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2025 (1) TMI 123 - HC - GSTChallenge to Summary of the Show Cause Notice - attachment to the determination of tax - attachments to both the GST DRC-01 as well as the GST DRC-07 did not contain any signature of the Proper Officer - opportunity of hearing as provided under Section 75 (4) of the CGST/AGST Act, 2017 not provided before passing of the order - violation of principles of natural justice - whether the said 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 - It would be apposite to take note of that in all these cases, the Summary of the Show Cause Notices have been issued in terms with Section 73 - Taking into account that it is only in the circumstances referred to above, the Proper Officer is required to issue a Show Cause Notice, therefore, the Show Cause Notice is required to specifically mention the reason(s) and the circumstances why the provision of Section 73 had been set into motion. The person against whom the said Show Cause Notice is issued would only have an adequate opportunity to submit a representation justifying that the prerequisites for issuance of Show Cause Notice is not there if and only if the reason(s) for issuance of the Show Cause is specifically mentioned in the Show Cause Notice. 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). Whether Rule 26 (3) can be applicable to Chapter-XVIII when the said Sub-Rule on refers to Chapter-III? - HELD THAT - In the case of M/S. SILVER OAK VILLAS LLP VERSUS THE ASSISTANT COMMISSIONER (ST) , THE ADDITIONAL COMMISSIONER OF CENTRAL TAX, STATE OF TELANGANA, UNION OF INDIA, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS 2024 (4) TMI 367 - TELANGANA HIGH COURT , the learned Division Bench of the Telangana High Court had applied Rule 26 (3) of the Rules of 2017 even to Chapter-XVIII of the Rules of 2017. In the case of AV BHANOJI ROW VERSUS ASSISTANT COMMISSIONER ST VISAKHAPATNAM 2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT , the learned Division Bench of the Andhra Pradesh High Court held that the signatures cannot be dispensed with and Sections 160 and 169 cannot save an order, notice, communication which did not contain a signature. In another judgment of the learned Division Bench of Delhi High Court in the case of RAILSYS ENGINEERS PRIVATE LIMITED ANR. VERSUS THE ADDITIONAL COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX (APPEALS-II) ANR. 2022 (7) TMI 1230 - DELHI HIGH COURT , the Delhi High Court held that there was a requirement of at least putting the digital signatures on the Show Cause Notice and Order in Original. This Court has duly perused the Summary of the Show Cause Notices wherein the petitioner was only asked to file his reply on a date specified. There was no mention as to the date of hearing and the Column was kept blank. However, the petitioner had sought for an opportunity of hearing which was however not given. In this regard, if this Court takes note of Section 75 (4) of both the Central Act as well as State Act, it would be seen that it is the mandate of the said provision that an opportunity of hearing should be granted when a request is received in writing from the person chargeable with tax or penalty or when any adverse decision is contemplated against such person. The mandate of Section 75 (4) of both the Central and State Act are safeguards provided to the assessees so that they can have a say in the hearing process. 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 - in a case where no reply is filed, a question arises whether the Proper Officer can pass an adverse order without providing an opportunity for hearing. The answer has to be in the negative else it would render the second part of Section 75 (4) redundant. Conclusion - 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 issuance of the Summary of the Show Cause Notice, Summary of the Statement and Summary of the Order do not dispense with the requirement of issuance of a proper Show Cause Notice and Statement as well as passing of the Order as per the mandate of Section 73 by the Proper Officer. As initiation of a proceedings under Section 73 and passing of an order under the same provision have consequences. 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 27.04.2024 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 - this Court while setting aside the impugned Order-in-Original dated 27.04.2024, grants liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit for the relevant financial year in question - Petition disposed off.
Issues Involved:
1. Validity of the Summary of Show Cause Notice as a substitute for a proper Show Cause Notice under Section 73 of the CGST/AGST Act, 2017. 2. Requirement of authentication of notices and orders by the Proper Officer as per Rule 26(3) of the Central Goods and Services Tax Rules, 2017. 3. Alleged violation of principles of natural justice due to lack of opportunity for a hearing under Section 75(4) of the CGST/AGST Act, 2017. 4. Applicability of Rule 26(3) to Chapter XVIII of the Rules concerning Demand and Recovery. Detailed Analysis: 1. Validity of the Summary of Show Cause Notice: The court examined whether the Summary of the Show Cause Notice issued in Form GST DRC-01 could replace the requirement of a proper Show Cause Notice as mandated by Section 73 of the CGST/AGST Act, 2017. It was determined that the Summary of Show Cause Notice, along with the tax determination attachment, does not constitute a valid initiation of proceedings under Section 73 without a proper Show Cause Notice. The court referenced judgments from other High Courts, such as the Jharkhand High Court in Nkas Services Private Limited, which held that a Summary cannot substitute a proper Show Cause Notice. Consequently, the court concluded that the proceedings initiated against the petitioner were invalid due to the absence of a proper Show Cause Notice. 2. Requirement of Authentication by the Proper Officer: The court emphasized the necessity for authentication of notices, certificates, and orders by the Proper Officer through digital signature or other specified means, as per Rule 26(3) of the Rules of 2017. The absence of such authentication renders the documents ineffective. The court cited cases like M/s Silver Oak Villas LLP and A.V. Bhanoji Row, where similar conclusions were reached. The court highlighted that the statutory mandate requires the Proper Officer to issue and authenticate these documents, and failure to do so makes them void and inoperative. 3. Violation of Principles of Natural Justice: The petitioner argued that the lack of an opportunity for a hearing violated the principles of natural justice, as mandated by Section 75(4) of the CGST/AGST Act, 2017. The court agreed, noting that the petitioner had requested a personal hearing, which was not granted. The court stressed that providing an opportunity for a hearing is a statutory safeguard for assessees, and failure to do so contravenes the statutory mandate. The court referred to the Chhattisgarh High Court's decision in Mahindra & Mahindra Limited, which underscored the necessity of granting a hearing when the statute mandates it. 4. Applicability of Rule 26(3) to Chapter XVIII: The court addressed whether Rule 26(3), which pertains to Chapter III (Registration), applies to Chapter XVIII (Demand and Recovery) of the Rules. It noted that while Rule 26(3) specifically mentions Chapter III, the necessity for authentication by the Proper Officer remains critical. The court, referencing the Telangana High Court's application of Rule 26(3) to Chapter XVIII, concluded that the authentication requirement should apply across chapters to ensure the validity of notices and orders. Conclusion: The court set aside and quashed the impugned order dated 27.04.2024, citing the lack of a proper Show Cause Notice, the absence of authentication by the Proper Officer, and the violation of the principles of natural justice. The court granted liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit, and directed the exclusion of the period from the issuance of the Summary of the Show Cause Notice until the certified copy of the judgment is served upon the Proper Officer when computing the time limit for passing the order under Section 73(10). The writ petition was disposed of with these observations and directions.
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