Introduction: The recent judgment by the Jharkhand High Court in the case of Alok Steel Industries Private Limited vs. State of Jharkhand addresses the validity of a GST order in the absence of a proper show cause notice. The petitioner sought relief, challenging the “Summary of the Show Cause Notice” and subsequent adjudication orders.
1. Lack of Proper Show Cause Notice:
2. Absence of Hearing Opportunity:
3. Legal Precedents:
Conclusion: The Jharkhand High Court, citing previous rulings, quashed the Summary of Show Cause Notice and the subsequent adjudication order. The court emphasized the importance of adherence to the principles of natural justice and proper legal procedures. The respondents have the option to initiate fresh proceedings in accordance with the law.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
Heard learned counsel for the parties.
2. The petitioner has filed the instant writ application primarily praying therein for the following reliefs:-
(i) For issuance of an appropriate writ/order/direction for quashing/setting aside the “Summary of the Show Cause Notice” contained in FORM GST DRC-01dated 27.09.2019 (Annexure-2/1) issued by Respondent 2 especially because, the said summary of show cause notice does not fulfill the ingredients of a proper show cause notice and amounts to violation of Principle of natural Justice.
(ii) For issuance of further appropriate writ/order/direction, for quashing/setting aside adjudication order dated 09.2020 contained in entire order sheet pertaining to the Finance Year 2018-19 allegedly passed by Respondent No. 2 (Annexure-5), wherein liability of tax, interest and penalty has been fastened upon the Petitioner on the alleged ground of wrongful availment of Input Tax Credit.
(iii) For issuance of further appropriate writ/order/direction for quashing/setting aside the “summary of the order” contained in FORM GST DRC-07 dated 04.09.2020 (Annexure-6) issued by Respondent 2 pertaining to the period 2018-19, wherein Respondent No.2 has directed the Petitioner to make payment of tax, interest and penalty, on the alleged ground of wrongful availement of Input Tax Credit.
(iv) For issuance of further appropriate writ/order/direction including Writ of Declaration, declaring that the purported adjudication order dated 02.09.2020 (Annexure-5) passed by Respondent No.2 in alleged exercise of power under Section 73 of the Jharkhand Goods and Services Tax Act, 2017 (hereinafter referred to as ‘JGST Act’ for short), as communicated to Petitioner vide Form GST DRC 07 dated 09.2020 (Annexure-6) is wholly illegal and arbitrary having been passed in utter violation of the provisions contained under Section 73 and Section 75 of the JGST Act, 2017 and, in utter violation of the principles of natural justice actuated with malice in law against the Petitioner.
3. The brief facts of the case as narrated in the writ application is that the Petitioner is engaged in the business of manufacturing of Sponge Iron and M.S. Billet and is duly registered under the Goods and Services Tax Act, 2007. For the period 2018-19, Petitioner was issued Notice in Form GST ASMT-10 pointing out certain discrepancies in the return filed by it in GSTR-3B as compared to GSTR-2A.
4. After issuance of GST ASMT-10, Petitioner was issued a Summary of Show Cause Notice vide Reference No. 7518 dated 27.09.2019 contained in Form GST DRC-01, wherein Respondent No.2, in alleged exercise of power under Section 73(1) of the Jharkhand Goods and Service Tax Act, 2017 (for short ‘JGST Act’), show caused the Petitioner as to why tax, interest and penalty be not imposed upon the Petitioner.
5. Although no date for compliance of the said notice was intimated to the Petitioner, the Petitioner, on 10.2019, itself filed its reply to the aforesaid Summary of Show Cause Notice.
It is the case of the Petitioner that no proceeding and/or hearing whatsoever was undertaken by Respondent-authority and, in the meantime, due to widespread of COVID-19 Virus, National Lockdown was imposed. However, no communication was made to the Petitioner regarding adjudication order and/or summary of order, and, in the month of September, 2023, for the first time, Petitioner was communicated Summary of the Order dated 04.09.2020 contained in Form GST DRC-07, which was uploaded in the GSTN Web Portal of the Petitioner, and, Petitioner was imposed tax, interest and penalty for alleged wrongful availment of Input Tax Credit.
Thereafter, Petitioner applied for certified copy of the entire order- sheet along with certified copy of Summary of Show Cause Notice in Form GST DDRC-01. Thereafter, certified copy of Summary of Order in Form GST DRC-07 and Order-sheet were supplied to the Petitioner. After receiving aforesaid certified copies, the present writ application has been preferred by the Petitioner.
6. Mr. Sumeet Gadodia, assisted by Mr. Ranjeet Kushwaha, learned counsel for the petitioner, challenged the impugned order primarily on the following grounds:-
(i) No Show Cause Notice was issued to the Petitioner in terms of Section 73(1) of the JGST Act, 2017 read with Rule 142(1) of the JGST Rules, It has been contended that aforesaid issue is squarely covered by the Judgment of this Court dated 06.10.2021 passed in W.P.(T) No.2444 of 2021 (M/s. NKAS Services Private Limited v. The State of Jharkhand & Ors.)
(ii) No date of hearing was fixed as would be evident from the order-sheet, and, in the order-sheet, it has been recorded that on 09.2019, notices were issued in GST DRC-01 and thereafter Petitioner appeared and filed its reply on 22.10.2019 and, thereafter without fixing any date of hearing, after a lapse of almost 11 (eleven) months, on 02.09.2020. It has been recorded in the order-sheet that GST DRC-07 is being issued towards liability of tax, interest and penalty.
It has been submitted that the records would clearly reveal that no opportunity of hearing was granted to the Petitioner and said issue is also no longer res integra and is covered by the decision of this Court vide order dated 18.04.2022 passed in W.P.(T) No. 3908 of 2020 with W.P.(T) No. 3909 of 2020 (M/s. Godavari Commodities Limited v. The State of Jharkhand & Ors.).
(iii) Even no adjudication order has been passed by the adjudicating authority and only Summary of Demand in Form GST DRC-07 has been issued to the Petitioner, which is wholly contrary to the law laid down by this Court in its Judgment in the case of NKAS Services Ltd. (supra).
7. Per contra, assisting counsel to Standing Counsel No.1 contended and submitted that Petitioner has alternative efficacious remedy of appeal which it can file before the Appellate Authority and, hence, writ application is not maintainable. It has been further submitted that Petitioner, prior to issuance of GST DRC-01, was issued intimation in Form ASMT-10 and it is only thereafter that Summary of Show Cause Notice was issued to the Petitioner in Form GST DRC-01. However, it was fairly admitted by referring to Para-14 of the Counter Affidavit that Petitioner has not been issued any Show Cause Notice and only a Summary of Show Cause Notice has been issued to the Petitioner.
8. We have heard learned counsels for the parties and, in our opinion, the instant application is squarely covered by the decisions of this Court rendered in the cases of M/s. NKAS Services Private Limited (supra) and M/s. Godavari Commodities Ltd. (supra). Admittedly, in the instant case, only ‘Summary of Show Cause Notice’ has been issued and no proper Show Cause Notice has been issued to the Petitioner. This Court, while considering the similar matter in the case of M/s. NKAS Services Private Ltd.(supra), has held as under:-
“17. As observed herein above, the impugned notice completely lacks in fulfilling the ingredients of a proper show-cause notice under Section 74 of the Act. Proceedings under Section 74 of the Act have to be preceded by a proper show-cause notice. A summary of show-cause notice as issued in Form GST DRC-01 in terms of Rule 142(1) of the JGST Rules, 2017 (Annexure-2 impugned herein) cannot substitute the requirement of a proper show-cause notice. This court, however, is not inclined to be drawn into the issue whether the requirement of issuance of Form GST ASMT-10 is a condition precedent for invocation of Section 73 or 74 of the JGST Act for the purposes of deciding the instant case. This Court finds that upon perusal of Annexure-2 which is the statutory form GST DRC-01 issued to the petitioner, although it has been mentioned that there is mismatch between GSTR-3B and 2A, but that is not sufficient as the foundational allegation for issuance of notice under Section 74 is totally missing and the notice continues to be vague.
18. Since we are of the considered view that the impugned show cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice, the challenge is entertainable in exercise of writ jurisdiction of this Accordingly, the impugned notice at Annexure-1 and the summary of show-cause notice at Annexure-2 in Form GST DRC-01 are quashed. However, since this Court has not gone into the merits of the challenge, respondents are at liberty to initiate fresh proceedings from the same stage in accordance with law within a period of four weeks from today.
19. This writ petition is allowed in the manner and to the extent indicated herein ”
9. In the instant case, from bare perusal of the order-sheet, it would transpire that Summary of Show Cause Notice in Form GST DRC-01 was issued to the Petitioner on 27.09.2019 and, although no date of compliance was given, the Petitioner, suo-motu, filed its reply on 22.10.2019. Thereafter, no date of hearing was fixed in the matter and, straightaway, vide order-sheet dated 02.09.2020, it has been recorded that Summary of Demand in Form GST DRC-07 is being issued to the Petitioner.
Thus, admittedly, no opportunity of hearing was also granted to the Petitioner before the impugned demand was raised upon the Petitioner. This issue is also squarely covered by a Bench decision of this Court in the case of M/s. Godavari Commodities Ltd.(supra), wherein this Court, while interpreting Section 75(4) and 75(5) of the JGST Act, vide Paras 21 and 22, has held as under:-
“21. At this stage, we deem it appropriate to quote the provisions of Section 75(4) and 75(5) of the CGST/JGST Act:-
“75. General provisions relating to determination of tax
(4) An opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person.
(5) The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing:
PROVIDED that no such adjournment shall be granted for more than three times to a person during the proceedings.”
22. A conjoint reading of the provisions of Sections 75(4) and 75(5) would reveal as under:-
(i) Opportunity of hearing’ shall be granted on request.
(ii) Opportunity of hearing shall be granted where any adverse decision is contemplated.
(iii) If sufficient cause is shown, the proper officer can adjourn the hearing for reasons to be recorded in writing.
(iv) However, no such adjournment shall be granted for more than three times during the proceedings.”
10. In view of aforesaid authoritative pronouncements of this Court, we are left with no option, but to quash and set aside the Summary of Show Cause Notice contained in Form GSR DRC-01 dated 27.09.2019 (Annexure 2/1) issued by Respondent 2 and consequently, set aside the adjudication order dated 02.09.2020 contained in the order-sheet pertaining to financial year 2018-19 and, consequently also, the Summary of the Order issued in form GST DRC-07 dated 04.09.2020 issued by Respondent No.2. However, Respondents would be at liberty to initiate fresh proceeding in accordance with law, if so advised.
11. As a result, the writ application is allowed and disposed of. Pending A., if any, also stands disposed of. Parties to bear their own cost.