2022 (8) TMI 975 - HC - GST

Jharkhand HC quashes JGST adjudication orders for violating Section 73 notice requirements and natural justice principles

Jharkhand HC quashed adjudication orders under JGST Act for non-compliance with statutory provisions and violation of natural justice principles. The ... Validity of adjudication orders - not following the statutory provisions as enshrined under JGST Act - Service of notice - specific case of the petitioner is that no show cause notice, summary of show cause notice, adjudication order and summary of order was ever served to the petitioner - principles of violation of natural justice - HELD THAT:- Even after going through the entire order sheet it clearly transpires that on 16.05.2019 there was an order for issuance of DRC-01 but after that there was no mention of issuance of DRC-07; rather all of a sudden, 08.09.2021, there was a direction to issue DRC-13. This clearly goes to show that there is serious discrepancy and incongruity in the assessment proceedings, inasmuch as, there is no whisper of issuing DRC-07. Thus, it clearly transpires that a proper show cause notice under Section 73 (1) of the JGST Act and proper opportunity of hearing was not afforded to the petitioner before the adjudication order was passed covering the tax period from July, 2017 to March, 2018. There is no other document to suggest that the petitioner was given due opportunity of hearing, inasmuch as, in the notice issued under notice under Section 73 of the Act, in the column of date time and venue of personal hearing it was indicated by the respondents as “NA” which means not applicable. This clearly indicates that no opportunity of personal hearing has been given and merely a form has been issued just to cover up the discrepancies committed by the respondent-State. Thus, it clearly transpires that the statutory requirements as enshrined under Section 73 and 75 of the JGST Act has not been followed and as a matter of fact principles of natural justice has also not been followed and thus, both these writ applications are maintainable - the impugned adjudication order in both these writ application are not in accordance with the procedure prescribed in law and deserves to be quashed and set aside on the ground of non-compliance of statutory provisions of the JGST Act and for non-compliance of principle of natural justice. The matter is remitted back to the adjudicating authority to issue a fresh show cause notice and after giving due opportunity to the petitioner pass an order afresh - application allowed. Issues Involved:1. Non-compliance with statutory provisions under JGST Act and principles of natural justice.2. Validity of the adjudication orders and the initiation of proceedings.3. Entitlement to Input Tax Credit (ITC) based on discrepancies between GSTR-3B and GSTR-2A.4. Maintainability of the writ petition in light of alternative remedy.5. Procedural irregularities in issuing show cause notices and subsequent orders.Detailed Analysis:1. Non-compliance with Statutory Provisions and Natural Justice:The petitioner challenged the adjudication orders dated 12.09.2019, asserting that the respondents did not follow the statutory provisions under the JGST Act and the principles of natural justice. The petitioner argued that no proper show cause notice, summary of show cause notice, adjudication order, or summary of order was served. The petitioner only became aware of the adjudication proceedings when the bank account was attached via GST DRC-13 notice dated 08.09.2021. The court found that the show cause notices were issued without specifying the date, time, and venue for personal hearing, indicating a lack of proper opportunity for the petitioner to defend themselves. This was seen as a violation of the principles of natural justice.2. Validity of Adjudication Orders and Initiation of Proceedings:The petitioner contended that the adjudication orders were arbitrary and illegal, as they were passed ex-parte without a proper hearing. The court observed that the adjudication orders were passed immediately after issuing Form GST DRC-01 without providing a personal hearing. The court noted serious discrepancies in the assessment proceedings, including the absence of a mention of issuing DRC-07 before the attachment notice under DRC-13 was issued. This led to the conclusion that the adjudication orders were not in compliance with the procedural requirements under Sections 73 and 75 of the JGST Act.3. Entitlement to Input Tax Credit (ITC):The petitioner argued that the discrepancies between GSTR-3B and GSTR-2A should not lead to the denial of ITC. The court highlighted that the adjudicating authority failed to appreciate that no proceedings for denial of ITC could be initiated merely due to differences between GSTR-3B and GSTR-2A. The court referred to a press release by the GST Council, which clarified that the facility to view GSTR-2A by the recipient is for taxpayer facilitation and does not impact the ability to avail ITC on a self-assessment basis as per Section 16 of the Act.4. Maintainability of Writ Petition:The respondent-State argued that the writ petition was not maintainable due to the availability of an alternative remedy of filing an appeal under Section 107 of the JGST Act. However, the court held that the writ petition was maintainable because the adjudication orders were passed without following the statutory provisions and principles of natural justice, making the challenge entertainable in writ jurisdiction.5. Procedural Irregularities:The court found that the show cause notices issued under Section 73 were not proper as they lacked specific details and did not provide a proper opportunity for a personal hearing. The court referred to the judgment in M/s NKAS Services Private Limited vs. The State of Jharkhand & Ors., which emphasized the necessity of a proper show cause notice and the opportunity to defend oneself. The court concluded that the impugned adjudication orders were not in accordance with the procedure prescribed by law and deserved to be quashed.Conclusion:The High Court quashed the adjudication orders dated 12.09.2019 and the consequential notices of demand in Form GST DRC-07 dated 18.09.2019. The matter was remitted back to the adjudicating authority to issue fresh show cause notices and provide the petitioner with a proper opportunity for a hearing before passing a new order. The court also directed that the 10% deposit of the tax amount could be refunded or adjusted against future tax liability, depending on the outcome of the fresh adjudication. Both writ applications were allowed to the extent indicated.