2022 (2) TMI 1157 - HC - GST

Validity of SCN - fulfillment of very ingredient of a proper show cause notice as required u/s 73 of the Act - SCN issued in a format without striking out any irrelevant portions and without stating the specific contravention committed by the petitioner - proper opportunity of defending denied - violation of principles of natural justice - HELD THAT - A perusal of the impugned show cause notice at Annexure-1 creates a clear impression that it is a notice issued in a format without even striking out any relevant portions and without stating the contraventions committed by the petitioner. The summary of the show cause notice under DRC-01 indicates that as per the statistics received from the headquarter/ government treasury, it has come to the notice of the department that the petitioner has received a sum as payment from the government treasury against works contracts services completed / partly completed during the above mentioned period April 2020 to March 2021 whereas the liability reflected by him through filed returns is less than the above mentioned sum as per GSTR-3B. As such, he was not reflecting the total payment received and consequent total liability accrued in the filed returns just to evade payment of due tax to the government. It needs to be mentioned here that even the summary of the show cause notice does not disclose the information as received from the headquarter / government treasury as to against which works contract service completed or partly completed the petitioner has not disclosed its liability in the returns filed under GSTR-3B. The show cause notice is completely silent on the violation or contravention alleged to have been done by the petitioner regarding which he has to defend himself. The summary of show cause notice at annexure-2 though cannot be a substitute to a show cause notice, also fails to describe the necessary facts which could give an inkling as to the contravention done by the petitioner - It needs no reiteration that a summary of show cause notice in Form DRC-01 could not substitute the requirement of a proper show cause notice. At the same time, if a show cause notice does not specify the grounds for proceeding against a person no amount of tax, interest or penalty can be imposed in excess of the amount specified in the notice or on grounds other than the grounds specified in the notice as per section 75(7) of the JGST Act. The impugned show cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show cause notice and amounts to violation of principles of natural justice - the writ petition is allowed.

Issues Involved:
1. Validity of the show cause notice issued under Section 73 of the Jharkhand Goods and Services Tax (JGST) Act, 2017.
2. Adequacy of the summary of the show cause notice issued in Form DRC-01.
3. Compliance with the principles of natural justice.
4. Requirement of a proper show cause notice under Section 73 of the JGST Act.
5. Jurisdiction and procedural compliance by the State Tax Authorities.

Detailed Analysis:

1. Validity of the show cause notice issued under Section 73 of the Jharkhand Goods and Services Tax (JGST) Act, 2017:
The petitioner challenged the show cause notice dated 14.06.2021 issued under Section 73 of the JGST Act, 2017, and the summary of the show cause notice in Form DRC-01 issued by the respondent. The petitioner argued that the notice lacked the essential ingredients of a proper show cause notice as required under Section 73. It was issued in a format without striking out irrelevant portions and did not state the specific contravention committed by the petitioner. The court observed that the impugned show cause notice was issued in a format without even striking out any relevant portions and without stating the contraventions committed by the petitioner, thus lacking the necessary details to constitute a valid show cause notice.

2. Adequacy of the summary of the show cause notice issued in Form DRC-01:
The petitioner contended that the summary of the show cause notice in Form DRC-01, issued in electronic form, could not substitute a proper show cause notice. The court noted that the summary of the show cause notice under DRC-01 indicated that the petitioner had received payments from the government treasury against works contracts services completed or partly completed, but had not reflected the total payment received and consequent total liability accrued in the filed returns. However, the summary did not disclose specific information about the contracts or services, rendering it insufficient to meet the requirements of a proper show cause notice.

3. Compliance with the principles of natural justice:
The petitioner argued that the vague nature of the show cause notice denied them a proper opportunity to defend themselves, violating the principles of natural justice. The court referred to the case of Gorkha Security Services vs. Government (NCT of Delhi), which emphasized that a show cause notice must contain specific charges and allegations to allow the noticee to defend themselves adequately. The court concluded that the impugned notice failed to meet these requirements, thus violating the principles of natural justice.

4. Requirement of a proper show cause notice under Section 73 of the JGST Act:
The court reiterated that a proper show cause notice under Section 73 must contain specific grounds and allegations. It referred to the Apex Court's judgment in the case of Metal Forging & another vs. Union of India, which emphasized that the foundation of the case must be laid in the show cause notice. The court found that the impugned notice lacked specific grounds and allegations, making it unsustainable in law.

5. Jurisdiction and procedural compliance by the State Tax Authorities:
The respondent argued that the show cause notice and summary were issued in accordance with the JGST Act and its rules. They contended that the show cause notice was issued in the prescribed format DRC-01 through the online portal of the GSTN, which allowed the proper officer to make comments in the summary. However, the court held that the prescribed format and online portal could not substitute the requirement of a proper show cause notice with specific grounds and allegations. The court also noted that the decision in W.P.(T) No. 2444 of 2021, which involved a similar issue, supported the petitioner's argument.

Conclusion:
The court concluded that the impugned show cause notice did not fulfill the ingredients of a proper show cause notice and amounted to a violation of the principles of natural justice. Consequently, the court quashed the impugned notice and the summary of the show cause notice in Form DRC-01. However, the court allowed the respondents to initiate fresh proceedings from the same stage in accordance with the law within four weeks. The writ petition was allowed to the extent indicated.

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