Court Overturns Order; Directs Reassessment of Composition Scheme Application Due to Procedural Errors.

The HC set aside the impugned order rejecting the petitioner's application for the composition scheme under CGST/KSGST Rules, 2017, due to procedural errors. The matter was remitted back to the second respondent to first assess the petitioner's eligibility for the scheme. The petitioner was directed to respond to the show cause notice within ten days, with the second respondent required to adjudicate the notice after providing an opportunity for a hearing. If the application for compounding is rejected, only then should a notice under Section 73(1) be issued. The writ petition was disposed of accordingly.

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Issues involved: Impugning order dated 18.12.2023 rejecting application for composition scheme under CGST/KSGST Rules, 2017.

Summary:
The petitioner, a registered dealer under CGST/KSGST Rules, 2017, opted for the composition scheme during the tax period 2017-18. However, the proper officer found that the petitioner was engaged in works contract, making him ineligible for the composition scheme. A show cause notice was issued on 29.09.2023 rejecting the application for the composition scheme and determining tax liability under Section 73 (1). The petitioner did not respond to the notice, leading to the issuance of a rejection notice on 30.09.2023. The petitioner argued that the eligibility for compounding should have been determined first before issuing the notice for tax liability under Section 73. The Government Pleader acknowledged the procedural error, as the rejection notice was issued before determining eligibility for compounding. The court held that there was a violation of the statutory scheme by the second respondent and set aside the impugned order. The matter was remitted back to the second respondent to first determine the petitioner's eligibility for the compounding scheme. The petitioner was directed to file a reply to the show cause notice within ten days, and the notice was to be adjudicated after affording an opportunity to be heard. Only if the application for compounding was rejected, a notice under Section 73 (1) should be issued. The petitioner was given a deadline to file a reply and appear before the second respondent, who would issue a fresh notice if unsatisfied with the reply, followed by a fresh order. The writ petition was disposed of.

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