2023 (1) TMI 1131 - HC - GST

Realization of its Input Tax Credit (ITC) in the electronic credit ledger of the petitioner as for the Financial Year 2018-19 last date for availing ITC as per provisions under Section 16(4) of Jharkhand Goods Service Act, 2017 - violation of Section 16(4) of JGST Act, 2017 or not - violation of principles of natural justice or not - HELD THAT - It appears that a show cause notice under Section 73(1) of the Act dated 12.02.2022 (Annexure-1) was issued to the petitioner which was issued in a format without striking out the irrelevant particulars and thus, there won t be an exaggeration in treating the same as vague as it does not spell out the contraventions for which the petitioner is charged. As a matter of fact, it is worse than the summary of show cause notice issued under FORM GST DRC-01 of the even date (Annexure-2). It further transpires that without giving any opportunity of hearing State Tax Officer was in so hurry, that he finally issued summary of order in FORM GST DRC-07 on 17.02.2022 (Annexure-3); that means just within five days from issuance of show cause. Now the law is no more res integra, inasmuch as, Rule 142(1) (a) of the JGST Rules provides that the summary of show cause notice in Form DRC-01 should be issued along with the show cause notice under Section 73(1) which will spell out the contraventions in details for which the Assessee is charged. The word along with clearly indicates that in a given case show cause notice as well as summary thereof both have to be issued. As per Rule 142(1)(a) of the JGST Rules, the summary of show cause notice has to be issued electronically to keep track of the proceeding initiated against the registered person whereas a show cause notice need not necessarily be issued electronically. This Court holds that the foundation of the proceeding in the instant case suffers from material irregularity and hence not sustainable being contrary to Section 73 (1) of the JGST Act. Thus, the subsequent proceedings/impugned orders issued under DRC-07 dated 17.02.2022 cannot sanctify the same and liable to be quashed and set aside. At the cost of repetition, DRC-07 has been issued within five days of issuance of DRC-01 is a clear picture of violation of principles of natural justice. The impugned show cause notice in the instant case does not fulfill the ingredients of a proper show cause notice and thus amounts to violation of principles of natural justice; the challenge is maintainable in exercise of writ jurisdiction of this Court - Application allowed.

Issues Involved:
1. Validity of the Show Cause Notice dated 12.02.2022 under Section 73 of the Jharkhand Goods and Services Tax Act, 2017.
2. Validity of the Summary of Show Cause Notice in FORM GST DRC-01 dated 12.02.2022.
3. Validity of the Summary of Order in FORM GST DRC-07 dated 17.02.2022.
4. Legality of the attachment of the petitioner's business bank account.
5. Availability of alternative remedies and principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of the Show Cause Notice dated 12.02.2022 under Section 73 of the Jharkhand Goods and Services Tax Act, 2017:
The petitioner contested the show cause notice issued on 12.02.2022 under Section 73(1) of the JGST Act, 2017, arguing that it was vague and did not spell out the contravention for which the petitioner was charged. The notice was in a format without striking out irrelevant particulars, which rendered it unclear and non-specific. The court observed that the notice did not fulfill the requirements of a proper show cause notice as per the law, thereby violating the principles of natural justice. The court held that the notice was not sustainable and quashed it.

2. Validity of the Summary of Show Cause Notice in FORM GST DRC-01 dated 12.02.2022:
The petitioner argued that the summary of the show cause notice issued in FORM GST DRC-01 on the same date was also vague and did not provide specific details of the alleged contraventions. The court noted that Rule 142(1)(a) of the JGST Rules mandates that the summary of the show cause notice should be issued electronically along with the detailed show cause notice. Since the detailed show cause notice itself was found to be vague, the summary issued in FORM GST DRC-01 was also deemed insufficient and not in compliance with the legal requirements. Consequently, the court quashed the summary of the show cause notice.

3. Validity of the Summary of Order in FORM GST DRC-07 dated 17.02.2022:
The petitioner contended that the summary of the order in FORM GST DRC-07 was issued just five days after the show cause notice, without providing a proper opportunity for the petitioner to respond. The court found that the issuance of the summary order within such a short period was a clear violation of the principles of natural justice. The court held that the summary order was not justified and quashed it along with the preceding show cause notice and summary of the show cause notice.

4. Legality of the attachment of the petitioner's business bank account:
The petitioner sought relief against the attachment of its business bank account. However, the court did not specifically address this issue in detail, as the primary focus was on the validity of the show cause notice and the subsequent orders. The court's decision to quash the show cause notice and subsequent orders implicitly addressed the issue of the bank account attachment, as these actions were based on the contested notices and orders.

5. Availability of alternative remedies and principles of natural justice:
The respondent argued that the petitioner had an alternative remedy available under Section 107(1) of the GST Act to appeal against the orders. However, the court held that the violation of the principles of natural justice, due to the vague and non-specific nature of the show cause notice, justified the invocation of writ jurisdiction despite the availability of alternative remedies. The court emphasized that a proper show cause notice is integral to ensuring fair play and adherence to the principles of natural justice.

Conclusion:
The court quashed the show cause notice dated 12.02.2022, the summary of the show cause notice in FORM GST DRC-01 dated 12.02.2022, and the summary of the order in FORM GST DRC-07 dated 17.02.2022. The court allowed the respondents to initiate fresh proceedings from the stage of issuance of a proper show cause notice under Section 73(1) of the JGST Act, 2017, in accordance with the law. The petitioner's application was allowed, and the interim application was disposed of.

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