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2024 (12) TMI 829 - HC - GSTViolation of principles of natural justice - Validity of the Summary of the Show Cause Notice in GST DRC-01 as a substitute for a proper Show Cause Notice - It is the grievance of the petitioner that the petitioner was not provided with the opportunity of hearing as provided under Section 75 (4) of the CGST/AGST Act, 2017 before passing of the order - whether the attachment can be said to be a Show Cause Notice as per the mandate of both the Central Act as well as the State Act and the Rules made therein under? - HELD THAT - This Court is of the view that the Summary of the Show Cause Notice along with the attachment containing the determination of tax cannot be said to be a valid initiation of proceedings under Section 73 without issuance of a proper Show Cause Notice. The Summary of the Show Cause Notice is in addition to the issuance of a proper Show Cause Notice. Under such circumstances, this Court is of the opinion that the impugned order challenged in the instant writ petition is contrary to the provisions of Section 73 as well as Rule 142 (1) (a) of the Rules as the said impugned Orders were passed with issuance of a proper Show Cause Notice. Whether the determination of tax as well as the order attached to the Summary to the Show Cause Notice in GST DRC-01 and the Summary of the Order in GST DRC-07 can be said to be the Show Cause Notice and order respectively, this Court duly dealt with what would constitute a Show Cause Notice, the Statement as per Section 73 (3) as well as the Summary to the Show Cause Notice in GST DRC-01 and Summary of the Statement in GST DRC-02. This Court had also opined above that the statement to be provided by the Proper Officer in terms with Section 73 (3) cannot be said to be a Show Cause Notice which is required to be issued in terms with Section 73 (1). Therefore, the submission of the respondents that the statement attached to the Summary of the Show Cause Notice is the Show Cause Notice is completely misconceived and contrary to Section 73 (1) and 73 (3). This Court is of the opinion that when the statute is clear to provide an opportunity of hearing, there is a requirement of providing such opportunity. In fact a perusal of the Form GST DRC-01 enclosed to the writ petition shows that details have been given as regards the date by which the reply has to be submitted; date of personal hearing; time of personal hearing and venue of personal hearing. It is seen that in the Summary of the Show Cause Notice only the date for submission of reply has been mentioned. Whether Rule 26 (3) can be applicable to Chapter-XVIII when the said Sub-Rule on refers to Chapter-III? - HELD THAT - This Court is of the view that the Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73 (1) of the Central Act as well as the State Act. Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion. The Show Cause Notice to be issued in terms with Section 73 (1) of the Central Act or State Act cannot be confused with the Statement of the determination of tax to be issued in terms with Section 73 (3) of the Central Act or the State Act. In the instant writ petitions, the attachment to the Summary of Show Cause Notice in GST DRC-01 is only the Statement of the determination of tax in terms with Section 73 (3). The said Statement of determination of tax cannot substitute the requirement for issuance of the Show Cause Notice by the Proper Officer in terms with Section 73 (1) of the Central or the State Act. Under such circumstances, initiation of the proceedings under Section 73 against the petitioners in the instant batch of writ petitions without the Show Cause Notice is bad in law and interfered with - The Show Cause Notice, Statement as well as the Order are all required to be authenticated in the manner stipulated in Rule 26 (3) of the Rules of 2017. Accordingly, this Court is of the opinion that the Impugned Order challenged in the writ petition are in violation of Section 75 (4) as no opportunity of hearing was given. The impugned order dated 31.12.2023 issued by the respondent no.3 is hereby set aside and quashed. This Court also cannot be unmindful of the fact that it is on account of certain technicalities and the manner in which the impugned order was passed, this Court interfered with the impugned order and hence set aside and quashed the same - Petition disposed off.
Issues Involved:
1. Validity of the Summary of the Show Cause Notice in GST DRC-01 as a substitute for a proper Show Cause Notice. 2. Requirement of signatures and authentication on notices and orders. 3. Compliance with the principles of natural justice and opportunity for a hearing. 4. Applicability of Rule 26(3) of the GST Rules, 2017 to Chapter XVIII. 5. Procedural compliance under Section 73 of the CGST/AGST Act, 2017. Detailed Analysis: 1. Validity of the Summary of the Show Cause Notice in GST DRC-01: The court examined whether the Summary of the Show Cause Notice issued in GST DRC-01 can serve as a substitute for a proper Show Cause Notice as mandated by Section 73 of the CGST/AGST Act, 2017. It was concluded that the Summary of the Show Cause Notice is an additional requirement and cannot replace the need for a proper Show Cause Notice. The court emphasized that the Show Cause Notice must explicitly state the reasons for its issuance to provide the taxpayer with an adequate opportunity to respond. The judgment referenced similar cases, such as Nkas Services Private Limited, where the necessity of a proper Show Cause Notice was upheld. 2. Requirement of Signatures and Authentication: The court addressed the issue of unsigned attachments in GST DRC-01 and GST DRC-07. It was noted that Rule 26(3) of the GST Rules, 2017, mandates that notices, certificates, and orders be authenticated through digital or e-signatures. The absence of such authentication renders the documents ineffective. The court cited precedents from various High Courts, including the Telangana and Andhra Pradesh High Courts, which held that unsigned documents lose their efficacy and are void. 3. Compliance with Principles of Natural Justice: The court observed that the principles of natural justice, as enshrined in Section 75(4) of the CGST/AGST Act, 2017, were violated because the petitioner was not granted an opportunity for a hearing despite requesting it. The court highlighted the statutory mandate to provide a hearing when requested or when an adverse decision is contemplated. The failure to provide a hearing was deemed contrary to the statutory provisions and violative of Article 21 of the Constitution. 4. Applicability of Rule 26(3) to Chapter XVIII: Although Rule 26(3) specifically pertains to Chapter III of the GST Rules, the court extended its applicability to Chapter XVIII, which deals with Demand and Recovery. The court reasoned that the authentication of notices and orders by the Proper Officer is crucial and should be uniformly applied across different chapters of the rules. This interpretation was supported by judgments from other High Courts, which applied Rule 26(3) beyond its explicit scope. 5. Procedural Compliance under Section 73: The court scrutinized the procedural requirements under Section 73, which necessitates the issuance of a Show Cause Notice by the Proper Officer. The court clarified that the Statement of determination of tax under Section 73(3) cannot replace the Show Cause Notice required under Section 73(1). The court found that the proceedings initiated against the petitioner without a proper Show Cause Notice were legally flawed. Consequently, the court set aside the impugned order and allowed for de novo proceedings, if deemed appropriate, ensuring that the statutory timelines are adjusted to account for the court's intervention. In conclusion, the court quashed the impugned order due to procedural irregularities, particularly the lack of a proper Show Cause Notice and the absence of authentication on documents. The court granted the respondent authorities the liberty to initiate fresh proceedings in compliance with the statutory requirements.
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