2024 (7) TMI 1158 - HC - GST

Violation of principles of natural justice - SCN was not communicated through any other mode - petitioner was unaware of proceedings and could not participate in the same - adjudications are challenged primarily on the ground of non-issuance of notice in Form ASMT 10 - what is the consequence of non-compliance? - Does it vitiate the subsequent adjudication either under Sections 73 or 74? - HELD THAT - he factual question as to whether the respective petitioner's returns were selected for scrutiny under Section 61 has limited significance. This contention was advanced on the basis that the subject description in the impugned order refers to scrutiny of returns and the discovery of discrepancies. On examining the preceding show cause notice, there is no reference to scrutiny under Section 61. Instead, data from the GSTR-01 and GSTR-3B returns are set out to indicate the mismatch. From the material on record, it is not possible to record a definitive conclusion that the petitioner's returns were selected for scrutiny under Section 61. In any event, nothing turns on the answer because such scrutiny was not the foundation for adjudication under Section 73. Both the show cause notice and the impugned order refer expressly to a scrutiny under Section 61 and to discrepancies being noticed. Thus, the two conditions necessary to trigger the obligation to issue the ASMT-10 notice were fulfilled in this case. As a consequence of not issuing the ASMT-10 notice, any conclusions drawn in course of scrutiny would stand vitiated and cannot be the basis for adjudication. In this case, the show cause notice specifies the outward supply value from the petitioner's GSTR-3B returns and the purchase value as reflected in the auto-populated GSTR-2A. Since the petitioner was provided an opportunity to show cause, it cannot be said that the adjudication was based only on the scrutiny under Section 61 or that the petitioner was prejudiced. The tax proposal was confirmed because the tax payer failed to reply. Since the petitioner asserted that such failure to participate was on account of not being aware of proceedings, the interest of justice warrants that an opportunity be provided to the petitioner to contest the tax demand on merits by putting the petitioner on terms. The impugned assessment order dated 11.04.2024 in W.P.No.13507 of 2024 is set aside on condition that the petitioner remits 10% of the disputed tax demand within fifteen days from the date of receipt of a copy of this order. Within the said period, the petitioner is permitted to submit a reply to the show cause notice - The impugned assessment order dated 23.12.2023 in W.P.No.15330 of 2024 is aside aside by remanding the matter for reconsideration - Petition disposed off.

Summary

Issues Involved:
1. Non-issuance of notice in Form GST ASMT-10.
2. Scrutiny of returns under Section 61 of GST enactments.
3. Adjudication under Section 73 of GST enactments.
4. Procedural compliance and its impact on adjudication.
5. Opportunity for the petitioner to contest the tax demand on merits.

Detailed Analysis:

1. Non-issuance of Notice in Form GST ASMT-10:
The petitioner in W.P.No.15307 of 2024 argued that the show cause notice was not communicated through any mode other than being uploaded on the GST portal, leading to their unawareness of the proceedings. The petitioner in W.P.No.15330 of 2024 contended that the non-issuance of Form GST ASMT-10 notice vitiated the adjudication process. The court concluded that the ASMT-10 notice is mandatory if discrepancies are discovered during the scrutiny of returns under Section 61 and Rule 99.

2. Scrutiny of Returns under Section 61 of GST Enactments:
The court examined Section 61, which allows the proper officer to scrutinize returns and inform the registered person of any discrepancies. It was noted that scrutiny is optional and not mandatory, but once discrepancies are found, issuing a notice in Form GST ASMT-10 becomes mandatory. The court emphasized that scrutiny under Section 61 does not constitute reassessment or adjudication but is a preparatory step for potential actions under Sections 65, 66, 67, 73, or 74.

3. Adjudication under Section 73 of GST Enactments:
The adjudications in both writ petitions were under Section 73. The court clarified that adjudication under Sections 73 or 74 can be initiated based on scrutiny, audit, or other credible information. It was concluded that scrutiny under Section 61 is not a mandatory pre-requisite for adjudication under Sections 73 or 74. The court distinguished the present case from Vadivel Pyrotech, where a notice in Form ASMT-10 was issued and replied to before adjudication.

4. Procedural Compliance and its Impact on Adjudication:
The court discussed the procedural requirements under Section 61 and Rule 99, concluding that non-issuance of ASMT-10 notice vitiates the scrutiny process but does not necessarily invalidate subsequent adjudication under Sections 73 or 74. The court emphasized that procedural defects that do not cause prejudice to the taxpayer are saved by Section 160 of applicable GST statutes.

5. Opportunity for the Petitioner to Contest the Tax Demand on Merits:
The court provided the petitioner in W.P.No.15307 of 2024 an opportunity to contest the tax demand by remitting 10% of the disputed tax demand and submitting a reply to the show cause notice. For the petitioner in W.P.No.15330 of 2024, the court remanded the matter for reconsideration, allowing the petitioner to submit an additional reply with supporting documents.

Conclusion:
The court set aside the impugned assessment orders in both writ petitions, providing directions for reconsideration and ensuring that the petitioners are given a reasonable opportunity to contest the tax demands. The court emphasized the importance of procedural compliance while also recognizing the need to balance it with substantive justice.