2022 (4) TMI 1026 - HC - GST

Validity of summary of the order as contained in Form-GST DRC 07 dated 11.09.2020 - Rule 142(1) of the GST Rules - specific case of the petitioner is that no show cause notice was ever issued to the petitioner and even in the summary of the show cause notice, no time line was provided as to when the petitioner was to submit its reply - Whether the very initiation of the adjudication proceeding without issuance of show cause notice is void ab initio and any consequential adjudication order passed thereto is nonest in the eye of law? - HELD THAT - The said issue has already been settled by a decision of Coordinate Bench of this Court in the case of M/s NKAS Services Private Limited Vs. State of Jharkhand and ors, 2021 (10) TMI 880 - JHARKHAND HIGH COURT . In the aforesaid matter of NKAS Services Pvt. Ltd., in respect of an identical situation where only a Summary of Show Cause Notice was issued and Adjudication Order was passed pursuant thereto, this Court has observed that the impugned show cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice, the challenge is entertainable in exercise of writ jurisdiction of this Court. The present case is squarely covered by the aforesaid decision of this Court and the law laid down in the case of NKAS Services Pvt. Ltd. is fully agreed upon and, accordingly, it is held that the Adjudication Order is non est in the eye of law, as the same has been passed without issuance of proper show cause notice and, thus, amounts to violation of principles of natural justice. From the facts of the present proceedings, it would transpire that on 14th March, 2020, Form GST DRC 01 was issued without specifying any date of hearing and, thereafter, straightaway, an Adjudication Order was allegedly passed on 13th August, 2020 fastening liability of tax, interest and penalty upon the Petitioner. From the order sheet, it is evident that no opportunity of personal hearing was granted to the petitioner and the purported Adjudication Order was passed on 13.08.2020 i.e. on the first date itself after issuance of the summary of show cause notice. This itself clearly reveals that the entire adjudication proceedings have been carried out in stark disregard to the mandatory provisions of the GST Act and in violation of the principles of natural justice and, thus, the Adjudication Orders, allegedly dated 13.08.2020, are liable to be quashed and set aside on this ground also. There is serious lacuna in the proceeding conducted under the JGST Act which has ultimately entailed adverse consequences upon the petitioner. Vide our order dated 10th March, 2022, we have directed respondent Nos. 3 and 4 to appear before us with complete records and has further communicated our order to the Commissioner, State Tax Department also so that the matter can be looked at from the level of the Commissionorate as it reflects on the Tax Administration within the State - the Commissioner of State Tax Department are directed to issue appropriate guidelines/circular/notification elaborating therein the procedure which is to be adopted by the State Tax authorities regarding the manner of issuance of Show Cause Notice, adjudication and recovery proceedings, so that proper procedure is followed by the State Tax authorities in conduct of the adjudication proceedings, as huge revenue of the State is involved and it would be in ultimate interest of the Respondent-State of Jharkhand itself that the adjudication proceedings are conducted after following due procedure and process of law. The summary of show cause notices, both dated 14.03.2020, Adjudication Order Dated 13.08.2020 and summary of orders, both dated 11.09.2020, issued against the petitioner in both the writ petitions, are hereby, quashed and set aside - Application allowed.

Summary

Issues Involved:
1. Issuance of proper show cause notice under Section 74 of the JGST Act.
2. Violation of principles of natural justice and statutory provisions under Section 75(4) and 75(5) of the JGST Act.
3. Allegation of antedating the adjudication order.

Issue-wise Detailed Analysis:

1. Issuance of Proper Show Cause Notice:
The petitioner contended that no show cause notice as required under Section 74 of the JGST Act, 2017, read with Rule 142(1) of the JGST Rules, 2017, was issued, rendering the entire proceeding void ab initio. The court observed that only a "summary of show cause notice" in Form GST DRC-01 was issued on 14th March 2020, without specifying a date for filing a reply or for a hearing. This issue was previously settled in the case of M/s NKAS Services Private Limited Vs. State of Jharkhand, where it was held that a proper show cause notice is mandatory for proceedings under Section 74. The court reiterated that the absence of a proper show cause notice violates principles of natural justice, making the adjudication order non est in the eye of law.

2. Violation of Principles of Natural Justice and Statutory Provisions:
The petitioner argued that the adjudication order was passed without providing an adequate opportunity to file a reply or a personal hearing, violating Sections 75(4) and 75(5) of the JGST Act. The court noted that Form GST DRC-01 was issued without specifying any date for a hearing, and the adjudication order was allegedly passed on 13th August 2020, without any recorded opportunity for a personal hearing. This was in stark disregard of the mandatory provisions of the GST Act. The court cited multiple judgments from various High Courts supporting the necessity of adhering to the principles of natural justice and statutory provisions, emphasizing that an opportunity of hearing must be granted where any adverse decision is contemplated.

3. Allegation of Antedating the Adjudication Order:
The petitioner alleged that the adjudication order dated 13th August 2020 was antedated to justify the earlier issued Form GST DRC-07. The court found that the summary of the order dated 11th September 2020 referred to an adjudication order dated 11th September 2020, while the respondents introduced an adjudication order dated 13th August 2020 in their counter affidavit. The court observed that there was no recording in the order-sheet of any proceeding conducted on either 13th August 2020 or 11th September 2020. The respondents admitted that the order-sheet did not record any proceedings on these dates, failing to provide a satisfactory explanation for the discrepancy.

Conclusion:
The court concluded that the adjudication proceedings were conducted in stark disregard of the mandatory provisions of the GST Act, entailing adverse consequences for the petitioner. The summary of show cause notices dated 14th March 2020, the adjudication order dated 13th August 2020, and the summary of orders dated 11th September 2020 were quashed and set aside. The respondents were granted liberty to initiate fresh proceedings in accordance with the law. The court also directed the Commissioner of the State Tax Department to issue appropriate guidelines to ensure proper procedure is followed in future adjudication proceedings. Both writ applications were allowed and disposed of.