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2024 (12) TMI 827 - HC - GSTViolation of principles of natural justice - Validity of the Summary of the Show Cause Notice in GST DRC-01 as a substitute for a proper Show Cause Notice - It is the grievance of the petitioner that the petitioner was not provided with the opportunity of hearing as provided under Section 75 (4) of the CGST/AGST Act, 2017 before passing of the order - whether the attachment can be said to be a Show Cause Notice as per the mandate of both the Central Act as well as the State Act and the Rules made therein under? - HELD THAT - This Court is of the view that the Summary of the Show Cause Notice along with the attachment containing the determination of tax cannot be said to be a valid initiation of proceedings under Section 73 without issuance of a proper Show Cause Notice. The Summary of the Show Cause Notice is in addition to the issuance of a proper Show Cause Notice. Under such circumstances, this Court is of the opinion that the impugned order challenged in the instant writ petition is contrary to the provisions of Section 73 as well as Rule 142 (1) (a) of the Rules as the said impugned Orders were passed with issuance of a proper Show Cause Notice. Whether the determination of tax as well as the order attached to the Summary to the Show Cause Notice in GST DRC-01 and the Summary of the Order in GST DRC-07 can be said to be the Show Cause Notice and order respectively, this Court duly dealt with what would constitute a Show Cause Notice, the Statement as per Section 73 (3) as well as the Summary to the Show Cause Notice in GST DRC-01 and Summary of the Statement in GST DRC-02. This Court had also opined above that the statement to be provided by the Proper Officer in terms with Section 73 (3) cannot be said to be a Show Cause Notice which is required to be issued in terms with Section 73 (1). Therefore, the submission of the respondents that the statement attached to the Summary of the Show Cause Notice is the Show Cause Notice is completely misconceived and contrary to Section 73 (1) and 73 (3). Whether Rule 26 (3) can be applicable to Chapter-XVIII when the said Sub-Rule on refers to Chapter-III? - HELD THAT - This Court is of the opinion that when the statute is clear to provide an opportunity of hearing, there is a requirement of providing such opportunity. In fact a perusal of the Form GST DRC-01 enclosed to the writ petition shows that details have been given as regards the date by which the reply has to be submitted; date of personal hearing; time of personal hearing and venue of personal hearing. It is seen that in the Summary of the Show Cause Notice only the date for submission of reply has been mentioned. This Court is of the view that the Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73 (1) of the Central Act as well as the State Act. Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion. The Show Cause Notice to be issued in terms with Section 73 (1) of the Central Act or State Act cannot be confused with the Statement of the determination of tax to be issued in terms with Section 73 (3) of the Central Act or the State Act. In the instant writ petitions, the attachment to the Summary of Show Cause Notice in GST DRC-01 is only the Statement of the determination of tax in terms with Section 73 (3). The said Statement of determination of tax cannot substitute the requirement for issuance of the Show Cause Notice by the Proper Officer in terms with Section 73 (1) of the Central or the State Act. Under such circumstances, initiation of the proceedings under Section 73 against the petitioners in the instant batch of writ petitions without the Show Cause Notice is bad in law and interfered with - The Show Cause Notice, Statement as well as the Order are all required to be authenticated in the manner stipulated in Rule 26 (3) of the Rules of 2017. Accordingly, this Court is of the opinion that the Impugned Order challenged in the writ petition are in violation of Section 75 (4) as no opportunity of hearing was given. The impugned order dated 30.12.2023 issued by the respondent no.3 is hereby set aside and quashed. This Court also cannot be unmindful of the fact that it is on account of certain technicalities and the manner in which the impugned order was passed, this Court interfered with the impugned order and hence set aside and quashed the same - Petition disposed off.
Issues Involved:
1. Validity of Summary of Show Cause Notice without a proper Show Cause Notice. 2. Requirement of authentication by the Proper Officer. 3. Violation of principles of natural justice and statutory mandates. 4. Applicability of Rule 26(3) for authentication in GST proceedings. Detailed Analysis: 1. Validity of Summary of Show Cause Notice without a proper Show Cause Notice: The petitioner challenged the issuance of a Summary of Show Cause Notice in Form GST DRC-01, arguing that it lacked the necessary formal Show Cause Notice as mandated by Section 73 of the Central Goods and Services Tax Act, 2017. The court noted that Section 73 requires a Show Cause Notice to be issued when there are grounds such as unpaid tax, short payment, erroneous refund, or incorrect input tax credit utilization, excluding fraud or willful misstatement. The court emphasized that the Show Cause Notice must specifically mention the reasons for its issuance, providing the taxpayer an opportunity to respond adequately. The court concluded that the Summary of Show Cause Notice cannot substitute the formal Show Cause Notice required by Section 73, and the proceedings initiated without it are invalid. 2. Requirement of authentication by the Proper Officer: The petitioner contended that the attachments to the Summary of Show Cause Notice and the Summary of the Order lacked proper authentication by the Proper Officer, as required by Rule 26(3) of the Central Goods and Services Tax Rules, 2017. The court highlighted that Rule 26(3) mandates electronic issuance of notices, certificates, and orders with digital signatures or other verified modes. Despite the respondents' claim that the portal ensures digital authentication, the court found that the absence of a proper signature rendered the notices and orders ineffective. The court reiterated that the Proper Officer's authentication is crucial for the validity of such documents. 3. Violation of principles of natural justice and statutory mandates: The petitioner argued that the lack of an opportunity for a hearing violated Section 75(4) of the CGST/AGST Act, 2017, and principles of natural justice. The court observed that the petitioner had requested a personal hearing, which was not granted, contravening the statutory mandate. Section 75(4) requires a hearing when requested or when an adverse decision is contemplated. The court emphasized that the opportunity for a hearing is a safeguard for taxpayers and must be provided to ensure fairness in the adjudication process. 4. Applicability of Rule 26(3) for authentication in GST proceedings: The court examined whether Rule 26(3), which pertains to Chapter III (Registration) of the Rules, applies to Chapter XVIII (Demand and Recovery). Despite the rule's specific reference to Chapter III, the court, citing precedents, applied it to Chapter XVIII, emphasizing the necessity of Proper Officer authentication for notices and orders. The court noted that without appropriate rules or notifications to fill the void, Rule 26(3) should guide the authentication process in GST proceedings. Conclusion: The court set aside the impugned order dated 30.12.2023, finding it contrary to Section 73 and Rule 142(1)(a) due to the absence of a proper Show Cause Notice and lack of Proper Officer authentication. The court granted the respondent authorities liberty to initiate de novo proceedings under Section 73, if deemed fit, while excluding the period from the issuance of the Summary of Show Cause Notice to the date of the judgment for computing the time limit under Section 73(10). The writ petition was disposed of with these observations and directions.
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