2022 (6) TMI 1258 - HC - GST

Validity of assessment order - search and seizure proceedings - proper service of notices or not - proper opportunity of hearing was provided or not - violation of principles of natural justice - HELD THAT - There was a surprise inspection in the petitioner's showrooms, Office and Godown from 14.09.2021 to 16.09.2021 and certain defects were pointed out and thereafter, explanation sought for. Though the petitioner had sent their objections and their authorized representative/Chartered Accountant appeared before the respondent, but they were unable to give proper explanation with supporting documents. This is a merit of the case. It is seen that after issuance of notice in Form DRC-01A, dated 06.12.2021, the respondent has issued Form GST DRC-01A. Thereafter, if the petitioner has got any objection and not paid tax as ascertained, a show cause notice has to be issued under Section 74(1) of the TNGST Act and after receiving objections, giving personal hearing, the assessment order ought to have been finalised. In this case, procedure not followed. It is also seen that following the impugned order, the respondent vide Form GST DRC-09, issued a communication, directing the Branch Manager, Axis Bank, Ramanathapuram, to recover the amount due from the petitioner under Section 79 of the TNGST Act, 2017, which is not proper. The assessment orders, bearing Assessment Nos.33AAQCA6068B1ZR/2020-21, 33AAQCA6068B1ZR/2019-20 and 33AAQCA6068B1ZR/2021-22, dated 31.01.2022, are hereby quashed. The consequential recovery notice, dated 10.06.2022, issued to the Branch Manager, Axis Bank, is also hereby quashed. The respondent is directed to issue notice after following the procedures prescribed under the TNGST Act and issue show cause notice and after giving an opportunity to file their objections, pass appropriate orders on merits and in accordance with law. Petition allowed.

Summary

Issues:
Challenging assessment orders for multiple assessment years based on surprise inspection findings.

Analysis:
The petitioner, engaged in trading textiles and garments, challenged assessment orders for various years following surprise inspections at showrooms. The inspection revealed irregularities leading to revision of assessments and issuance of show cause notices. The petitioner disputed tax liabilities and procedural flaws, alleging misinterpretation of provisions and violation of natural justice principles.

The petitioner objected to inspection procedures and findings, requesting time to respond to communications pointing out defects and tax liabilities. Despite objections and requests for personal hearings, the respondent proceeded to confirm proposed tax, penalty, and interest amounts without issuing proper show cause notices as mandated by the law.

The petitioner argued that the assessment order violated principles of natural justice, citing circulars and legal precedents to support their case. The respondent contended that the notices and assessments were in accordance with the law, placing the burden of proof on the dealers to demonstrate tax compliance and address issues raised in the show cause notices.

The Court noted discrepancies in the assessment process, highlighting the failure to follow proper procedures post-inspection and the issuance of recovery notices without due process. Consequently, the Court quashed the assessment orders and directed the respondent to adhere to prescribed procedures, issue show cause notices, and pass orders in compliance with the law promptly.

In conclusion, the Court allowed the writ petitions, quashed the assessment orders and recovery notices, and instructed the respondent to conduct the assessment process following legal requirements without delay.