2025 (4) TMI 626 - HC - GST

Violation of principles of natural justice - issuance of summary of SCN without issuing any SCN u/s 73 (1) of the CGST Act 2017 and the summary of the order without passing any order u/s 73 (9) of the CGST Act 2017 - opportunity of hearing also not provided - HELD THAT - The issue raised in Construction Catalysers Pvt. Ltd. 2024 (10) TMI 279 - GAUHATI HIGH COURT and the present petition is similar and therefore the determination made in Construction Catalysers Pvt. Ltd shall accordingly cover the present petition and as agreed to by the learned counsel for the parties the present writ petition stands dsposed of by setting aside the summary of show cause notice dated 28.09.2023 and the summary of order dated 30.12.2023 in terms of the determination and conclusion arrived at para 29 of Construction Catalysers Pvt. Ltd. It was held in Construction Catalysers Pvt. Ltd that The issuance of the Summary of the Show Cause Notice Summary of the Statement and Summary of the Order do not dispense with the requirement of issuance of a proper Show Cause Notice and Statement as well as Page passing of the Order as per the mandate of Section 73 by the Proper Officer. As initiation of a proceedings under Section 73 and passing of an order under the same provision have consequences. 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. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue in this case revolves around the procedural validity of the issuance of a summary of a show cause notice and a subsequent summary order under the Central Goods and Services Tax (CGST) Act, 2017, without following the prescribed legal procedures. Specifically, the questions considered include:

1. Whether the issuance of a summary of a show cause notice without a formal show cause notice under Section 73(1) of the CGST Act is legally valid.

2. Whether the issuance of a summary order without passing a formal order under Section 73(9) of the CGST Act is permissible.

3. Whether the lack of an opportunity for a hearing before issuing the summary order violates the principles of natural justice as per Section 75(4) of the CGST Act.

ISSUE-WISE DETAILED ANALYSIS

1. Issuance of Summary of Show Cause Notice without a Formal Notice

- Relevant Legal Framework and Precedents: Section 73(1) of the CGST Act mandates the issuance of a formal show cause notice to initiate proceedings for the determination of tax liability. The precedent set by the case of Construction Catalysers Pvt. Ltd. established that a summary notice cannot substitute a formal show cause notice.

- Court's Interpretation and Reasoning: The Court reiterated that a summary of the show cause notice (GST DRC-01) does not fulfill the legal requirement of a formal notice under Section 73(1). The proper officer must issue a formal show cause notice to trigger the legal process.

- Key Evidence and Findings: The Court found that the petitioner was not issued a formal show cause notice, only a summary, which is insufficient under the law.

- Application of Law to Facts: The Court applied the legal requirement of Section 73(1) and concluded that the absence of a formal notice invalidated the initiation of proceedings against the petitioner.

- Treatment of Competing Arguments: The respondent's argument that the summary notice sufficed was rejected based on the precedent and the clear statutory requirement for a formal notice.

- Conclusions: The issuance of a summary of the show cause notice without a formal notice is procedurally flawed and legally invalid.

2. Issuance of Summary Order without a Formal Order

- Relevant Legal Framework and Precedents: Section 73(9) requires the passing of a formal order after considering the taxpayer's response to the show cause notice. The precedent in Construction Catalysers Pvt. Ltd. emphasized the necessity of a formal order.

- Court's Interpretation and Reasoning: The Court held that the issuance of a summary order (GST DRC-07) without a formal order under Section 73(9) is not permissible. A formal order must be passed by the proper officer.

- Key Evidence and Findings: The petitioner was not provided with a formal order, only a summary, which does not meet the legal requirements.

- Application of Law to Facts: The absence of a formal order under Section 73(9) led the Court to conclude that the summary order was invalid.

- Treatment of Competing Arguments: The respondent's reliance on the summary order was dismissed due to the clear statutory mandate for a formal order.

- Conclusions: The issuance of a summary order without a formal order is procedurally improper and legally invalid.

3. Lack of Opportunity for Hearing

- Relevant Legal Framework and Precedents: Section 75(4) of the CGST Act requires that an opportunity for a hearing be provided before passing an order. The Construction Catalysers Pvt. Ltd. case highlighted the importance of this provision.

- Court's Interpretation and Reasoning: The Court found that the lack of an opportunity for a hearing violated the principles of natural justice and Section 75(4).

- Key Evidence and Findings: The petitioner was not given an opportunity to be heard before the summary order was issued.

- Application of Law to Facts: The Court applied the requirement for a hearing and concluded that the failure to provide one invalidated the proceedings.

- Treatment of Competing Arguments: The respondent's argument that procedural shortcuts were permissible was rejected in favor of upholding natural justice principles.

- Conclusions: The lack of an opportunity for a hearing constitutes a violation of procedural fairness and invalidates the proceedings.

SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "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."

- Core Principles Established: The necessity of issuing formal show cause notices and orders under Sections 73(1) and 73(9) respectively, and the importance of providing an opportunity for a hearing as per Section 75(4).

- Final Determinations on Each Issue: The Court set aside the summary of the show cause notice and the summary order due to procedural deficiencies and violations of statutory requirements, aligning with the precedent set in Construction Catalysers Pvt. Ltd.