2025 (2) TMI 1008 - HC - GST

Violation of 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 and the petitioner was only served with a Summary of SCN in Form GST DRC-01 - 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 of 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 2024 (10) TMI 279 - GAUHATI HIGH COURT the impugned Order dated 21.08.2024 Annexure-C to the writ petition is found not sustainable in law and the same deserve to be set aside and quashed. Conclusion - i) 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. ii) The issuance of proper Show Cause Notices is mandatory for initiating proceedings under Section 73 and that compliance with natural justice principles is essential. Petition disposed off.

Summary

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 (AGST Act)?

[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 AGST Act are in conformity with Section 75(4) of the AGST Act and are in consonance with the principles of natural justice?

ISSUE-WISE DETAILED ANALYSIS

[i] Issuance of Show Cause Notices:

Relevant legal framework and precedents: Section 73 of the AGST Act requires a proper Show Cause Notice to be issued by the Proper Officer before determining any tax liability. The notice must be served in accordance with sub-section (1) of Section 73, which mandates a specific procedure to initiate proceedings.

Court's interpretation and reasoning: The Court found that a Summary of Show Cause Notice in Form GST DRC-01 was issued instead of a proper Show Cause Notice as required by Section 73(1). The Court held that the Summary is not a substitute for the formal notice needed to commence proceedings.

Key evidence and findings: The petitioner was only served with a Summary of Show Cause Notice and an Attachment to Determination of Tax, which did not fulfill the legal requirements of a proper Show Cause Notice.

Application of law to facts: The Court applied the provisions of Section 73 and determined that the absence of a proper Show Cause Notice rendered the proceedings invalid.

Treatment of competing arguments: The respondent's argument that the Summary constituted a valid notice was rejected based on the statutory requirements under Section 73.

Conclusions: The Court concluded that the proceedings initiated without a proper Show Cause Notice were not in compliance with the law and thus invalid.

[ii] Determination and Attachment of Tax:

Relevant legal framework and precedents: Section 73(3) allows for a statement of tax determination, but this cannot replace the requirement for a Show Cause Notice under Section 73(1).

Court's interpretation and reasoning: The Court emphasized that the Statement of Determination of Tax attached to the Summary of the Show Cause Notice is not equivalent to a proper Show Cause Notice. The law requires distinct and separate issuance of these documents.

Key evidence and findings: The Court noted that the documents served to the petitioner did not meet the statutory criteria for initiating tax proceedings.

Application of law to facts: The Court applied the statutory requirements and found the process followed by the respondents was flawed.

Treatment of competing arguments: The Court dismissed the respondent's contention that the attached Statement sufficed for legal compliance.

Conclusions: The Court held that the issuance of a Statement of Determination of Tax without a proper Show Cause Notice is insufficient to meet the legal requirements.

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

Relevant legal framework and precedents: Section 75(4) of the AGST Act and principles of natural justice require that an opportunity for a hearing be provided before any adverse order is passed.

Court's interpretation and reasoning: The Court found that no opportunity for a hearing was provided to the petitioner, violating Section 75(4) and principles of natural justice.

Key evidence and findings: The Court observed that the petitioner was not given a chance to present their case before the order was passed.

Application of law to facts: The Court applied the principles of natural justice and statutory requirements, determining that the process followed was unjust.

Treatment of competing arguments: The Court did not find any valid counterarguments from the respondents to justify the lack of a hearing.

Conclusions: The Court concluded that the impugned orders were in violation of legal and natural justice principles and thus invalid.

SIGNIFICANT HOLDINGS

The Court preserved several crucial legal reasonings:

"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 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."

The Court established core principles that the issuance of proper Show Cause Notices is mandatory for initiating proceedings under Section 73, and that compliance with natural justice principles is essential.

The final determination was that the impugned orders were set aside and quashed due to procedural irregularities, with liberty granted to the respondent authorities to initiate de novo proceedings if deemed fit, in compliance with statutory requirements.