2024 (2) TMI 133 - HC - GST

Tax Authorities Ordered to Restart Proceedings After Skipping Mandatory Show Cause Notice Under Section 74(1)

HC found that tax authorities violated procedural requirements by issuing a liability notice under Section 74(5) without first serving a show cause notice ... Requirement of issuance of show cause notice under Section 74(1) of the Uttar Pradesh Goods and Services Tax Act, 2017 - consequences of non issuance of mandatory notice - statutory procedural sequence under Section 74 (interaction of sub sections 74(5), 74(7) and 74(1))Requirement of issuance of show cause notice under Section 74(1) of the Uttar Pradesh Goods and Services Tax Act, 2017 - consequences of non issuance of mandatory notice - Impugned orders passed without issuance of a show cause notice under Section 74(1) of the Act are without basis and liable to be set aside. - HELD THAT: - The record shows a notice under Section 74(5) was issued on June 4, 2021 asserting tax liability. The court observed that upon non payment, Section 74(7) requires the proper officer to issue a notice under Section 74(1) before passing any adjudicatory order. That mandatory procedural step was not followed and no show cause notice under Section 74(1) was issued; instead the order dated July 30, 2021 was passed. For failure to comply with the statutory procedure of issuing the show cause notice, the orders impugned lack legal basis and must be quashed and set aside. [Paras 3, 4, 5]Impugned orders dated July 30, 2021 and August 31, 2022 are quashed and set aside for non issuance of the mandatory show cause notice under Section 74(1).Statutory procedural sequence under Section 74 (interaction of sub sections 74(5), 74(7) and 74(1)) - remand for fresh proceedings after compliance with mandatory notice requirement - Respondents permitted to proceed afresh after issuance of the statutory notice under Section 74(1). - HELD THAT: - Having quashed the impugned orders for procedural non compliance, the court left open the right of the respondents to continue the matter, provided they first issue the notice required by Section 74(1) and thereafter follow the statutory procedure before passing any adjudicatory order. The order therefore sets aside the past adjudication but does not preclude fresh proceedings in conformity with the Act. [Paras 6]Respondents are at liberty to proceed in the matter after issuing notice under Section 74(1) of the Act.Final Conclusion: Writ petition allowed: impugned orders dated July 30, 2021 and August 31, 2022 quashed for failure to issue the mandatory show cause notice under Section 74(1); respondents may initiate fresh proceedings only after issuing the statutory notice and following the prescribed procedure. Issues involved: Challenge to orders passed under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017 without proper notice.Summary:Issue 1: Lack of proper notice under Section 74(1) of the ActThe petitioner challenged the orders dated July 30, 2021 and August 31, 2022 passed by the Assistant Commissioner and Additional Commissioner, Grade-2 (Appeal) respectively, on the ground that no notice was issued to the petitioner under Section 74(1) of the Act. The court noted that a notice was issued under Section 74(5) of the Act on June 4, 2021, asserting tax liability, but no show cause notice under Section 74(1) was given. The court held that the proper procedure was not followed, rendering the impugned orders without legal basis. Consequently, the court quashed and set aside the impugned orders, allowing the writ petition.Decision:The court allowed the writ petition, quashed the impugned orders, and directed the respondents to proceed in the matter after issuing a notice under Section 74(1) of the Act.