2023 (2) TMI 585 - HC - GST

Violation of principles of natural justice (non-service of SCN) - notice in Part A of FORM GST DRC-01A not issued - requirement to issue SCN under Section 74 of CGST Act, before starting any subsequent proceeding - inherent defect in the proceedings - HELD THAT - The present writ petition deserves to be allowed, as admittedly for initiation of proceedings against the petitioner a notice as provided for under Rule 142(1A) of the Rules in Part A of FORM GST DRC-01A was not issued, which provided for communication of details of any tax, interest and penalties as ascertained by the officer. Any subsequent reminder will not cure inherent defect in proceedings initiated against the petitioner. Similar view has been expressed by the Delhi High Court in Gulati Enterprises' case 2022 (5) TMI 1137 - DELHI HIGH COURT and this Court in M/s Skyline Automation Industries' cases 2023 (1) TMI 379 - ALLAHABAD HIGH COURT wherein also in identical facts pertaining to a case prior to the amendment of Rule 142(1A) of the Rules with effect from October 15, 2020, the impugned show cause notice was set aside and the matter was remitted back to authority concerned to initiate fresh proceedings in accordance with law. Petition allowed.

Summary

Issues:
Challenge to order under Section 74(9) of the Central Goods and Service Tax Act, 2017 - Requirement of notice in Part A of FORM GST DRC-01A before passing order - Jurisdictional validity of proceedings initiated without notice.

Analysis:
The writ petition challenged an order dated February 23, 2021, passed by respondent No.2 under Section 74(9) of the Central Goods and Service Tax Act, 2017. The petitioner contended that as per Rule 142(1A) of the Central Goods and Service Tax Rules, 2017, before passing any order under Section 74, a show cause notice in Part A of FORM GST DRC-01A was mandatory. The absence of this notice deprived the petitioner of a fair opportunity to respond, rendering subsequent proceedings jurisdictionally flawed.

The petitioner relied on a Division Bench judgment of the Delhi High Court and an order of the Allahabad High Court to support the argument. In response, the respondents acknowledged the non-issuance of the required notice but argued that subsequent reminders provided the petitioner with a fair hearing opportunity, which was not utilized. The respondents contended that the impugned order was appealable under Section 107 of the Act.

After considering the arguments, the Court held in favor of the petitioner. It noted that the initiation of proceedings against the petitioner without issuing the mandatory notice in Part A of FORM GST DRC-01A was a jurisdictional flaw. The Court emphasized that subsequent reminders could not rectify the inherent defect in the proceedings. Citing precedents from the Delhi High Court and the Allahabad High Court, the Court concluded that the impugned order was to be quashed, allowing the writ petition. The Court granted liberty to the respondents to initiate fresh proceedings against the petitioner in compliance with the law.

In conclusion, the Court allowed the writ petition, quashed the impugned order dated November 10, 2022, and permitted the respondents to initiate fresh proceedings against the petitioner in accordance with the legal requirements, emphasizing the necessity of complying with procedural mandates for a fair adjudication process.