Current appeal has been filed against the Order SLP(C)No. 14956 of 2020 dated October 23, 2019 by the Hon’ble Jharkhand HIgh Court (Jharkhand HC) which quashed the Show Cause Notice (SCN) on the grounds of it violating Section 70(5)(b) of Jharkhand Value Added Tax Act, 2005 (JVAT Act) and not being in conformity with the provisions of it.
The Hon’ble Supreme Court allowing the current appeal by the Revenue observed that the contention put forth by M/s. Bihar Sponge Iron Ltd. (“the Respondent”) that the Jharkhand HC decided the matter in favour of Respondents was not correct. The Apex Court noted that the contention is based upon incorrect reading of the Jharkhand HC’s Order, observing that the judgment revolved around the factum of validity of the SCN, not more and not less.
Modifying the judgment put forth by the HC, the Supreme Court held that the HC should have kept the option open to the competent authority to issue a fresh SCN in conformity with the provisions of the JVAT Act and Rules.
Thus, directed the appropriate authority to issue a fresh SCN while being in continuation with action initiated in the Original SCN.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
This appeal takes exception to the judgment and order dated 23.10.2019 passed by the High Court of Jharkhand at Ranchi in WPT No. 5516 of 2017, thereby quashing the show cause notice issued by the competent authority under Rule 58 for violation of Section 70(5)(b) on the ground that it was not in conformity with the provisions of Jharkhand Value Added Tax Act, 2005 (for short “the Act”) and Rules framed thereunder.
As a result, the High Court proceeded to also set aside the order of penalty, appellate order and the order of Commercial Taxes Tribunal regarding imposition of penalty under Section 70(5)(b) of the Act and resultantly, the demand made by the revenue with further directions that if any amount is paid towards the impugned demand, the same be refunded within a period of two months with statutory interest.
The High Court, as per our understanding of the impugned judgment, allowed the writ petition on the finding reached by it that the show cause notice dated 13.05.2010 issued by the Assistant Commissioner of Commercial Taxes under Rule 58 of the Jharkhand Value Added Rules, 2006 was not in conformity with the provisions of the Act and Rules.
Having said that, it proceeded to conclude that all steps taken on the basis of such show cause notice stood effaced and set aside, including the order of penalty.
Significantly, the ground which appealed to the High Court was not raised by the respondent before the first authority or in the proceedings arising from the show cause notice upto the Tribunal. This plea was obviously taken before the High Court for the first time, on which the respondent succeeded.
The view taken by the High Court that the show cause notice was infirm and not in conformity with the Act and Rules does not require any interference.
However, after having said that the High Court ought to have kept the option to the competent authority open to issue a fresh show cause notice in conformity with the provisions of the Act and Rules concerning the subject matter of notice under Rule 58 for violation of Section 70(5)(b), which was set aside and thereafter the respondent would respond and contest the said proceedings. That liberty is not conferred by the High Court in the present case. Hence, to that extent, we need to modify the order of the High Court.
Learned counsel for the respondent was at pains to persuade us that the High Court had decided the matter on merits in favour of the respondent. We are not impressed by this argument. In our opinion, this submission is based on incorrect reading of the judgment. The High Court has adverted to the factual aspects regarding merits but in the ultimate analysis, the impugned judgment of the High Court revolves around the factum of validity of the show cause notice. No more and no less.
As aforesaid, the High Court having set aside the show cause notice should have given liberty to the competent authority to proceed with the matter in accordance with law afresh, if so advised.
To that extent, this appeal ought to succeed.
In other words, the appropriate authority may proceed to issue a fresh show cause notice within four weeks from today, concerning the subject matter referred to in the show cause notice dated 13.05.2010, which has been set aside by the High Court and proceed in the matter, thereafter, in accordance with law. This fresh show cause notice would be in continuation of the action initiated under the show cause notice dated 13.05.2010 under Rule 58 for violation of Section 70(5)(b) of the Act which has been set aside by the High Court for reasons noted in the impugned decision.
All other contentions available to the parties in such proceedings on merits are left open, to be decided in accordance with law.
Needless to observe that we have not expressed any opinion on the merits of the controversy and, more so, have also rejected the argument of the respondent that the High Court has touched upon the merits of the case.
The amount deposited by the respondent during the pendency of proceedings pursuant to show cause notice dated 13.05.2010, will abide by the final orders, which would direct adjustment/payment of the said amount, as the case may be.
The High Court judgment and order impugned stands modified accordingly.
The appeal is partly allowed in the above terms.
Pending applications, if any, stand disposed of.
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