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2024 (12) TMI 828 - 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). 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 17.04.2024 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 the Summary of the Show Cause Notice without a proper Show Cause Notice. 2. Requirement of proper authentication of notices and orders under GST laws. 3. Violation of principles of natural justice due to lack of opportunity for a hearing. Detailed Analysis: 1. Validity of the Summary of the Show Cause Notice without a proper Show Cause Notice: The core issue addressed in this judgment is whether the attachment to the Summary of the Show Cause Notice in Form GST DRC-01, which contained the determination of tax, can be considered a valid Show Cause Notice under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) and corresponding state laws. The court observed that Section 73 mandates the issuance of a proper Show Cause Notice by the Proper Officer when tax has not been paid, short paid, erroneously refunded, or where input tax credit has been wrongly availed or utilized. The court emphasized that the issuance of a proper Show Cause Notice is a prerequisite for initiating proceedings under Section 73, and the Summary of the Show Cause Notice cannot substitute this requirement. The court referred to Rule 142 of the Central Goods and Services Tax Rules, 2017, which requires the issuance of a summary electronically in Form GST DRC-01 in addition to the Show Cause Notice. The judgment cited precedents from various High Courts, including the Jharkhand High Court, which held that a Summary of a Show Cause Notice cannot replace a proper Show Cause Notice. Consequently, the court concluded that the proceedings initiated without a proper Show Cause Notice were invalid and contrary to the provisions of Section 73 and Rule 142 (1) (a). 2. Requirement of proper authentication of notices and orders under GST laws: Another significant issue discussed was the lack of proper authentication of the notices and orders. The petitioner argued that the attachments to both the Summary of the Show Cause Notice and the Summary of the Order lacked the signature of the Proper Officer, rendering them void and inoperative. The court examined Rule 26 (3) of the Rules of 2017, which stipulates that all notices, certificates, and orders must be issued electronically with digital or e-signatures as specified under the Information Technology Act, 2000. The court noted that while Rule 26 (3) specifically refers to Chapter III of the Rules, which pertains to registration, the necessity of authentication by the Proper Officer applies broadly to ensure the validity of notices and orders. The judgment referenced several High Court decisions, including those from Telangana and Andhra Pradesh, which underscored the requirement of signatures on notices and orders. The court concluded that the lack of authentication rendered the Show Cause Notice, Statement, and Order ineffective and redundant. 3. Violation of principles of natural justice due to lack of opportunity for a hearing: The petitioner contended that they were not provided an opportunity for a hearing as mandated by Section 75 (4) of the CGST Act, which requires granting a hearing when requested by the taxpayer or when an adverse decision is contemplated. The court observed that the petitioner had requested a personal hearing in their reply, yet no such opportunity was afforded. The court highlighted the statutory mandate for a hearing to ensure the principles of natural justice are upheld. It cited the Chhattisgarh High Court's decision in Mahindra & Mahindra Limited, which emphasized that statutory mandates for hearings must be honored to avoid rendering provisions ineffective. The court concluded that the failure to provide a hearing violated Section 75 (4), and the adverse order passed without such a hearing was unsustainable. As a result, the court set aside the impugned order dated 17.04.2024, allowing the respondent authorities to initiate de novo proceedings under Section 73, if deemed necessary. The court also directed the exclusion of the period from the issuance of the Summary of the Show Cause Notice until the certified copy of the judgment is served upon the Proper Officer when computing the time limit for passing an order under Section 73 (10). In conclusion, the court quashed the impugned order due to procedural irregularities and violations of statutory mandates, emphasizing the necessity of a proper Show Cause Notice, authentication of documents, and adherence to principles of natural justice.
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