2022 (3) TMI 794 - HC - GST

Non-compliance of the principles of natural justice - non-issuance of SCN - failure to follow the procedure prescribed under Section 73 of JGST Act - HELD THAT - A perusal of the adjudication order dated 1st November 2021 would itself show that no show-cause notice under Section 73(1) of the Act was issued and petitioner denies issuance of any summary of show-cause notice either. It is submitted that in those circumstances, the respondents may be restrained from taking any coercive steps for realizing the amount in question through the garnishee notice from the petitioner s bank Punjab National Bank. Learned counsel for the respondents-State seeks short time to file a counter affidavit - As prayed for by Mr. Rahul Saboo, learned S.C.-I, list the matter on 22nd March 2022. Counter affidavit be filed by 21st March 2022.

Summary

Issues:
1. Discrepancies in GST return for the period April 2018 to March 2019.
2. Allegations of interpretation of Section 16(4) of the JGST Act and denial of ITC.
3. Levy of interest without prescribed rules for computation.
4. Failure to issue show-cause notice under Section 73(1) before levying tax, interest, and penalty.
5. Violation of principles of natural justice and procedural requirements under Section 73 of the Act.
6. Issuance of garnishee notice to petitioner's bank for immediate payment.

Analysis:
1. The petitioner's GST return for April 2018 to March 2019 showed discrepancies, leading to an intimation of tax payable under Section 73(5)/74(5) of the JGST Act. The petitioner contended that denial of Input Tax Credit (ITC) based on Section 16(4) was misconceived, citing relevant judgments in support.

2. Regarding the levy of interest, the petitioner argued that interest computation rules were absent, making the levy unworkable. It was emphasized that interest should start post adjudication of the demand, especially when the liability is disputed. The petitioner highlighted the necessity of a show-cause notice under Section 73(1) before imposing penalties.

3. The adjudication order issued without following the principles of natural justice and procedural requirements under Section 73 was challenged. The petitioner referenced specific judgments, including one related to the initiation of recovery proceedings without proper adjudication on interest disputes.

4. The petitioner sought relief from coercive actions following the issuance of a garnishee notice to their bank for immediate payment. The petitioner argued that without issuance of a show-cause notice under Section 73(1), coercive steps for recovery should not be taken. The court granted time for the State to file a counter affidavit and restrained coercive actions until further hearing.

5. The judgment highlighted the importance of adhering to procedural fairness and legal requirements in tax matters, emphasizing the need for proper adjudication and issuance of show-cause notices before imposing tax, interest, or penalties. The court's decision to prevent coercive actions without proper legal basis reflects a commitment to upholding natural justice principles in tax disputes.