2023 (2) TMI 394 - HC - GST

Cancellation of registration of petitioner - the petitioner, being a buyer, had paid the tax liability to the seller and therefore, the impugned show cause notice cannot be issued to them alone - Violation of principles of natural justice - HELD THAT - Both the Hon'ble Judges of this Court have consistently held that Section 42 of the CGST Act 2017, has to be necessarily adhered to by the respondents. Being a show cause notice, that too when the same has been issued on account of non payment of the GST as per FORM GST DRC-01, this Court cannot entertain this writ petition at this stage. Necessarily the petitioner will have to submit a reply to the impugned show cause notice, raising the contentions that have been raised in this writ petition. On receipt of the same, it is for the respondents to consider it, on merits and in accordance with law. However, the respondents will have to adhere to the aforementioned Sections and also give due consideration to the decisions of this Court referred to supra, before passing final orders. This writ petition is disposed of by directing the petitioner to submit an additional reply raising the contentions that have been raised in this writ petition to the respondents, within a period of three weeks from the date of receipt of a copy of this order.

Summary

Issues:
Challenge to Show Cause Notice under FORM GST DRC-01; Adherence to Provisions of GST Act 2017; Enquiry by Respondents; Necessity of Detailed Reply before Consideration.

Analysis:

The writ petition challenges a Show Cause Notice issued by the third respondent in FORM GST DRC-01. The petitioner contests the condition requiring the buyer to prove tax payment by the supplier, stating they have paid the tax to the seller, and the cancellation of the seller's registration led to the notice, deemed arbitrary and illegal. Additionally, the petitioner argues that Sections 42(3) and 43-A of the GST Act 2017 mandate an enquiry involving both buyer and seller, criticizing the predetermined nature of the notice issued only to them.

The petitioner's counsel cites previous judgments emphasizing the necessity of an enquiry involving both buyer and seller before taking any action. The respondents argue that the notice must be sent to the supplier as per the Central Authority's communication, and the petitioner should have submitted a detailed reply before challenging the notice. The respondents assert that the petitioner's liability arises from non-payment of tax by either the buyer or the supplier, with the supplier's registration cancellation complicating matters.

The Court observes that the challenge is solely to the show cause notice, where the petitioner claims tax payment to the supplier. The Court notes the discrepancies highlighted in the notice regarding tax payment and the cancelled registration of the supplier. References to Sections 42(3), 43-A, and 16(2) of the GST Act 2017 are made to emphasize the need for a thorough enquiry involving both parties before making any assessment.

The Court acknowledges the importance of Sections 42 and previous judgments in ensuring a fair enquiry process. It directs the petitioner to submit a detailed reply to the notice within three weeks, emphasizing that the respondents must consider the reply, conduct a personal hearing, and pass final orders in accordance with the law and relevant provisions before closing the matter. The judgment underscores the significance of due process and adherence to statutory provisions in resolving the dispute effectively.