2022 (8) TMI 400 - HC - GST

Validity of summary SCN - mismatch in GSTR-3B and GSTR-2A for the period in question - availment of undue ITC to which they were not entitled - violation of principles of natural justices - HELD THAT - The notices under section 73(1) of the Act of 2017 at Annexure-1 of the respective writ petition is in the standard format and neither any particulars have been struck off, nor specific contravention has been indicated to enable the petitioner to furnish a proper reply to defend itself. The show-cause notices can therefore, be termed as vague. This Court has, in the case of M/S. NKAS SERVICES PRIVATE LIMITED. VERSUS THE STATE OF JHARKHAND, THE COMMISSIONER OF STATE TAXES, RANCHI, DEPUTY COMMISSIONER OF STATE TAXES, GODDA 2021 (10) TMI 880 - JHARKHAND HIGH COURT categorically held that summary of show cause notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under section 73(1) of the Act of 2017. It seems that the authorities have, after issuance of show-cause notice dated 28.08.2020 (Annexure-1) and Summary of show cause notices contained in GST DRC-01 (Annexure-2) of the same date, proceeded to issue Summary of the Order dated 12.12.2020 (Annexure-3). Respondents have also not brought on record any adjudication order. Levy of penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 vide Annexure-34 in the writ petition is also in the teeth of the provisions of Section 73(9) of the Act of 2017, wherein while passing an adjudication order, the Proper Officer can levy penalty up to 10% of tax dues only. The above infirmity clearly shows non-application of mind on the part of the Deputy Commissioner, State Tax, Godda Circle, Godda. Proceedings also suffer from violation of principles of natural justice and the procedure prescribed under section 73 of the Act and are in teeth of the judgment rendered by this Court in the case M/s NKAS SERVICES PRIVATE LIMITED. The impugned show-cause notices and Summary of the Show Cause Notice dated 28.08.2020 (Annexure-1 and 2) and Summary of Orders contained in Form GST DRC-07 dated 12.12.2020 (Annexure-3) are quashed - Petition allowed.

Summary

Issues:
Quashing of show cause notice under Section 73 of the JGST Act, challenge to summary of show cause notice and order, imposition of 100% penalty, violation of principles of natural justice, appeal under section 107 of the Act, limitation for initiating fresh proceedings, vagueness of show-cause notices, non-application of mind in penalty imposition.

Analysis:
The petitioner, a civil contractor registered under the JGST Act, sought to quash a show cause notice dated 28.08.2020 and challenged related summaries and orders issued by the Deputy Commissioner of State Tax, Jharkhand. The petitioner contended that the notices failed to specify contraventions adequately, citing a previous judgment. The petitioner argued against the imposition of 100% penalty under Section 73(9) of the Act, claiming it should only apply under Section 74(9). The petitioner alleged serious violations of natural justice and procedural norms, seeking the quashing of the notices and orders, and a remand of the matters.

The Respondent State filed a counter affidavit, emphasizing the standard format of notices and the necessity of the charges related to GSTR-3B and GSTR-2A discrepancies. They highlighted the dynamic nature of GSTR-2A figures and the need for interest under section 50 due to delayed GSTR-1 filings by suppliers. The respondents did not specifically deny the petitioner's argument regarding the penalty imposition.

The Court noted the vague nature of the show-cause notices and the lack of specific contraventions, deeming them inadequate. Referring to a previous case, the Court emphasized the necessity of a proper show cause notice and the violation of natural justice principles. The Court highlighted the limitations of penalty imposition under Section 73(9) and criticized the lack of application of mind by the Deputy Commissioner. Consequently, the Court quashed the impugned notices and orders but granted liberty to initiate fresh proceedings with proper show-cause notices. The judgment emphasized the importance of adhering to legal procedures and principles of natural justice in such matters.

In conclusion, the Court's decision focused on rectifying procedural deficiencies, ensuring clarity in show cause notices, and upholding the principles of natural justice. The judgment highlighted the limitations on penalty imposition and the necessity of following legal norms in tax proceedings. The ruling granted the respondent the opportunity to initiate fresh proceedings while emphasizing the importance of proper notice issuance and procedural compliance.