2018 (9) TMI 371 - HC - GST

Transitional Credit - Section 140 of the Central General Sales Tax Act, 2017 - violation of Principles of Natural Justice - Held that - The respondent states that the impugned order is only a show cause notice. This Court is unable to agree with the said stand taken by the learned Senior Panel Counsel appearing for the Revenue, as a show cause notice cannot pre-judge the issue. Had the first respondent issued a notice calling upon the petitioner to state as to why the transitional credit claimed by them cannot be granted or should be directed to be reversed, then it would be a different matter. In the impugned proceedings, the first respondent denied the credit and all that has been granted is 15 days time to reverse the credit, which, according to the first respondent, is inadmissible. These are sufficient grounds to hold that the impugned order is in violation of the principles of natural justice. Petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to order denying transitional credit under Section 140 of Central General Sales Tax Act, 2017 on grounds of legality, arbitrariness, and violation of natural justice.

Analysis:
The petitioner filed a writ petition challenging an order dated 30.5.2018, which was argued by the respondents to be a show cause notice. The petitioner contended that the order was a demand made without considering their objections, denying legitimate transitional credit under Section 140 of the Act. The petitioner argued that the order was final and communicated without due process, violating natural justice principles. The petitioner claimed entitlement to carry forward various credits, including Education Cess and Secondary and Higher Education Cess, under Section 140(1) of the Act.

The court noted that the petitioner had responded to the notice promptly, but their submissions were not considered or adjudicated upon. The court found that the impugned order was not a show cause notice but a demand for the petitioner to reverse the credit within 15 days, failing which penal action would be initiated. The court disagreed with the respondent's assertion that it was a show cause notice, emphasizing that pre-judging the issue was against natural justice. The court held that the order denying credit and directing reversal within a specified time was a violation of natural justice, entitling the petitioner to succeed.

Consequently, the court allowed the writ petition, setting aside the impugned order and directing the first respondent to proceed afresh in accordance with the law. No costs were awarded, and the connected Writ Miscellaneous Petition was closed.