2025 (1) TMI 724 - HC - GST

Violation of principles of natural justice - no proper and prior Show Cause Notice prescribed under sub-section 1 of Section 73 of the Assam Goods and Services Tax Act, 2017 - petitioner was only served with a Summary of Show Cause Notice in Form GST DRC-01, which is also not in conformity with Section 73 read with Rule 142 1 a of the Assam Goods and Services Tax Act, 2017. HELD THAT - Non-issuance of a proper and prior Show Cause Notice, as contemplated under sub-section 1 of Section 73 of AGST Act, 2017 and issuance of only Summary of Show Cause Notice and Attachment to Determination of Tax cannot be said to be in compliance with sub-section 1 of Section 73 and sub-rule 1 and Rule 142 of the AGST Rules, 2017, a Summary of Show Cause Notice is held to be not a substitute of a Show Cause Notice, contemplated by the provisions of sub-section 1 of Section 73 to set the proceeding in motion. From the provisions of Section 73, it emerges that the Show Cause Notice is required to be issued by the proper officer, the statement under Section 73 3 is to be issued by the proper officer as well as the Order under Section 73 9 is required to be issued by the proper officer. Compliance of the provisions contained in sub-section 1 to sub-section 8 and sub-section 10 to subsection 11 of Section 73 and sub-rule 1 of Rule 142 are conditions precedent to term an Order passed under sub-section 9 of Section 73 as a valid one. Having regard to the fact that a proper and prior Show Cause Notice under sub-section 1 of Section 73 of the AGST Act, 2017 was not issued along with the Summary of Show Cause Notice in Form GST DRC-01 Annexure-I to the writ petition and the Attachment to Determination of Tax Annexure-II to the writ petition , the impugned Order dated 14.12.2023 Annexure-IV to the writ petition is found not sustainable in law and the same deserves to be set aside and quashed. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

[i] Whether Show Cause Notices were issued prior to passing the Impugned Order under Section 73(9) of the Assam Goods and Services Tax Act, 2017?

[ii] Whether the determination of tax as well as the Order attached to the Summary of the Show Cause Notice in GST DRC-01 and Summary of the Order in GST DRC-07 can be said to be the Show Cause Notice and Order respectively?

[iii] Whether the impugned orders under Section 73(9) of the State Act are in conformity with Section 75(4) of the State Act and are in consonance with the principles of natural justice?

2. ISSUE-WISE DETAILED ANALYSIS

Issue [i]: Whether Show Cause Notices were issued prior to passing the Impugned Order under Section 73(9) of the State Act?

Relevant legal framework and precedents: Section 73 of the Assam Goods and Services Tax Act, 2017 requires a proper Show Cause Notice to be issued by the proper officer before any determination of tax can be made. Rule 142 of the AGST Rules, 2017 outlines the procedure for issuing such notices.

Court's interpretation and reasoning: The court found that the issuance of a Summary of Show Cause Notice in Form GST DRC-01 does not fulfill the requirement of a proper Show Cause Notice as mandated by Section 73(1).

Key evidence and findings: It was established that only a Summary of Show Cause Notice and an Attachment to Determination of Tax were issued to the petitioner, without a proper Show Cause Notice.

Application of law to facts: The court concluded that the absence of a proper Show Cause Notice invalidates the proceedings under Section 73.

Treatment of competing arguments: The respondent argued that the Summary of Show Cause Notice sufficed, but the court disagreed, emphasizing the need for a formal notice as per the statute.

Conclusions: The court held that the proceedings initiated without a proper Show Cause Notice are legally unsustainable.

Issue [ii]: Whether the determination of tax as well as the Order attached to the Summary of the Show Cause Notice in GST DRC-01 and Summary of the Order in GST DRC-07 can be said to be the Show Cause Notice and Order respectively?

Relevant legal framework and precedents: Section 73(3) allows for a statement of tax determination, but this is distinct from the Show Cause Notice required under Section 73(1).

Court's interpretation and reasoning: The court clarified that the attachment to the Summary of the Show Cause Notice is merely a statement of tax determination and cannot replace the formal Show Cause Notice.

Key evidence and findings: The court found that the documents provided were not in compliance with the statutory requirements for initiating tax proceedings.

Application of law to facts: The court determined that the procedural requirements were not met, rendering the actions taken by the tax authorities invalid.

Treatment of competing arguments: The court rejected the notion that procedural summaries could substitute the formal notices required by law.

Conclusions: The court concluded that the procedural shortcuts taken by the tax authorities were insufficient to meet legal standards.

Issue [iii]: Whether the impugned orders under Section 73(9) of the State Act are in conformity with Section 75(4) of the State Act and are in consonance with the principles of natural justice?

Relevant legal framework and precedents: Section 75(4) requires that an opportunity for a hearing be provided before an order is finalized.

Court's interpretation and reasoning: The court noted that the petitioner was not given an opportunity to be heard, which violated the principles of natural justice.

Key evidence and findings: The absence of a proper hearing was a critical factor in the court's decision to quash the impugned orders.

Application of law to facts: The court applied the principles of natural justice to find that the petitioner's rights were violated due to the lack of a hearing.

Treatment of competing arguments: The court emphasized the necessity of adhering to procedural fairness, which the respondent failed to provide.

Conclusions: The court held that the impugned orders were in violation of both statutory requirements and the principles of natural justice.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "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."

Core principles established: The court established that procedural compliance with statutory requirements is mandatory, and any deviation renders the proceedings void. The principles of natural justice must be adhered to, ensuring that parties are given a fair opportunity to present their case.

Final determinations on each issue: The court quashed the impugned orders due to the failure to issue a proper Show Cause Notice and the lack of adherence to procedural fairness. The authorities were granted the liberty to initiate de novo proceedings in compliance with the legal framework.