2023 (1) TMI 379 - HC - GST

GST demand proceedings started without mandatory Rule 142(1A) pre-SCN intimation in DRC-01A, later notice and order quashed

Where GST proceedings were initiated without issuing the mandatory pre-SCN intimation under Rule 142(1A) in Part A of Form GST DRC-01A, the HC held that ... Show cause notice in Part A of FORM GST DRC-01A under Rule 142(1A) - initiation of proceedings - jurisdictional validity of proceedings - fair opportunity of hearing - effect of subsequent reminders on defective initiation - quashment of order passed consequent to invalid initiation - remand for fresh proceedings in accordance with lawShow cause notice in Part A of FORM GST DRC-01A under Rule 142(1A) - jurisdictional validity of proceedings - fair opportunity of hearing - Validity of initiation of proceedings where Part A of FORM GST DRC-01A under Rule 142(1A) was not issued prior to proceedings under Section 74 of the Act. - HELD THAT: - The Court found that, on the admitted facts, the mandatory notice in Part A of FORM GST DRC-01A required by Rule 142(1A) (as it stood prior to its amendment of October 15, 2020) was not issued before initiation of proceedings. That communication was intended to provide details of tax, interest and penalties as ascertained by the officer and to afford the assessee a fair opportunity to respond. The absence of that Part A notice rendered the initiation itself invalid and deprived the petitioner of the required opportunity of hearing. The Court rejected the contention that subsequent reminders or communications cured the defect, holding that reminders do not remedy the inherent jurisdictional defect caused by failure to issue the prescribed Part A notice.Initiation of proceedings without the Part A notice was invalid and deprived the petitioner of a fair opportunity; such initiation was without jurisdiction.Quashment of order passed consequent to invalid initiation - effect of subsequent reminders on defective initiation - remand for fresh proceedings in accordance with law - Whether an order passed under Section 74(9) consequent to invalidly initiated proceedings must be set aside and what remedial course should follow. - HELD THAT: - Having held that the initiation was invalid, the Court concluded that the consequential order dated November 10, 2022 could not stand and must be quashed. The Court applied the principle that an order which flows from an invalid jurisdictional initiation is vitiated. However, the Court granted the respondents liberty to initiate fresh proceedings in accordance with law, thereby remitting the matter to the authority to proceed after issuing the requisite Part A notice and following the statutory procedure.The order dated November 10, 2022 is quashed; respondents are granted liberty to initiate fresh proceedings in accordance with law.Final Conclusion: Writ petition allowed; impugned order dated November 10, 2022 quashed because proceedings were initiated without the mandatory Part A notice in FORM GST DRC-01A under Rule 142(1A); respondents permitted to commence fresh proceedings in accordance with law. Issues:Challenge to order under Section 74(9) of the Central Goods and Service Tax Act, 2017 due to lack of issuance of notice in Part A of FORM GST DRC-01A.Analysis:The writ petition challenged the order dated November 10, 2022, passed by respondent No.2 under Section 74(9) of the Act. The petitioner argued that according to Rule 142(1A) of the Central Goods and Service Tax Rules, 2017, before passing any order under Section 74, a show cause notice in Part A of FORM GST DRC-01A must be issued. The absence of this notice deprived the petitioner of a fair opportunity to respond. The petitioner relied on a Delhi High Court judgment in Gulati Enterprises v. Central Board of Indirect Taxes and Customs & others to support this argument.The respondents did not dispute the non-issuance of the required notice but contended that subsequent reminders provided a fair opportunity for the petitioner to present their case, which was not utilized. The respondents mentioned that the impugned order was appealable under Section 107 of the Act.The High Court, after hearing both parties, found merit in the petitioner's argument. It held that the absence of the notice in Part A of FORM GST DRC-01A rendered the initiation of proceedings against the petitioner invalid. The Court emphasized that subsequent reminders could not rectify the fundamental flaw in the initiation process. Citing the Delhi High Court's decision in Gulati Enterprises' case with similar facts, the Court ruled in favor of the petitioner, quashing the impugned notice dated November 10, 2022. The Court granted liberty to the respondents to initiate fresh proceedings against the petitioner in compliance with the law.In conclusion, the High Court allowed the writ petition, emphasizing the importance of adhering to procedural requirements for initiating proceedings under Section 74 of the Act. The judgment highlighted the significance of issuing the requisite notice as per Rule 142(1A) of the Rules to ensure a fair opportunity for the party concerned to respond, ultimately leading to the quashing of the impugned notice and granting permission for fresh proceedings to be initiated.