Thekrubizolie And Anr Vs Union of India And 3 Ors (Gauhati High Court)
The Gauhati High Court dealt with two writ petitions challenging orders passed under Section 74(9) of the Nagaland Goods and Services Tax Act, 2017 (NGST Act). The petitioners were issued notices in Form DRC01-A determining tax, interest, and penalty for multiple financial years. Subsequently, show cause notices dated 28.06.2023 were issued under Section 74(1) of the NGST Act, stating that only the penalty portion had been paid and requiring the petitioners to explain why demand notices should not be issued for the remaining tax and interest. The petitioners did not file replies to these show cause notices, and adjudication orders were passed on 17.07.2023 and 18.07.2023 directing payment of dues, followed by summaries in Form DRC07. The petitioners approached the High Court challenging these orders.
The petitioners contended that the show cause notices were invalid as they did not disclose the essential conditions required for invoking Section 74, namely fraud, willful misstatement, or suppression of facts to evade tax. They also argued that no opportunity of hearing was granted as required under Section 75(4) of the NGST Act, and that the adjudication orders did not set out relevant facts or the basis of the decision as mandated under Section 75(6). Additionally, it was submitted that the notices and orders were issued by different authorities without specifying before whom replies were to be filed or hearings conducted.
The respondents argued that notices were issued after determining liability and partial payment by the petitioners, and that the petitioners failed to respond to the show cause notices. It was also contended that the petitioners had an alternative remedy of appeal under Section 107 of the NGST Act and that the writ petitions were not maintainable.
The Court examined the show cause notices and found that they did not contain any allegation that tax was unpaid or short paid due to fraud, willful misstatement, or suppression of facts. Since such conditions are necessary for invoking Section 74(1), the absence of these allegations rendered the notices defective and invalid. The Court held that the jurisdiction to initiate proceedings under Section 74 depends on fulfillment of these conditions, and failure to mention them makes the notices unsustainable.
The Court further observed that no opportunity of hearing was provided to the petitioners despite adverse orders being passed, which was contrary to Section 75(4). It also noted that the adjudication orders did not set out relevant facts or the basis of the decision, violating Section 75(6). On this basis, the Court concluded that both the show cause notices and the adjudication orders were not in accordance with the statutory provisions.
Accordingly, the Court set aside and quashed the show cause notices dated 28.06.2023, the adjudication orders dated 17.07.2023 and 18.07.2023, and the corresponding summaries in Form DRC07. However, it clarified that the authorities are not precluded from initiating fresh proceedings under Section 74, if permissible under law. The Court also directed that the period during which the writ petitions were pending shall be excluded for the purpose of computing limitation under Section 74(10) of the NGST Act. No order as to costs was made.
FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT
