2023 (4) TMI 402 - HC - GST

Validity of SCN - Summary of Show-Cause Notice can be a substitute of a proper show- cause notice or not - section 73 of JGST Act, 2017 - levy of 100% penalty instead of 10% - HELD THAT - Notices under section 73(1) of the Act of 2017 at Annexure-2 in the respective writ petitions are in the standard format and neither any particulars have been struck off, nor specific contravention have been indicated to enable the petitioners to furnish a proper reply to defend themselves. The show-cause notices can therefore, be termed as vague. This Court has, in the case of M/s NKAS SERVICES PRIVATE LIMITED 2021 (10) TMI 880 - JHARKHAND HIGH COURT categorically held that summary of show cause notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under section 73(1) of the Act of 2017. It seems that the authorities have, after issuance of show-cause notices dated 07.10.2020 and 20.10.2020 (Annexure-2 in the respective writ petitions) and Summary of show cause notices contained in GST DRC-01 (Annexure-3 in the respective writ petitions) of the same date, proceeded to issue Summary of the Order dated 12.12.2020 and 14.12.2020 (Annexure-4 in the respective writ petitions). Respondents have also not brought on record any adjudication order. Levy of penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 vide Annexure-4 in the respective writ petitions are also in the teeth of the provisions of Section 73(9) of the Act of 2017, wherein while passing an adjudication order, the Proper Officer can levy penalty up to 10% of tax dues only. The above infirmity clearly shows non-application of mind on the part of the Deputy Commissioner, State Tax, Godda Circle, Godda. Proceedings also suffer from violation of principles of natural justice and the procedure prescribed under section 73 of the Act and are in teeth of the judgment rendered by this Court in the case M/s NKAS SERVICES PRIVATE LIMITED. The impugned show-cause notices and Summary of the Show Cause Notices dated 07.10.2020 and 20.10.2020 (Annexure-2 in the respective writ petitions) and Summary of Orders contained in Form GST DRC-07 dated 12.12.2020 and 14.12.2020 (Annexure-4 in the respective writ petitions) are quashed - Petition allowed.

Summary

Issues Involved:
- Quashing of show-cause notices and orders issued under JGST Act, 2017
- Challenge to the imposition of 100% penalty
- Violation of principles of natural justice and procedural errors

Summary of the judgment:

The High Court of Jharkhand heard and decided two writ petitions concerning different petitioners but with common issues. The first petitioner, engaged in civil construction, sought to quash a show-cause notice and related orders for the tax period of April 2018 to March 2019. The second petitioner, a proprietor of a medical store, also challenged a show-cause notice and related orders for the same tax period. Both petitioners argued that the notices did not comply with Section 73(1) of the JGST Act, 2017, and failed to specify the contraventions adequately. They also contested the imposition of 100% penalty, which they deemed impermissible under the law.

In response, the State argued that the notices followed the standard format provided by GSTN and highlighted discrepancies in the taxpayers' filings. The State contended that late filing of GSTR-1 by suppliers led to changes in GSTR-2A figures, necessitating the levying of interest under section 50 of the Act to prevent revenue loss. The Court noted that the State did not specifically deny the petitioners' argument regarding the penalty imposition.

After considering the submissions, the Court found the show-cause notices to be vague and not meeting the requirements of a proper notice under Section 73(1) of the Act. The Court cited a previous judgment to emphasize the importance of specifying grounds in a show-cause notice to enable the taxpayer to defend themselves adequately. The Court also observed that the penalty of 100% tax dues imposed was in violation of the Act and principles of natural justice.

Consequently, the Court quashed the impugned show-cause notices, orders, and penalties, allowing the Deputy Commissioner to initiate fresh proceedings with proper notices and adherence to the law. The writ petitions were allowed in favor of the petitioners based on the identified deficiencies in the proceedings.