SCN Can’t be reissued for Accepted, Finalized First Appellate Authority Order: HC

Ambey Mining Pvt Ltd Vs Commissioner of State Tax (Jharkhand High Court)

This article discusses a crucial ruling by the Jharkhand High Court in the case of Ambey Mining Pvt Ltd Vs. Commissioner of State Tax. The court found that Revenue cannot reissue show cause notices for a period already covered by an accepted First Appellate Order.

Analysis: The case involves a writ application filed by Ambey Mining Pvt Ltd seeking relief from two show cause notices issued by different authorities for the same period. The petitioner argued that the notices were attempting to reopen an already settled matter. The court examined the legality and propriety of the First Appellate Order dated 16-01-2021, which was accepted by the Revenue and had attained finality.

The court noted that the First Appellate Authority does not have the power to remand the matter back to the assessing authority. Therefore, initiating fresh proceedings by the lower authorities after the appellate order is contrary to the law and principles of res judicata. It also referred to precedents supporting the view that issuing second show cause notices on the same cause of action is impermissible.

Additionally, the court addressed the demand of interest for March 2020 and found that the petitioner was entitled to the benefit of a COVID-19 relaxation measure reducing the interest rate. The court directed the petitioner to pay the reduced amount of interest.

Conclusion: The Jharkhand High Court’s ruling in the case of Ambey Mining Pvt Ltd Vs. Commissioner of State Tax reinforces the principle of finality of orders and the prohibition against re-agitating settled matters. It clarifies that Revenue cannot reissue show cause notices for a period already covered by an accepted First Appellate Order. The judgment sets a precedent for similar cases and upholds the principle of res judicata in tax matters.

FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT

1. Heard learned counsel for the parties.

2. The instant writ application has been preferred for following reliefs:-

(i) For issuance of an appropriate writ(s), order(s), or direction(s) for quashing and setting aside the impugned Show Cause Notice dated 09.2022 bearing Ref. No. 1131 dated 16.09.2022 along with Summary of Show Cause Notice in Form GST-DRC-01 dated 16.09.2022 which are at Annexure-1 hereto, issued by the respondent No.3 for the period April 2019 to March 2020 in purported exercise of powers conferred under section 73, Section 75 (120, Section 50 of the Jharkhand Goods and Service Tax Act, 2017 read with Rule 142 (1) of the Jharkhand Goods and Service Tax Act, 2017 read with Rule 142 (1) of the Jharkhand Goods and Services Tax Rules, 2017;

(ii) For issuance of an appropriate writ(s), order(s), or direction(s) for quashing and setting aside the impugned Show Cause Notice dated 10.2022 bearing Ref. No. 1510 along with Summary of Show Cause Notice in Form GST-DRC-01 dated 20.10.2022 which are at Annexure-2 hereto, issued by the respondent no.2 for the period April 2019 to March 2020 in purported exercise of powers conferred under section 73 of the Jharkhand Goods and Services Tax Act, 2017 read with Rule 142 (1) (a) of the Jharkhand Goods and Services Tax Rules, 2017;

3. The brief fact of the case is that the petitioner is registered with the State GST Authorities under the Jharkhand Goods and Services Tax Act, 2017/Central Goods & Services Tax Act, 2017 vide GSTIN No. 20AAFCA2578R1ZD. The case of the petitioner is that two show cause notices were issued and both impugned show cause notices are for the same period for the self-same cause of action (except March, 2020) issued by two different authorities i.e., the Deputy Commissioner of State Tax, West Circle, Ranchi, the Respondent No.2 and the Assistant Commissioner of State Tax, West Circle Ranchi, the Respondent No.3. Both the impugned show cause notices (except to the extent of March, 2020) attempted to start a fresh adjudication proceeding in respect of the self- same cause of action which has already attained finality by First Appellate Order dated 16-0 1- 2021.

As per the petitioner, their monthly GSTR-3B returns for the following months under Section 39 of the JGST Act/ Rule 61 of the JGST Rules were filed with some delay as tabulated below.

Delay in filing GSTR-3B returns

Precisely, there was delay in filing returns on which interest is demanded. As far as delayed payment of tax is concerned; the Petitioner has already discharged interest of Rs.23,95,500/- which is not the subject matter of dispute in the instant case.

4. By the impugned show cause notice dated 16-09-2022 interest is demanded not for delayed payment of tax but for delayed filing of GSTR-3B returns. In the first round of litigation, the respondent No.2, straight away passed order no.22 dated 14-03-2020 (Ref. No. ZA200320001253R) in purported exercise of powers under Section 73 of the JGST Act and issued Summary Order in FORM DRC-07 dated 16-03-2022 in exercise of powers under Rule 100/Rule 142(5) confirming interest demand of Rs.61,45,233.94/- (IGST Rs.3,17,399,96 + CGST Rs.28,99,045.40 + SGST Rs.29,28,788.58) for the period April, 2019 to November, 2019 for purported delay in filing of GSTR-3B returns under Section 39(1) of the JGST Act read with Rule 6 1(5) of the JGST Rules, 2017 for the period April, 2019 to November, 2019. The Respondent No.2 before passing the said adjudication Order dated 14-03- 2020 did not issue any show cause notice as mandated under Section 73 of the JGST Act, 2017, and on this ground the Petitioner-Company challenged the order dated 14-03-2020/DRC-07 dated 16-03-2020 before the Joint Commissioner of State Tax (Appeal), Ranchi U/s 107 of the JGST Act.

The Joint Commissioner of State Tax (Appeal) Ranchi vide ₁st Appellate Order dated 16-01-2021 accepted the contentions of the Petitioner and allowed the appeal filed by the Petitioner and determined the interest as NIL. The First Appellate Authority held that the Respondent No.2 should have started proceedings in accordance with provisions of Section 73 of the JGST Act before creating the interest demand following judgments of this Court in Godavari Commodities Ltd. Vs. UOI and Mahadev Construction Co. Vs. UOI.

However, after more than 20 months of passing of 1^st Appellate Order dated 16-01-2021 by the Joint Commissioner of State Tax (Appeal) Ranchi, the Respondent No.3, initiated fresh proceeding by way of the impugned Show Cause Notice bearing Ref. No.1131 under Section 73 (1) read with

Section 75 (12) of the JGST Act, 2017 read with Rule 142 (1) of the JGST Rules, 2017 demanding interest of Rs.45,59,626.86/- for the same period i.e., April’ 2019 to November’ 2019, and for the same cause of action which was already adjudicated and Petitioner’s appeal was allowed by the First Appellate Authority. In the impugned Show Cause Notice interest of Rs.6,63,025/- is also additionally demanded for the month of March, 2020, a period, which is not covered in the 1^st Appellate Order dated 16-01-2021.

The Petitioner vide its reply dated 21-09-2022 challenged the jurisdictional legality and authority of the Respondent No.3 in issuing the impugned show cause notice dated 16-09-2022. The Respondent No.2, after issuance of impugned first Show Cause Notice dated 16-09-2022, issued the impugned Second Show Cause Notice dated 20-10-2022 bearing Ref.No.1510 along with Summary of Show Cause Notice dated 22-10-2022 in Form GST-DRC-01 in purported exercise of powers conferred under Section 73 of the JGST Act,2017 read with Rule 142(1) of the JGST Rules, 2017 for the second time, for the same period i.e., April,2019 to November, 2019, proposing demand of interest of Rs.37,49,732.75/- (IGST Rs.2,05,233.63 + CGST Rs.18,58,308.02 + SGST Rs.16,86,191.10) under Section 50 for the same cause of action which is already adjudicated and first appeal is allowed vide First Appellate Order dated 16-01-2021 and has attained finality. In this impugned show cause notice the period of March, 2020 is not included.

5. Mr. K. Kurmy, learned counsel for the petitioner assisted by Mr. N. K. Pasari and Ms. Sidhi Jalan submits that the initiation of fresh proceedings once again by the impugned Show Cause Notices (Annexure- 1 & Annexure 2) by the Respondent No.3 & Respondent No.2 for the same cause of action (except month of March, 2020 in Annexure- 1) even after the First Appellate Order dated 16-01-202 1 which was decided in favour of the Petitioner and has attained finality; is wholly without jurisdiction and bad in law and procedure and is also against the principles of res judicata contemplated in Section 11 of the Code of Civil Procedure, 1908.

Learned counsel further submits that in the case of UOI Vs. Vicco Laboratories reported in (2007) 218 ELT 647 (SC), it is held that reopening concluded assessment amounts to abuse of the process of law. It is held that when there is abuse of the process of law, writ under Article 226 would be maintainable. The Hon’ble Apex Court in the case of Duncans Industries Ltd Vs. CCE reported in (2006) 201 E.L. T 517(S. C), has held that for the same period two assessments are not permissible in law.

6. With respect of demand for March, 2020, learned counsel contended that the demand of interest of Rs.6,63,025/- in the impugned first Show Cause Notice dated 16-09-2022 (Annexure-1) is erroneous and is contrary to State GST Notification No.45 1 dated 29-07-2017 as amended by Notification No.3 1/2020-State Tax dated 25-06-2020 and corresponding Central GST Notification No.13/2017-Central Tax dated 28-06-2017 as amended by Notification No.31/2020-CT dated 03-04-2020, whereby the rate of interest for the month of February, 2020 to April, 2020 was reduced to Nil for the first 15 days of delay and 9% thereafter in place of 18%, for registered persons having annual turnover above Rs.5.00 Cr.

It has been contended that since the annual turnover of the Petitioner is above Rs.5.00 Cr.; hence, they are entitled to the benefit of said notification. Considering the above extension of limitation for filing of GSTR-3B returns and reduction in the rate of interest, amount of Interest demand should have been Rs.12,791.44 only for the month of March,2020 as against demand of interest of Rs.6,63,026/- in the impugned Show Cause Notice dated 16-09- 2022 for the month of March, 2020. Relying upon the aforesaid contentions, Mr. Kurmy submits that both the impugned show-cause notices deserve to be quashed.

7. Mr. Ashutosh Anand, learned AAG-III for the revenue submits that the returns filed by the petitioner for the period 2019-2020 were duly scrutinized by the concerned Assessing Officer. Based on available documents on records, an order no. 22 dated 14.03.2020 under the JGST Act, 2017 was passed as the same found mentioned in Summary Order mentioned in Form GST DRC – 07, inclusive of interest and penalty for an amount of Rs. 61,45,233.94. It is categorically mentioned in Form DRC – 07 that the reason for passing the said order is for ‘delay in filing the return’. Further, the Form GST DRC-07 dated 16.03.2020 specifies that the demand is created under other section of GST Act and not what petitioner is submitting that said order was passed under section 73 of the JGST Act.

Learned counsel further submits that after perusing the Appellate Authority order dated 16.01.202 1, the concerned authority after finding that the proceeding under 73 of the JGST Act is inevitable, a Show Cause Notice along with Form DRC-01 having reference no. 1131 dated 16.09.2022 was issued to the petitioner. Subsequently, looking into the importance of the matter the Circle In-charge DCST, West Circle, Ranchi took over the matter and issued a Show Cause Notice in Form DRC-0 1 vide process no. 1510 dated 20.10.2022 to the petitioner. Since the matter was taken over by the D.C.S.T., hence he had to issue fresh Show Cause Notice to provide the taxpayer opportunity of being heard. Consequently, the D.C.S.T. issued the notice in DRC-01 along with show cause notice.

He contended that as on date the proceeding as initiated under section 73 of the JGST Act by the ‘Assistant Commissioner of State Tax’ has been taken over by the Deputy Commissioner of State Taxes, West Circle, Ranchi and only one proceeding under section 73 of the JGST Act is going on. The simultaneous proceeding under section 73 before two (2) authorities for the same period was an administrative process, which occurred due to reason above stated.

He lastly submits that the instant writ application is devoid of any merit and deserves to be dismissed.

8. Having heard learned counsel for the parties and after going through the averments made in the respective affidavits and the documents annexed therein; it is evident that the first Appellate Order dated 16-01-2021 passed by the Joint Commissioner of State Tax (Appeal), Ranchi was accepted by the department and no further appeal was filed and thus; the same has attained finality and therefore the same issue or cause of action cannot be re-agitated in a fresh proceeding as the same is contrary to settled proposition of law.

It further transpires that Section 107(16) of the JGST Act provides that every 1^st appellate order passed thereunder shall be final unless subjected to Revision under Section 108, appeal to Tribunal under Section 113 or appeal to High Court under Section 117 or appeal to Supreme Court under Section 118 of the JGST Act. In the instant case, since the 1^st appellate order is not subjected to Section 108, Section 113, Section 117, Section 118; thus, by virtue of sub-Section (16) of Section 107, it has attained finality.

The Hon’ble Apex Court in the case of CCE Vs Prince Gutkha Ltd. reported in (2015) 15 SCC 775 has held that adjudicating authority dropping earlier demand accepting explanation of Assessee, issuance of second show cause notice on same cause of action, not permissible. Paragraph-3 of the said order is extracted herein below:

“3. Insofar as the issue of clandestine removal of goods by Respondent 1 is concerned, we find that on the statement of Respondent 5 given earlier, the adjudicating authority had dropped the proceedings accepting the explanation furnished. In view thereof, CESTAT has held that there could not have been second show-cause notice on the same cause of action. In this behalf we do not find any error in the order passed by CESTAT.”

In the case of CCE Vs. Gujarat State Fertilisers and Chem. Ltd reported in (2008) 15 SCC 46 it is held by the Hon’ble Apex Court that order of the Tribunal has attained finality due to non-filing of appeal by the department. Hence, appeal on the same issue is not maintainable which has already attained finality. Paragraph-9 of the said order is quoted herein below:

“9. On the second contention raised by the respondent, namely, that as per Rule 57-B(1)(iv), the MOD VAT credit was available on the inputs used for generation of electricity or steam, used for manufacture of final products or for any other purpose, within the factory of production, the Tribunal decided the case in favour of the assessee relying upon a decision of the Tribunal in Raymond Ltd. v. CCE [(2000) 37 RLT 447 (CEGAT)] , wherein it has been held that the MOD VA T credit would be available on inputs used to manufacture steam which was in turn used for manufacture of exempted or nil duty rated final product or for any other purpose. It is stated before us that no appeal has been preferred by the Revenue against the decision in the aforesaid case. The same has thus become final.”

9. At this stage it is pertinent to mention here that under Section 112(3) of the JGST Act, the Commissioner may, on his own motion or upon request from the Commissioner of Central Tax, call for and examine the record of any order passed by the Appellate Authority or the Revisional Authority under this Act or under the Central Goods and Services Tax Act for the purpose of satisfying himself as to the legality or propriety of the said order may, by order, direct any officer subordinate to him to apply to the Appellate Tribunal within six months from the date on which the said order has been passed, for determination of such points arising out of said order as may be specified by the Commissioner in his order. Further, Section 112(4) of the JGST Act provides that where in pursuance of an order under Section 112(3) the authorized officer makes an application to the Appellate Tribunal, such application shall be dealt with by the Appellate Tribunal as if it is an appeal made against the order under Section (11) of Section 107.

The Respondents in the instant case being not aggrieved by the First Appellate Order dated 16-01-2021, did not challenge the same or availed remedies available under the law but accepted the same and allowed the same to attain finality; thus now they cannot be allowed to turn around and re-agitate a matter afresh which has already come to an end by due process of law.

10. It is also relevant to indicate that Section 107(11) envisages that the ₁st Appellate Authority cannot remand the matter back. In such circumstances, to bypass the embargo of law, restarting fresh proceeding by lower authorities amounts to doing something indirectly which cannot be done directly. As per Section 107(11) of the JGST Act, no power is vested on the First Appellate Authority to remand the matter back to the assessing authority that passed the order. Therefore, since there is no power vested in the first appellate authority to remand the matter back to the Respondent No.2 or Respondent No.3 to initiate a denovo proceeding; the first appellate authority accordingly and rightly so, did not remand the matter back to the Respondent No.2 or Respondent No.3 for initiation of any fresh proceedings. Under the circumstances the Respondent No.2 and/or the Respondent No.3 are not vested with power to issue the impugned Show Cause Notices.

Having regard to the discussions made herein above the Revenue cannot re-agitate and issue fresh show cause notices again for the same cause of action covering same period against which the Order passed by the first Appellate Authority has been accepted by the Respondents and same has attained finality. The actions of the Respondent No.2 and the Respondent No.3 is therefore bad in law and is without jurisdiction and is further hit by the principles of res judicata and is clearly not permissible under the law. As stated herein above, after passing of the 1^st appellate order, only course available with the Respondents were to challenge the first Appellate Order dated 16-01-202 1 before the Appellate Tribunal under Section 112 of the JGST Act, if at all aggrieved, and therefore, the impugned Show Cause Notices are wholly without jurisdiction, without authority of law and also barred by principles of res-judicata.

11. So far as the demand of interest with respect of March, 2020 is concern; the demand of interest of Rs.6,63,025/- in the impugned first Show Cause Notice dated 16-09-2022 (Annexure-1) is also erroneous and is contrary to State GST Notification No.451 dated 29-07-2017 as amended by Notification No.31/2020-State Tax dated 25-06-2020 and corresponding Central GST Notification No.13/2017-Central Tax dated 28-06-2017 as amended by Notification No.31/2020-CT dated 03-04-2020. As per Notification No.31/2020-State Tax dated 25-06-2020 and Notification No.31/2020-CT dated 03-04-2020 as a COVID-19 relaxation Measures, the rate of interest for the month of February, 2020 to April, 2020 was reduced to Nil for first 15 days of delay and 9% thereafter in place of 18%, for registered persons having annual turnover above Rs.5.00 Cr. Since the annual turnover of the Petitioner is above Rs.5.00 Cr.; hence, they are entitled to the benefit of said notification.

Considering the above extension of limitation for filing of GSTR-3B returns and reduction in the rate of interest, amount of Interest demand should have been Rs.12,791.44/- only for the month of March, 2020 as against demand of interest of Rs.6,63,026/- in the impugned Show Cause Notice dated 16-09-2022 for the month of March,2020. Thus; the petitioner is liable to pay interest of Rs.12,791.44/- only for the month of March, 2020 as against demand of interest of Rs.6,63,026/-.Thus, the petitioner is directed to pay the same amount within a period of two weeks, if not paid, from the date of receipt/production of copy of this Order.

12. In view of the aforesaid findings and the judicial pronouncements, both the impugned show-cause notices, are hereby, quashed and set-aside. As a result, the instant writ application is allowed in the manner indicated herein above. I.A, if any, also stands disposed of.