Tax authorities must follow Section 73 procedures before issuing garnishee notices under JGST Act

The Jharkhand HC quashed a garnishee notice and adjudication order dated 1st November 2021 for violating natural justice principles and prescribed procedures under the JGST Act. The court found that the tax authorities failed to issue proper show cause notice under Section 73(1) and denied the assessee three opportunities to reply as required under Sections 70(4)(5). The adjudication proceeding was conducted without following due procedure under Section 73 read with Section 75(4)(5) of JGST Act. The matter was remanded to the State Tax Officer to initiate fresh proceedings with proper show cause notice.

---

---

Issues Involved:
1. Issuance of Show Cause Notice under Section 73(1) of the Jharkhand Goods and Services Tax Act, 2017.
2. Validity of the Order dated 01-11-2021 and related documents.
3. Compliance with principles of natural justice.
4. Legality of Garnishee Notice under Section 79(1)(c) of the Jharkhand Goods and Services Tax Act, 2017.
5. Proper procedure for adjudication under the Jharkhand Goods and Services Tax Act, 2017.

Issue-wise Detailed Analysis:

1. Issuance of Show Cause Notice under Section 73(1) of the Jharkhand Goods and Services Tax Act, 2017:
The petitioner argued that the service of a Show Cause Notice under Section 73(1) is a condition precedent for issuing any order under Section 73(9) or other provisions of the Act. The petitioner claimed that no such notice was issued, which vitiates the entire proceedings. The court found that no proper show cause notice was issued apart from the summary of the show cause notice in Form GST DRC-01. This failure to issue a proper show cause notice was a significant procedural lapse.

2. Validity of the Order dated 01-11-2021 and related documents:
The petitioner sought to quash the Order dated 01-11-2021, the Summary of Order dated 01-11-2021, and the Garnishee Order dated 25-02-2022, arguing that these were void ab initio due to the absence of a mandatory Show Cause Notice. The court agreed, noting that the adjudication order and related documents were issued without following the due procedure prescribed under Section 73, rendering them null and void.

3. Compliance with principles of natural justice:
The petitioner contended that the adjudication order was issued without compliance with the principles of natural justice, as no proper show cause notice was given, preventing the petitioner from taking a proper defense. The court concurred, emphasizing that the absence of a proper show cause notice violated the principles of natural justice and the prescribed procedure under the JGST Act.

4. Legality of Garnishee Notice under Section 79(1)(c) of the Jharkhand Goods and Services Tax Act, 2017:
The petitioner argued that the Garnishee Notice issued to Punjab National Bank for the recovery of Rs.3,84,02,528/- was illegal and without authority. The court found that the garnishee notice was issued based on an invalid adjudication order, thereby rendering it illegal.

5. Proper procedure for adjudication under the Jharkhand Goods and Services Tax Act, 2017:
The court noted that the adjudication order was passed without following the due procedure prescribed under Section 73 read with Section 75(4) & (5) of the JGST Act. The court highlighted that the petitioner was not given an opportunity to submit a proper reply to the show cause notice, which vitiated the adjudication proceedings.

Conclusion:
The court quashed the summary of the show cause notice, the adjudication order dated 1st November 2021, the summary of the order and demand notice contained in GST DRC-07 dated 01.11.2021, and the Garnishee notice dated 25.02.2022. The matter was remanded to the State Tax Officer, Dhanbad, to initiate fresh proceedings in accordance with the law after issuing a proper show cause notice under Section 73(1) of the JGST Act. The court made it clear that no comments were made on the merits of the case. The writ petition was disposed of accordingly.

---