistant Government Pleader for the respondent – State.
4. Facts in brief indicate that the petitioner is a partnership firm having its registered office and principal place of business at Ghantia Prachi, Taluka: Sutrapada, Gir Somnath. A notice under Sec.61 of the CGST / GGST was issued to the petitioner on 05.07.202 1. Subsequently, it is the case of the petitioner that on 07.02.2022, a show cause notice / intimation in Form GST DRC – 01 was issued on 07.02.2022, wherein, a demand has been raised against the petitioner for the financial year 2019-2020.
4.1 Perusal of the show cause notice would indicate that the petitioner was asked to submit his reply on, or before, 20.02.2022. It is the case of the petitioner that pursuant to the show cause notice, the petitioner responded in detail by filing a reply on 19.02.2022. Further, considering the reply so filed, by the impugned order dated 06.06.2022, the petitioner has been saddled with the liability to pay the amounts so stated in the order in Form GST DRC 07.
4.2 As pointed out by the learned counsel for the petitioner, perusal of the decision impugned dated 06.06.2022, indicates that the authorities have proceeded on an assumption that pursuant to the show cause notice, a response had to be filed on, or before 14.02.2022, which the petitioner did not so file, and therefore, the order was passed.
5. Evident it is from the show cause notice dated 05.02.2022 that a response was to be filed by the petitioner latest by 20.02.2022, which the petitioner in fact had filed a day prior thereto on 19.02.2022. The impugned order does not reflect consideration of the reply so filed and only on this ground, as there is a violation of principles of natural justice and non consideration of the reply so filed, the order dated 06.06.2022 is hereby quashed and set aside.
It is clarified that this Court has not gone into the merits of the issue and the authorities are free to pass a fresh order after consideration of the response filed by the petitioner on 19.02.2022 and after giving personal hearing to the petitioner from the stage of DRC-01. The petition is partly allowed, accordingly. Rule is made absolute to the aforesaid extent.
