2020 (11) TMI 786 - HC - GST

Court invalidates tax demand due to improper communication under CGST Act, stresses procedural compliance for natural justice

The Court held that the demand raised against the petitioner for non-payment of tax was invalid due to the failure to properly communicate the show-cause ... Principle of natural justice - Failure to uploand the Show Cause Notice (SCN) and Order on the GSTN portal - Rule 142 of Central Goods and Services Tax Act, 2017 - HELD THAT:- It is trite principle of law that when a particular procedure is prescribed to perform a particular act then all other procedures/modes except the one prescribed are excluded. This principle becomes all the more stringent when statutarily prescribed as is the case herein. This Court has no manner of doubt that statutory procedure prescribed for communicating show-cause notice/order under Rule 142(1) of CGST Act having not been followed by the revenue, the impugned demand dated 18.09.2020 vide Annexure P/1 and P/2 pertaining to financial year 2018-2019 and 2019-2020 and tax period September, 2018 to March, 2019 and April, 2019 to May, 2019 respectively, deserves to be and is struck down. Petition allowed. Issues:Violation of principle of natural justice regarding communication of show-cause notice/orders under Rule 142 of CGST Act.Analysis:The petitioner filed a writ petition seeking various reliefs under Articles 226 and 227 of the Constitution. The main grievance was that the demand of tax raised against the petitioner was not communicated properly. The foundational show-cause notice/orders dated 10.06.2020 were allegedly not received by the petitioner, who is registered under the GST Act. The Court, considering the violation of the principle of natural justice under Rule 142 of the CGST Act, sought a reply from the State regarding the communication of the said notice/orders to the petitioner.The State responded by stating that the show-cause notice/orders were sent to the petitioner's email address, and despite receiving them, the petitioner did not respond. The petitioner argued that Rule 142(1) of the CGST Act mandates the revenue department to communicate such notices by uploading them on the revenue website. The petitioner contended that this mode of communication allows the aggrieved person to access the reasons behind the demand and seek remedies under the CGST Act.The Court examined Rule 142 of the CGST Act, which specifies the procedure for serving notices and orders for demand of amounts payable under the Act. The rule emphasizes electronic communication of summaries of notices and orders to the concerned parties. The Court noted that the State failed to provide evidence that the show-cause notice/orders were uploaded on the revenue website. It was acknowledged by the State's counsel that the communication was done via email and not in accordance with the statutory requirement of uploading on the revenue website.Considering the statutory provision and the principle that prescribed procedures must be strictly followed, the Court held that the demand dated 18.09.2020, pertaining to specific financial years and tax periods, was invalid due to non-compliance with the communication procedure under Rule 142(1) of the CGST Act. Consequently, the Court allowed the petition, striking down the impugned demand and granting liberty to the revenue to follow the prescribed procedure for communication of show-cause notices in the future.In conclusion, the judgment focused on the importance of adhering to statutory procedures for communication of notices and orders under the CGST Act to ensure the principles of natural justice are upheld. The Court's decision highlighted the significance of proper communication methods to enable aggrieved parties to understand the reasons behind demands and seek appropriate remedies under the law.