2025 (1) TMI 1309 - HC - GST

Violation of principles of natural justice - respondents failure to supply the petitioner with a copy of the Special Investigation Branch (SIB) report which formed the basis of the SCN u/s 74 of the Goods and Services Tax Act 2017 - HELD THAT - Once the foundation of the show cause notice has been the SIB report it was but incumbent on the respondents to supply a copy thereof so as to enable the petitioner to respond to the findings arrived at by the same SIB and/ or point out the discrepancy in the said report. The mere fact that in show cause notice the conclusions arrived at by the SIB have been indicated by itself cannot fulfill the requirement of supplying a copy of the SIB report as the manner in which the conclusion had been arrived at by the SIB cannot be deciphered from the show cause notice. It is apparent that the order impugned has been passed by the respondents in violation of principles of natural justice i.e. without supplying the foundational document before passing of the order impugned. The matter is remanded back to the authority who would supply copy of the SIB report to the petitioner afford opportunity to respond to the show cause notice within a reasonable time and thereafter after providing opportunity of hearing as required by Section 74 of the Act decide the matter afresh - Petition allowed by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the respondents' failure to supply the petitioner with a copy of the Special Investigation Branch (SIB) report, which formed the basis of the show cause notice under Section 74 of the Goods and Services Tax Act, 2017, constituted a violation of the principles of natural justice. The court also considered whether the order dated 05.11.2024, which raised a demand of Rs. 90,25,540/-, should be quashed due to this alleged procedural deficiency.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework revolves around Section 74 of the Goods and Services Tax Act, 2017, which pertains to the determination of tax liability in cases of fraud or willful misstatement. The principles of natural justice, a fundamental aspect of administrative law, require that parties be given a fair opportunity to present their case, which includes access to documents that form the basis of any adverse order.

The petitioner relied on a precedent, M/s Lari Almira House Vs. State of U.P., where it was presumably held that failure to provide foundational documents could violate principles of natural justice.

Court's interpretation and reasoning:

The Court emphasized that the SIB report was the foundation of the show cause notice. It reasoned that merely indicating the conclusions of the SIB report in the show cause notice does not suffice, as it does not allow the petitioner to understand the basis of those conclusions or to challenge any discrepancies effectively. The Court found that the absence of the SIB report denied the petitioner a fair opportunity to respond, thus violating the principles of natural justice.

Key evidence and findings:

The key evidence was the show cause notice itself, which referenced the SIB report but did not include it. The Court noted that the petitioner had explicitly requested the SIB report to prepare an adequate response, which was not provided by the respondents.

Application of law to facts:

Applying the principles of natural justice to the facts, the Court determined that the respondents' failure to supply the SIB report deprived the petitioner of an essential opportunity to respond to the allegations. This procedural lapse rendered the subsequent order invalid.

Treatment of competing arguments:

The respondents argued that the show cause notice was comprehensive and included all necessary details from the SIB report, thus negating the need to provide the report itself. The Court, however, rejected this argument, stating that the petitioner needed the full report to understand and challenge the methodology and findings of the SIB, which could not be discerned from the conclusions alone.

Conclusions:

The Court concluded that the failure to provide the SIB report constituted a breach of natural justice principles, warranting the quashing of the impugned order.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Court held, "Once the foundation of the show cause notice has been the SIB report, it was but incumbent on the respondents to supply a copy thereof so as to enable the petitioner to respond to the findings arrived at by the same SIB and/or point out the discrepancy in the said report."

Core principles established:

The judgment reinforces the principle that foundational documents must be provided to parties in administrative proceedings to ensure compliance with natural justice. It underscores that conclusions in a notice cannot substitute for the actual report, which allows the affected party to understand and contest the findings.

Final determinations on each issue:

The Court quashed the order dated 05.11.2024, holding it was passed in violation of natural justice principles. It remanded the matter back to the authority with directions to supply the SIB report to the petitioner, allow a reasonable time to respond, and provide an opportunity for a hearing as required by Section 74 of the Act before deciding the matter afresh.