Case Law Details
Microtek Himachal Power Products Private Limited Vs State of Himachal Pradesh (Himachal Pradesh High Court)
Summary: In the case of M/s. Microtek Himachal Power Products (P.) Ltd. v. State of Himachal Pradesh, the Himachal Pradesh High Court addressed the legality of a demand order issued without a prior Show Cause Notice (SCN). The petitioner challenged an order dated June 20, 2023, which was issued under Section 74(9) of the CGST Act, arguing that it violated principles of natural justice due to the absence of a prior SCN as required by Section 74(1). The Revenue Department acknowledged the error, clarifying that the intent was to issue an SCN rather than a final demand. Accepting the Revenue’s submissions, the court directed that the impugned order be treated as an SCN, allowing the petitioner four weeks to respond. This decision aligns with previous rulings by other High Courts, reinforcing that demand orders for tax, interest, and penalties cannot be validly issued without prior notice. The court’s ruling emphasizes the necessity for proper procedural compliance in tax matters.
Introduction: The Hon’ble Himachal Pradesh High Court in the case of M/s. Microtek Himachal Power Products (P.) Ltd. v. State of Himachal Pradesh [CWP No. 5562 of 2023 dated June 26, 2024] disposed the writ petition and directed that the erroneous order passed with wrong description be treated as Show Cause Notice (SCN) and be further adjudicated upon after the filing of reply to the deemed SCN.
Facts:
M/s. Microtek Himachal Power Products (P.) Ltd. (“the Petitioner”) filed a writ petition against the order dated June 20, 2023 (“the Impugned Order”) issued in Form GST DRC-01 passed under Section 74(9) of the Central Goods and Services Act (“the CGST Act”) contending that no prior SCN has been issued before the passing of Impugned order mandated under Section 74(1) of the CGST Act and thereby the Impugned Order passed is in violation of principles of natural justice.
However, the Revenue Department (“the Respondent”) contended that there has been error on the part of the Respondent officer, as the portion of the SCN has been mentioned as if there is determination of tax, interest and penalty.
Issue:
Whether demand order can be passed without the issuance of SCN?
Held:
The Hon’ble High Court in the case of CWP No. 5562 OF 2023 accepted the submissions made by the Respondent and directed that the Impugned Order shall be treated as SCN issued to the Petitioner. Further, the Hon’ble High Court is directed to file the reply to deemed SCN within the period of four weeks.
Our Comments:
The Hon’ble Jharkhand High Court in the case of Prity Dokania Sole Proprietor of M/S Samridhi Enterprises v. The State of Jharkhand [W.P.(T) No. 745 of 2021 dated September 14, 2022] and Hon’ble Allahabad High Court in the case of M/s. Yash Building Material v. State of UP and Ors. [Writ Tax No. 1435 of 2022 dated January 31, 2024] interlalia held that orders demand tax, interest and penalty thereof, cannot be passed without the issuance of SCN.
FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT
In this Writ petition, the petitioner assails order dt.20.06.2023, Order in FORM GST DRC-01 passed by the second respondent purportedly u/s 74(9) of the HPGST/CGST Act, 2017.
2) Though the said order states on page 1 that it is in fact “summary of a Show Cause Notice”, on page 4 thereof, in para D, there is a table indicating the tax liability, which appears to have been already determined by the second respondent, and there is also a direction in the said para to the petitioner to pay the said tax liability. No doubt, this is followed by a sentence on the same page that reply or objections, if any, be submitted on or before 19.07.2023, failing which demand will be finalized.
3) The petitioner has therefore approached this Court contending that there is no prior show cause notice as mandated in Section 74(1) of the HPGST Act and that the impugned order is in violation of principle of natural justice.
4) Learned Advocate General contends that the second respondent actually intended to issue only a Show Cause Notice, but erroneously mentioned in para D as if there is a determination of the tax liability alongwith penalty and interest. He contended that the impugned order dt.20.06.2023 be treated as a Show Cause Notice and opportunity to file reply be given to the petitioner, and that thereafter the second respondent will pass a reasoned order in accordance with law and communicate it to the petitioner.
5) Accordingly, in view of the submissions of learned Advocate General, the impugned order dt.20.06.2023 is set aside; the same is directed to be treated as a Show Cause Notice issued to the petitioner; the petitioner is granted four weeks’ time to reply to the same; on the receipt of the reply of the petitioner, a personal hearing be offered by the 2nd respondent and then reasoned order be passed in accordance with law and communicated to the petitioner.
6) The Writ petition is disposed of alongwith pending applications, if any.
7) No costs
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