2023 (5) TMI 749 - HC - GST

Principles of natural justice - validity of SCN - show cause notice being vague and cryptic - Non-communication of relevant information and material thereby disabling the petitioner to respond - Section 74 and 75 of GST Act as well as Rule 142 of GST Rules - HELD THAT - Bare reading of the show cause notice reveals that it neither contained the material and information nor the statement containing details of ITC transaction under question. Section 75 of GST Act is complete Code in itself which prescribes for various stages or determination of wrongful utilization of ITC which is required to subject to affording of reasonable opportunity of being heard to the assessee. Since the Statute itself prescribes for affording reasonable opportunity, it is incumbent upon the Revenue to afford the same and any deficiency in that regard vitiates the end result. In the case of Division Bench of Jharkhand High Court in M/s Sidhi Vinayak Enterprises Vs. The State of Jharkhand ors 2022 (10) TMI 671 - JHARKHAND HIGH COURT the facts and circumstances of which are similar if not identical to the facts and circumstance prevailing herein - The Jharkhand High Court has dealt with the provisions of Section 74 and 75 of GST Act as well as Rule 142 of GST Rules, and held that the impugned show cause notice in both the cases does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice. In view of above and the following decision of the Jharkhand High Court, this Court has no manner of doubt that the very initiation of the proceedings by way of show cause notice is vitiated for the same being vague - petition allowed.

Summary

Issues involved:
The issues involved in this case are the challenge to show cause notice under Section 74(1) of GST Act for not meeting the requirements of the provision, the vagueness of the show cause notice preventing the petitioner from responding adequately, and the subsequent actions of passing orders being vitiated in law.

Challenge to Show Cause Notice:
The writ petition challenges Annexure P-2 dated 03.05.2019 and Annexure P-4 dated 30.08.2019 issued by the Appellate Authority & Joint Commissioner, State Tax, Sagar Division. The principal ground of challenge is that the show cause notice issued under Section 74(1) of GST Act was vague and did not communicate relevant information, hindering the petitioner's ability to respond effectively. The petitioner argued that this deficiency in the notice tainted the subsequent actions of passing orders and dismissing appeals.

Precedent and Legal Analysis:
The petitioner relied on a decision of the Division Bench of Jharkhand High Court, citing similarities between the facts of that case and the present one. The Jharkhand High Court's judgment emphasized that a show cause notice must fulfill the requirements of a proper notice as mandated by law. The Court held that the summary of show cause notices issued in that case did not meet the standards of a proper notice, violating principles of natural justice. Consequently, the Court quashed the impugned orders and directed the authorities to initiate fresh proceedings from the stage of issuing a proper show cause notice under Section 74(1) of the JGST Act.

Analysis of Show Cause Notice:
The Court analyzed the show cause notice (Annexure P-1) and found that it lacked essential material, information, and details of the ITC transaction under question. Despite the State's argument that the petitioner was not hindered in responding to the vague notice, the Court emphasized that Section 74 of the GST Act mandates that show cause notices must be clear and informative to enable the assessee to provide a meaningful response.

Legal Provisions and Conclusion:
Section 75 of the GST Act was highlighted as a complete code that outlines the stages for determining wrongful utilization of ITC, emphasizing the importance of affording a reasonable opportunity to the assessee. The Court concluded that the initiation of proceedings through the vague show cause notice was vitiated. Consequently, the impugned orders and the show cause notice were quashed, granting the competent authority the liberty to proceed in accordance with the law. The writ petition was allowed in favor of the petitioner.