2022 (11) TMI 552 - HC - GST

Principles of natural justice - opportunity granted to the Petitioner to file a reply to the draft audit report or not - draft audit report as well as the final audit report, issued on the same date - extension of audit period - HELD THAT - On a plain reading of Section 65 (4) together with Section 65 (6) of the OGST Act and Rule 101(4) of the OGST Rules, it is plain that the procedural requirement of the Petitioner having to be given 30 days time to file a reply to the draft audit report was not followed in the present case. On that short ground, this Court sets aside the final audit report dated 30th June, 2022 issued under Section 65 (6) of the OGST Act. The position would, therefore, revert to the stage, at which the draft audit report was issued on 30th June, 2022. However, even if the Petitioner is afforded an opportunity at this stage to file a reply to the above draft audit report, followed by the authorities issuing the final audit report, the original deadline of three months would be crossed on 21st December 2022. If the exercise is not completed by that date, the entire exercise would be rendered futile. Therefore, the following directions are issued by this Court subject to the condition that the Commissioner will by a reasoned order in terms of the proviso Section 65(4) of the OGST Act extend the time for completion of the audit by the maximum permissible further period of six months in terms thereof. The Petitioner will file its reply to the draft audit report accompanied by all the documents that the Petitioner wishes to rely on not later than 28th November, 2022 - After considering the reply of the Petitioner, the final audit report will be issued by the Opposite Party Department under Section 65 (6) of the OGST Act not later than 21st December, 2022. Petition disposed off.

Summary

Issues:
1. Challenge to draft and final audit reports under the Orissa GST Act, 2017.
2. Non-compliance with procedural requirements for filing a reply to the draft audit report.
3. Deadline extension for completion of the audit exercise under Section 65(4) of the OGST Act.
4. Directions for further proceedings in light of procedural lapses.

Analysis:
The High Court of Orissa addressed a writ petition challenging both a draft audit report and a final audit report issued under the Orissa GST Act, 2017. The petitioner, a Senior Advocate, highlighted the non-compliance with Rule 101(4) of the OGST Rules, 2017, which mandates the opportunity for the registered person to file a reply to discrepancies observed in the audit report. The court noted that in this case, the petitioner was not granted the chance to respond to the draft audit report before the final report was issued on the same day, raising procedural concerns.

Furthermore, the court examined the timeline for completing the audit exercise under Section 65(4) of the OGST Act, emphasizing that the audit must be finalized within three months from the commencement date, with a provision for a six-month extension if necessary. The court clarified that the three-month period for the audit commenced when the petitioner submitted the requested documents, setting the deadline for the final audit report issuance. Noting the authority's issuance of both reports on the same day after the three-month deadline had passed, the court found procedural irregularities.

In light of the procedural lapses, the court set aside the final audit report and directed the petitioner to file a reply to the draft audit report by a specified date. The court further instructed the department to issue the final audit report within a revised deadline, subject to the Commissioner's extension of time as per Section 65(4) of the OGST Act. The court's directions aimed to ensure compliance with procedural requirements and the timely completion of the audit exercise, preventing the futility of the entire process if deadlines were not met. The judgment provided a structured approach for further proceedings, emphasizing adherence to statutory provisions and procedural fairness.