2025 (2) TMI 1009 - 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 the judgment are:

[i] Whether the Show Cause Notices were properly 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 Summary of the Order in GST DRC-07 can be considered as 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 in accordance with 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 requires a proper Show Cause Notice to be issued by the Proper Officer before proceeding with tax determination under the Act. Rule 142(1) of the AGST Rules mandates the issuance of a summary of the notice in Form GST DRC-01.

- Court's Interpretation and Reasoning: The Court found that the issuance of only a Summary of the Show Cause Notice and an Attachment to Determination of Tax was not in compliance with Section 73(1) of the AGST Act. The Court emphasized that a proper Show Cause Notice is a prerequisite to initiate proceedings under Section 73.

- Key Evidence and Findings: The petitioner was only served with a Summary of Show Cause Notice in Form GST DRC-01, without a proper and prior Show Cause Notice as required under Section 73(1).

- Application of Law to Facts: The Court applied the legal requirement of a proper Show Cause Notice under Section 73(1) and found that the procedural requirements were not met, rendering the proceedings and the subsequent order unsustainable.

- Treatment of Competing Arguments: The respondent's reliance on the Summary of Show Cause Notice as a substitute for a proper Show Cause Notice was rejected by the Court.

- Conclusions: The lack of a proper Show Cause Notice invalidated the proceedings under Section 73, leading to the quashing of the impugned order.

Issue [ii]: Validity of Tax Determination and Orders

- Relevant Legal Framework and Precedents: The AGST Act and Rules require a clear distinction between a Show Cause Notice and a Statement of tax determination. Section 73(3) allows for a statement of tax determination, but it cannot replace the need for a Show Cause Notice.

- Court's Interpretation and Reasoning: The Court determined that the attachment to the Summary of Show Cause Notice in GST DRC-01 was merely a Statement of tax determination under Section 73(3) and could not substitute the requirement for a proper Show Cause Notice under Section 73(1).

- Key Evidence and Findings: The Court found that the documents served to the petitioner did not meet the statutory requirements for a Show Cause Notice.

- Application of Law to Facts: The Court applied the statutory requirements and concluded that the issued documents were insufficient to constitute a valid Show Cause Notice.

- Treatment of Competing Arguments: The Court dismissed the argument that the Summary of Show Cause Notice and Statement of tax determination were sufficient for compliance with Section 73.

- Conclusions: The Court held that the proceedings initiated without a proper Show Cause Notice were invalid.

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

- Relevant Legal Framework and Precedents: Section 75(4) of the AGST Act mandates that an opportunity for a hearing must be given before passing an order determining tax liability.

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

- Key Evidence and Findings: The lack of a hearing was evident from the procedural history of the case.

- Application of Law to Facts: The Court applied the principles of natural justice and found that the absence of a hearing rendered the orders procedurally flawed.

- Treatment of Competing Arguments: The respondent's failure to provide a hearing opportunity was a significant procedural lapse, leading to the quashing of the orders.

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

SIGNIFICANT HOLDINGS

- "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 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."

- "The Impugned Orders challenged in the writ petitions are in violation of Section 75 [4] as no opportunity of hearing was given."

- The Court set aside and quashed the impugned orders due to procedural deficiencies and granted liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit, while excluding certain periods for limitation purposes.