Case Law Details
Ds Chewing Products Llp Vs State Of U.P. And 3 Others (Allahabad High Court)
Allahabad High Court, in DS Chewing Products LLP vs. State of U.P. & Others, granted interim relief to the petitioner by staying a GST demand order. The petitioner challenged the assessment order issued under Section 73 of the Goods and Services Tax Act, arguing that the Assessing Authority failed to issue a pre-show cause notice as required by law in 2020. The petitioner contended that the absence of such notice amounted to a violation of mandatory procedural safeguards, rendering the assessment order legally flawed.
In support of its argument, the petitioner relied on the Division Bench judgment in Skyline Automation Industries vs. State of U.P. (Writ-Tax No. 1512 of 2022), where the court ruled that failure to issue a notice under Rule 142(1A) of the GST Rules was a fundamental procedural defect that could not be remedied by subsequent communications. The Allahabad High Court noted that the Delhi High Court had taken a similar view in Gulati Enterprises vs. GST Authorities, where it quashed a show cause notice issued before the amendment of Rule 142(1A) on October 15, 2020. Given these precedents, the petitioner argued that the assessment proceedings suffered from a legal infirmity.
The petitioner also highlighted the lack of an appellate tribunal under the GST framework, asserting that it had no alternative remedy but to approach the High Court under Article 226 of the Constitution. The petitioner had already deposited 10% of the disputed tax liability at the first appellate stage and agreed to deposit an additional 10% as a condition for interim relief. The High Court acknowledged the need for further examination of the case and directed the State Tax Department to file a counter affidavit within four weeks, with a rejoinder to be filed thereafter.
Pending a final decision, the court granted a stay on the operation of the impugned assessment order and the subsequent appellate order, provided the petitioner deposited the additional 10% of the tax liability within three weeks. The court made it clear that non-compliance with this condition would lead to the automatic cessation of the interim relief. The matter has been scheduled for further hearing on February 13, 2025. This ruling underscores the importance of procedural adherence in GST assessment proceedings and aligns with judicial precedents emphasizing due process in tax adjudication.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Rahul Agarwal, learned counsel for the petitioner.
2. It is contended by learned counsel for the petitioner that in the matter of impugned tax liability imposed upon the petitioner in purported exercise of power by the Assessing Authority under Section 73 of the Goods and Services Tax Act, it was mandatory for the authority to have issued a pre show cause notice to enable the petitioner to put up his defence but the same having not been done, there clearly appeared to be violation of the mandatory provisions of law as then stood in the statute in the year 2020. Thus, according to him, the impugned order passed by the Assessing Authority suffered from manifest error of law inasmuch as being de hors the procedure prescribed, it deserves to be set aside. He has placed reliance upon the decision of Division Bench of this Court in the matter of Skyline Automation Industries vs. State of U.P. and others being Writ-Tax No. 1512 of 2022 decided on 2nd January, 2023. Paragraph-5 of the said judgment runs as under:-
” 5. After hearing learned counsel for the parties, in our opinion, present writ petition deserves to be allowed, as admittedly for initiation of proceedings against the petitioner a notice as provided for under Rule 142(1A) of the Rules in Part A of FORM GST DRC-01A was not issued, which provided for communication of details of any tax, interest and penalties as ascertained by the officer. Any subsequent reminder will not cure inherent defect in proceedings initiated against the petitioner. Similar view has been expressed by the Delhi High Court in Gulati Enterprises’ case (supra) wherein also in identical facts pertaining to a case prior to the amendment of Rule 142(1A) of the Rules with effect from October 15, 2020, the impugned show cause notice was set aside and the matter was remitted back to authority concerned to initiate fresh proceedings in accordance with law. In the case in hand, the only difference being that subsequent thereto an order has also been passed on November 10, 2022, the same will not make any difference. As the initiation of proceedings itself are bad, the order passed consequent thereto will also fall.”
3. Learned counsel for the petitioner further submits that since no Tribunal has been constituted under the Act, petitioner has no other remedy to avail except approaching this Court seeking a writ in exercise of its extraordinary jurisdiction under Article 226 of the Constitution. He further submits that the petitioner has already deposited 10% of tax liability at the stage of first appeal and given an opportunity shall deposit further 10% of tax liability.
4. Matter requires consideration.
5. Let counter affidavit by filed by learned Standing Counsel within four weeks’. Rejoinder affidavit, if any, may be filed within two weeks’ thereafter.
6. List this case on 13th February, 2025.
7. In the meanwhile and until further orders, effect and operation of the order dated 03.11.2020 passed by the Assessing Authority as well as the order dated 09.2024 passed by Additional Commissioner (Appeal-III), State Tax, Noida, shall remain stayed provided the petitioner deposits further 10% of tax liability in addition to what he has deposited earlier, within three weeks’ from today.
8. It is made clear that in the event of default in payment of further 10% of the tax liability, as directed above, interim order granted hereinabove shall cease to operate.
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