2020 (11) TMI 749 - HC - GST

Revenue Dept Violated CGST Rule; Tax Demand Invalid. Petition Accepted for Compliance Review.

The High Court found that the revenue department's failure to adhere to the statutory procedure of communicating the show-cause notice/order by uploading ... Service/communication of show-cause notice under Rule 142 of CGST Act - Mandatory mode of communication by uploading on revenue/GSTN portal - Violation of principle of natural justice for failure to follow statutory communication procedure - Exclusionary effect of statutorily prescribed procedureService/communication of show-cause notice under Rule 142 of CGST Act - Mandatory mode of communication by uploading on revenue/GSTN portal - Violation of principle of natural justice for failure to follow statutory communication procedure - Whether the show-cause notice/order communicated by Email complied with the statutory mode of communication under Rule 142 and whether non compliance vitiated the demand. - HELD THAT: - The Court examined Rule 142 and observed that the provision prescribes electronic uploading of the notice/summary on the revenue system as the mode for communicating show cause notices/orders. The State produced no material to show that the foundational show cause notice/order was uploaded on the revenue website and candidly conceded that it was communicated only by Email. Applying the settled principle that where a particular statutory procedure is prescribed, alternative modes are excluded, and having regard to the insistence of Rule 142 on upload, the Court found that the statutory mode was not followed. The Court held that such non compliance amounted to a breach of the statutory procedure and jeopardised the aggrieved person's ability to know the reasons for the demand and to avail available remedies, thereby engaging the principle of natural justice. For these reasons the impugned demand was held to be vitiated. [Paras 6, 7, 8, 9]The demand dated 18.09.2020 pertaining to financial year 2018-2019 and tax period April, 2018 to March, 2019 was struck down for failure to comply with the statutory communication procedure prescribed by Rule 142.Exclusionary effect of statutorily prescribed procedure - Liberty to revenue to follow prescribed procedure and proceed in accordance with law - Whether the revenue may re proceed after complying with the procedure prescribed under Rule 142. - HELD THAT: - Having set aside the impugned demand for failure to follow Rule 142, the Court granted the revenue liberty to communicate the show cause notice by the appropriate mode as prescribed in Rule 142 and thereafter to proceed in accordance with law. The order therefore nullified the defective demand but did not preclude the revenue from initiating fresh proceedings provided the statutory procedure is strictly followed. [Paras 9, 10]Petition allowed; revenue given liberty to follow Rule 142 and thereafter proceed in accordance with law.Final Conclusion: Writ petition allowed: impugned demand dated 18.09.2020 for financial year 2018-2019 (tax period April, 2018 to March, 2019) struck down for non compliance with the statutory communication procedure under Rule 142 of the CGST Act; revenue permitted to re issue/communicate the show cause notice by the prescribed mode and proceed thereafter in accordance with law. Issues: Violation of natural justice in tax demand communicationDetailed Analysis:Issue 1: Violation of Natural JusticeThe petitioner invoked the writ and supervisory jurisdiction of the High Court under Articles 226 and 227 of the Constitution, seeking various reliefs, including quashing of the impugned order in Form GST DRC-07 dated 18.09.2020 and related orders under section 74 dated 10.06.2020. The grievance raised was that the foundational show-cause notice/order No.12 dated 10.06.2020, pertaining to the financial year 2018-2019 and tax period April 2018 to March 2019, was not communicated to the petitioner, who is a GST-registered individual.Issue 2: Compliance with Rule 142 of CGST ActThe Court examined the provisions of Rule 142 of the Central Goods and Services Tax Act, 2017 (CGST Act), which statutorily obliges the revenue department to communicate show-cause notices/orders by uploading them on the revenue website. The petitioner's counsel highlighted the importance of this provision in ensuring access to information and reasons behind demands, enabling aggrieved parties to seek remedies under the CGST Act.Issue 3: State's Response and Procedural ComplianceIn response to the Court's requisition, the State disclosed that the show-cause notice/order No.12 dated 10.06.2020 was communicated to the petitioner via email. However, the State failed to demonstrate that the notice was uploaded on the revenue website, as required by Rule 142(1) of the CGST Act. The Court emphasized that when a specific procedure is prescribed by law, all other methods are excluded, especially when the statute explicitly mandates a particular course of action.JudgmentThe Court held that the revenue's failure to follow the statutory procedure of communicating the show-cause notice/order by uploading it on the revenue website amounted to a violation of Rule 142(1) of the CGST Act. Consequently, the impugned tax demand dated 18.09.2020 was deemed invalid and was struck down. The petition was allowed, granting the revenue the liberty to comply with Rule 142 of the CGST Act by properly communicating the show-cause notice to the petitioner and proceeding in accordance with the law.