2022 (10) TMI 671 - HC - GST

HC quashes GST summary orders for procedural violations, missing show cause notices under Sections 73/74

Prity Dokania sole proprietor of M/s Samridhi Enterprises Versus The State of Jharkhand, The Commissioner, Jharkhand State Goods & Service Tax, The Deputy Commissioner, State Taxes, State Taxes Officer

The HC quashed summary orders and adjudication orders issued under JGST Act, 2017, finding them invalid due to procedural violations. The court held that ... Validity of summary orders/adjudication orders - challenged on the ground that the revisional authority without passing an order under Section 108 of JGST Act had just returned the revision applications filed by the respective petitioners - Proper enquiry not carried out - violation of principles of natural justice - Section 74 (1) of JGST Act, 2017 read with Rule 142 (1) (a) of JGST Rules, 2017 - HELD THAT:- After going through the documents available on record it appears that in all these writ applications no show cause notice has been issued and no relied upon materials has been given. DRC-01 which was issued is vague and lacks in details and is in violation of principle of natural justice. The demand of tax, interest and penalty has been confirmed without proper enquiry. Failure to issue the mandatory Show Cause Notices under Section 73/74 of the JGST Act along with summary Show Cause Notice under Rule 142(1) goes to the root of the matter and vitiates the entire proceeding and violates principles of natural justice. The law is now no more res integra that the show cause notice under Section 73/74 is mandatory in nature. Leaving the question open that “whether an Assessee can invoke jurisdiction under Section 108 of the JGST Act or not”, it is held that the summary of orders, adjudication orders and all subsequent orders issued by the department in all the writ applications is bad in law, inasmuch as, the same has been issued without issuance of any Show Cause Notice and without affording the opportunity of personal hearing which is mandatory and without passing any detailed order in terms of the provisions of the Act. The summary of SCN and orders are quashed and set aside - All these matters are remitted back to the concerned respondents to pass afresh order in accordance with law and specific provision as enshrined under JGST Act, 2017 after following principles of natural justice - application allowed. Issues Involved:1. Issuance of Show Cause Notices (SCN) under Section 74 of the JGST Act.2. Compliance with principles of natural justice.3. Validity of summary orders (DRC-07) and related proceedings.4. Right to appeal under Section 107 of the JGST Act.5. Jurisdiction of revisional authority under Section 108 of the JGST Act.Detailed Analysis:1. Issuance of Show Cause Notices (SCN) under Section 74 of the JGST Act:The petitioners challenged the summary of SCN issued under Rule 142 of the JGST Rules, respective adjudication orders, and all consequential orders, arguing that mandatory show cause notices under Section 74(1) of the JGST Act were never issued. Instead, only summary orders in Form DRC-07 were issued. The court found that no detailed orders had been passed against the petitioners, and they were served DRC-07 notices without the issuance of any proper SCN, which is a violation of the provisions of the Act.2. Compliance with principles of natural justice:The petitioners argued that the entire procedure adopted by the respondents suffered from illegality, impropriety, material irregularity, and miscarriage of justice. They contended that DRC-01 issued was vague, lacked details, and violated principles of natural justice as no reference to any relied upon adverse materials was provided. The court noted that the DRC-01 issued was indeed vague and lacked details, and no relied upon materials were given, which is in violation of the principles of natural justice.3. Validity of summary orders (DRC-07) and related proceedings:The court observed that in some cases, only penalty orders were passed, and in some cases, no DRC-01 was issued. The procedure required under the Act was not followed at all. The court concluded that the summary of orders, adjudication orders, and all subsequent orders issued by the department were bad in law as they were issued without issuing any SCN and without affording the opportunity of personal hearing, which is mandatory.4. Right to appeal under Section 107 of the JGST Act:The respondents argued that the petitioners, to avoid the statutory appeal under Section 107 of the JGST Act, preferred revision under Section 108 before the Additional Commissioner. The court did not delve deeply into this issue but noted that the petitioners' challenge was based on the ground of non-compliance with the principles of natural justice and the provisions of the Act.5. Jurisdiction of revisional authority under Section 108 of the JGST Act:The petitioners initially argued that the revisional authority should have adjudicated their revision applications. However, during the proceedings, they sought to press the challenge on the alternative grounds of non-compliance with principles of natural justice and the provisions of the Act. The court left the question open regarding whether an assessee can invoke jurisdiction under Section 108 of the JGST Act.Conclusion:The court quashed and set aside the summary of SCN and orders, including DRC-01, DRC-02, DRC-07, penalty orders, and DRC-13 notices in all the writ applications. It remitted the matters back to the concerned respondents to pass fresh orders in accordance with the law and specific provisions of the JGST Act, 2017, after following the principles of natural justice. The court clarified that it did not go into the merits of the case of the parties. All writ applications were allowed and disposed of, and any pending I.A. was also disposed of.