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2025 (2) TMI 1046 - HC - GSTValid service of SCN - attachment to the Summary of the Show Cause Notice (SCN) in Form GST DRC-01 - absence of a proper SCN - violation of principles of natural justice - HELD THAT - From the perusal of the records it would show that in the Summary of the Show Cause Notices issued in GST DRC-01 to the petitioner in the writ petition there is a mention therein that there is a Show Cause Notice attached. It is the case of the respondents that the said attachment wherein determination of tax is mentioned is the Show Cause Notice. The question therefore arises as to 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. 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. 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 - Section 73 further stipulates that upon consideration of the representations if any the Proper Officer shall pass the order under Section 73(9) determining the amount of tax interest and penalty. 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 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 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 A.V. Bhanoji Row (supra) 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. 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 - 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. Conclusion - 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. This Court while setting aside the impugned Order-in-Original dated 28.04.2024 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 PRESENTED and CONSIDERED
The primary legal issues considered in this judgment pertain to the procedural requirements under the Central Goods and Services Tax Act, 2017 (CGST Act) and the associated Rules, particularly:
ISSUE-WISE DETAILED ANALYSIS 1. Validity of the Attachment as a Show Cause Notice The legal framework requires that a proper SCN be issued under Section 73 of the CGST Act when there is non-payment, short payment, or erroneous refund of tax. The Court examined whether the attachment to the Summary in GST DRC-01 fulfills this requirement. The Court noted that Section 73 mandates a specific SCN, and the attachment, which merely summarizes tax determination, does not suffice as a substitute for a proper SCN. The Court referenced precedents, including judgments from the Telangana High Court and the Andhra Pradesh High Court, which held that a summary cannot replace a proper SCN. The Court concluded that the attachment does not meet the statutory requirement, rendering the proceedings initiated based on it invalid. 2. Authentication of Notices and Orders Rule 26(3) of the CGST Rules mandates electronic authentication of notices and orders through digital signatures. The Court found that the attachments lacked proper authentication, as they did not bear the digital signature of the Proper Officer. The Court emphasized that authentication by the Proper Officer is crucial for the validity of notices and orders, and failure to comply with this requirement renders them ineffective. The Court considered various judgments, including those from the Telangana High Court and Delhi High Court, reinforcing the necessity of digital signatures for validity. 3. Opportunity for Hearing under Section 75(4) Section 75(4) of the CGST Act mandates that an opportunity for a hearing must be granted when requested by the taxpayer or when an adverse decision is contemplated. The petitioner argued that no such opportunity was provided, despite requesting a personal hearing in Form GST DRC-06. The Court agreed with the petitioner, emphasizing that the statutory mandate for a hearing must be honored. The absence of a hearing opportunity violated the principles of natural justice, further invalidating the proceedings. SIGNIFICANT HOLDINGS The Court held that the attachment to the Summary of the Show Cause Notice in Form GST DRC-01 cannot substitute a proper SCN under Section 73 of the CGST Act. The proceedings initiated without a proper SCN are invalid. It was held that the lack of digital signature authentication on the attachments violated Rule 26(3) of the CGST Rules, rendering the notices and orders ineffective. The Court reiterated the necessity of providing an opportunity for a hearing under Section 75(4) of the CGST Act, emphasizing that failure to do so breaches the principles of natural justice. The impugned order dated 28.04.2024 was set aside and quashed due to procedural deficiencies, with the Court granting liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit. In conclusion, the judgment underscores the importance of adhering to statutory requirements and procedural fairness in tax proceedings, ensuring that taxpayers are afforded their rights under the law. The Court's decision reinforces the necessity of proper notice issuance, authentication, and the opportunity for a hearing, as fundamental to the integrity of the legal process.
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