2025 (2) TMI 359 - HC - GST

Principles of natural justice - no proper and prior SCN prescribed under sub-section 1 of Section 73 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 sub-section 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-B to the writ petition and the Attachment to Determination of Tax Annexure-B to the writ petition and in terms of the observations made in the common Judgment and Order in CONSTRUCTION CATALYSERS PRIVATE LIMITED 2024 (10) TMI 279 - GAUHATI HIGH COURT the impugned Order is found not sustainable in law and the same deserves to be set aside and quashed. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

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

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

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

ISSUE-WISE DETAILED ANALYSIS

Issue [i]: Proper Issuance of Show Cause Notices

- Relevant Legal Framework and Precedents: Section 73(1) of the AGST Act mandates that a proper Show Cause Notice must be issued by the proper officer when any tax has not been paid or has been short paid. Rule 142(1) of the AGST Rules requires the issuance of a summary electronically in FORM GST DRC-01.

- Court's Interpretation and Reasoning: The Court emphasized that a Summary of the Show Cause Notice in GST DRC-01 is not a substitute for the actual Show Cause Notice required under Section 73(1). The proper officer must issue a formal Show Cause Notice to initiate proceedings under Section 73.

- Key Evidence and Findings: The petitioner was only served with a Summary of the Show Cause Notice and an Attachment to Determination of Tax, without a proper Show Cause Notice as required by law.

- Application of Law to Facts: The Court found that the issuance of only a summary and attachment does not comply with the legal requirements of Section 73(1) and Rule 142(1).

- Treatment of Competing Arguments: The respondent's reliance on the Summary of the Show Cause Notice was not accepted as a valid substitute for the formal notice required by law.

- Conclusions: The initiation of proceedings under Section 73 without a proper Show Cause Notice is invalid and interfered with by the Court.

Issue [ii]: Validity of Summary of Show Cause Notice and Order

- Relevant Legal Framework and Precedents: Section 73(3) allows for a statement of tax determination, but this cannot replace the requirement for a formal Show Cause Notice under Section 73(1).

- Court's Interpretation and Reasoning: The Court clarified that the statement of tax determination under Section 73(3) cannot substitute the Show Cause Notice required under Section 73(1).

- Key Evidence and Findings: The attachment to the Summary of the Show Cause Notice was merely a statement of tax determination, not a formal notice.

- Application of Law to Facts: The Court held that the procedure followed by the respondent authorities did not meet the legal standards set by the AGST Act.

- Treatment of Competing Arguments: The Court rejected the argument that the attachment and summary constituted a valid Show Cause Notice.

- Conclusions: The Court found the proceedings and orders invalid due to non-compliance with the statutory requirements.

Issue [iii]: Conformity with Section 75(4) and Principles of Natural Justice

- Relevant Legal Framework and Precedents: Section 75(4) of the AGST Act requires adherence to principles of natural justice, including the right to a fair hearing.

- Court's Interpretation and Reasoning: The Court noted that the impugned orders violated Section 75(4) as no opportunity for a hearing was provided.

- Key Evidence and Findings: The lack of a proper Show Cause Notice and opportunity for hearing led to the conclusion that the principles of natural justice were not followed.

- Application of Law to Facts: The Court determined that the procedural shortcomings rendered the orders unsustainable in law.

- Treatment of Competing Arguments: The respondent's procedural approach was found inadequate in ensuring compliance with the principles of natural justice.

- Conclusions: The impugned orders were set aside due to violations of Section 75(4) and principles of natural justice.

SIGNIFICANT HOLDINGS

- Core Principles Established: The issuance of a proper Show Cause Notice is a prerequisite for initiating proceedings under Section 73 of the AGST Act. A summary or attachment cannot replace the formal notice requirement.

- Final Determinations on Each Issue: The Court quashed the impugned orders due to the lack of a proper Show Cause Notice and non-compliance with statutory requirements and principles of natural justice.

- 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."

The Court concluded that the impugned orders were not sustainable in law due to procedural deficiencies and granted liberty to the respondent authorities to initiate de novo proceedings, if deemed fit, in compliance with the legal framework and principles of natural justice.