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2022 (3) TMI 446 - HC - GSTValidity of summary order and SCN - Violation of principles of natural justice - Summary Order issued without issuance of any show cause and initiation of adjudication proceedings in terms of Sections 62, 67,70, 73, 74, 76 79 of the Act of 2017 - allegation of the petitioner having claimed excess ITC, without affording any opportunity of hearing to the petitioner company - Input Tax Credit lying in the credit of electronic ledger account has been blocked - HELD THAT - A perusal of the impugned show-cause notice (Annexure-5) issued under section 73 of the Act shows that it completely lacks in fulfilling the ingredients of proper show cause notice under section 73 of the Act. It does not indicate as to the contravention committed by the petitioner. It has been issued in a format without striking off the irrelevant particulars. In the case of M/s NKAS Services Private Limited 2021 (10) TMI 880 - JHARKHAND HIGH COURT concerning the SCN issued under section 74 of the Act and also in the case of the same petitioner in W.P (T) No. 2659/2021 relating to a similar vague show cause notice issued under section 73 of the Act, this Court vide detailed judgment dated 06.10.2021 2021 (10) TMI 880 - JHARKHAND HIGH COURT and 09.02.2022 2022 (2) TMI 1157 - JHARKHAND HIGH COURT quashed the notices impugned in those writ petition and granted liberty to the Respondents to initiate fresh proceeding from the same stage in accordance with law within a period of four weeks from the date of the order. The impugned show cause notice issued under section 73 of the JGST Act and Summary of the Show Cause Notice issued in Form GST DRC-01 are quashed. Since the breach relates to violation of principles of natural justice and mandatory procedure prescribed in law - Writ petition is allowed.
Issues Involved:
1. Legality of the Summary Order under Rule 142 without a proper show cause notice and adjudication. 2. Imposition of tax, interest, and penalty without providing an opportunity of hearing. 3. Blocking of Input Tax Credit (ITC) in the electronic ledger without intimation. 4. Maintainability of the writ petition despite available statutory remedy. Detailed Analysis: 1. Legality of the Summary Order under Rule 142 without a proper show cause notice and adjudication: The petitioner challenged the issuance of a Summary Order under Rule 142 without a proper show cause notice and adjudication proceedings as per Sections 62, 67, 70, 73, 74, 76, and 79 of the JGST Act, 2017. The court noted that the show cause notice (SCN) issued under section 73 of the Act was in a format and did not indicate any specific contravention committed by the petitioner. The SCN lacked the necessary details and did not fulfill the statutory requirements under section 73(1) of the Act. The court referred to its earlier decisions in similar cases, emphasizing that a Summary of Show Cause Notice in Form GST DRC-01 cannot substitute a proper show cause notice. 2. Imposition of tax, interest, and penalty without providing an opportunity of hearing: The petitioner argued that the department imposed tax, interest, and penalty amounting to ?14,36,896/- based on an alleged excess ITC claim without affording any opportunity of hearing. The court found that the Summary Order dated 14.12.2020 was issued without considering the petitioner’s reply and without providing a proper hearing. The court held that such an action violated the principles of natural justice and the mandatory procedure prescribed by law. 3. Blocking of Input Tax Credit (ITC) in the electronic ledger without intimation: The petitioner’s Electronic Credit Ledger was blocked to the extent of ?12,30,238/- on 05.03.2020 and again ?4,21,698/-. The court noted that the ITC remained blocked for more than a year, contravening Rule 86A(3) of the JGST Rules, 2017, which restricts the blocking of ITC for more than one year. The respondents did not dispute this fact, and the court found the blocking of ITC without intimation to be illegal and arbitrary. 4. Maintainability of the writ petition despite available statutory remedy: The petitioner contended that the writ petition is maintainable despite the availability of a statutory remedy under section 107 of the Act due to the violation of principles of natural justice and improper procedure. The court agreed, citing the Supreme Court’s opinion in Assistant Commissioner of State Tax and Others versus Commercial Steel Limited, which supports the maintainability of a writ petition in cases of procedural violations and denial of natural justice. The court further cited the Apex Court’s principles laid in Magadh Sugar & Energy Ltd. Versus State of Bihar & others, reinforcing the maintainability of the writ petition. Conclusion: The court quashed the impugned show cause notice and Summary of Show Cause Notice dated 20.10.2020, as well as the Summary Order dated 14.12.2020, due to procedural violations and denial of natural justice. The respondents were granted liberty to initiate fresh proceedings in accordance with law within four weeks. The writ petition was allowed to the extent indicated.
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