2023 (1) TMI 379 - HC - GST

GST Proceedings Halted: Procedural Defects Invalidate Tax Notice, Mandate Proper Form Compliance for Fair Hearing

M/s Skyline Automation Industries Versus State of U.P. and another

HC allowed writ petition challenging GST order under Section 74(9), finding procedural non-compliance invalid. Court quashed the notice due to absence of ... Initiation of proceedings without issuance of SCN - notice in Part A of FORM GST DRC-01A having not been issued - validity of subsequent proceedings - HELD THAT:- As admittedly for initiation of proceedings against the petitioner a notice as provided for under Rule 142(1A) of the Rules in Part A of FORM GST DRC-01A was not issued, which provided for communication of details of any tax, interest and penalties as ascertained by the officer. Any subsequent reminder will not cure inherent defect in proceedings initiated against the petitioner. Similar view has been expressed by the Delhi High Court in GULATI ENTERPRISES VERSUS CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS & ORS. [2022 (5) TMI 1137 - DELHI HIGH COURT] wherein also in identical facts pertaining to a case prior to the amendment of Rule 142(1A) of the Rules with effect from October 15, 2020, the impugned show cause notice was set aside and the matter was remitted back to authority concerned to initiate fresh proceedings in accordance with law - In the case in hand, the only difference being that subsequent thereto an order has also been passed on November 10, 2022, the same will not make any difference. As the initiation of proceedings itself are bad, the order passed consequent thereto will also fall. The impugned notice dated November 10, 2022 is quashed - Petition allowed. 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.