2024 (10) TMI 279 - HC - GST

HC sets aside orders under Section 73(9) for procedural violations and lack of proper authentication

Construction Catalysers Private Limited, The Assam Gramin Vikash Bank, M/s. Nitai Kangsa Banik And Anr., The Assam Gramin Vikash Bank (Formerly Known As Langpi Dehangi Rural Bank), Aurora Fine Arts Versus State Of Assam And, The Principal Commissioner Of State Tax, The Assistant Commissioner Of State Tax Guwahati, The Union Of India, Central Board Of Indirect Taxes And Customs New Delhi, The Principal Commissioner State GST, Assam, The Assistant Commissioner of State Tax Silchar.

The HC set aside impugned orders under Section 73(9) of the State Act, finding multiple procedural violations. The court held that summary show cause ... Principles of natural justice - service of SCN - Show Cause Notices were issued prior to passing the Impugned Order under Section 73 (9) of the State Act or not - challenge to determination of tax as well as the Order attached to the Summary of the Show Cause Notice in GST DCR-01 - impugned orders under Section 73 (9) of the State Act is in conformity with Section 75 (4) of the State Act or not. Whether Show Cause Notices were issued prior to passing the Impugned Order under Section 73 (9) of the State Act? - HELD THAT:- This Court is of the view that the Summary of the Show Cause Notice along with the attachment containing the determination of tax cannot be said to be a valid initiation of proceedings under Section 73 without issuance of a proper Show Cause Notice. The Summary of the Show Cause Notice is in addition to the issuance of a proper Show Cause Notice. Under such circumstances, this Court is of the unhesitant opinion that the impugned orders challenged in the instant batch of writ petitions are contrary to the provisions of Section 73 as well as Rule 142 (1) (a) of the Rules as the said impugned Orders were passed with issuance of a proper Show Cause Notice. Whether the determination of tax as well as the Order attached to the Summary of the Show Cause Notice in GST DCR-01 and Summary of the Order in GST DCR-07 can be said to be the Show Cause Notice and Order respectively? - HELD THAT:- A perusal of the provisions of Section 73 would show that the Show Cause Notice is required to be issued by the Proper Officer, the Statement under Section 73 (3) is to be issued by the Proper Officer as well as the Order under Section 73 (9) is required to be passed by the Proper Officer. Section 2 (91) of the Act defines who is the Proper Officer meaning thereby either the Commissioner or the Officer who had been specifically entrusted by the Commissioner. As it is the statutory mandate that it is only the Proper Officer who has the authority to issue Show Cause Notice and the Statement and pass the order, the authentication in the Show Cause Notice, Statement as well as the Order by the Proper Officer is a must and failure to do so, makes the Show Cause Notice, Statement and Order ineffective and redundant. It is also important to note that the Act only stipulates that notice would be issued and order would be passed by the Proper Officer. The manner in which the Proper Officer would authenticate the notice(s) or the order(s) in so far as other Chapters of the Rules of 2017 is silent except Chapter-III. Taking into account the utmost necessity of the authentication by the Proper Officer, this Court is of the opinion unless appropriate insertion are made in the Rules or notification are issued as per the directions of the Board to fill the void in the Rules of 2017, the authentication in the manner stipulated in Rule 26 (3) of the Rules of 2017 has to be applied as and when the Proper Officer is required to issue notice or Statement and pass Order in terms with the Act. Whether the impugned orders under Section 73 (9) of the State Act is in conformity with Section 75 (4) of the State Act and is in consonance with the principles of natural justice? - HELD THAT:- This Court is of the opinion that when the statute is clear to provide an opportunity of hearing, there is a requirement of providing such opportunity. In fact a perusal of the Form GST DRC-01 enclosed to the writ petitions shows details have been given as regards the date by which the reply has to be submitted; date of personal hearing; time of personal hearing and venue of personal hearing. It is seen that in the Summary of the Show Cause Notice only the date for submission of reply has been mentioned. In respect to other details as stated above have been mentioned to as ‘NA’. It may be that the Proper Officer assumed that based on the reply he/she may proceed with the adjudication depending as to whether the person to whom the notice is issued had opted for personal hearing or not. But in a case where no reply is filed, a question arises whether the Proper Officer can pass an adverse order without providing an opportunity for hearing. The answer has to be in the negative else it would render the second part of Section 75 (4) redundant. The impugned order is set aside - petition disposed off. Issues Involved:1. Whether Show Cause Notices were issued prior to passing the Impugned Order under Section 73 (9) of the State Act.2. Whether the determination of tax as well as the Order attached to the Summary of the Show Cause Notice in GST DRC-01 and the Summary of the Order in GST DRC-07 can be said to be the Show Cause Notice and Order respectively.3. Whether the impugned orders under Section 73 (9) of the State Act are in conformity with Section 75 (4) of the State Act and are in consonance with the principles of natural justice.Issue-wise Detailed Analysis:(i) Show Cause Notices Prior to Impugned Order:The court examined whether proper Show Cause Notices were issued before the orders under Section 73 (9) of the State Act were passed. It was observed that the Summary of the Show Cause Notices in GST DRC-01 mentioned an attachment as the Show Cause Notice. However, the court clarified that the Summary of the Show Cause Notice cannot substitute a proper Show Cause Notice as mandated by Section 73. The court highlighted the necessity of issuing a detailed Show Cause Notice that specifies the reasons and circumstances for invoking Section 73, providing the taxpayer an opportunity to respond adequately. The court concluded that the absence of a proper Show Cause Notice rendered the proceedings invalid.(ii) Determination of Tax and Order Attachments:The court addressed whether the attachments to the Summary of the Show Cause Notice and the Summary of the Order could be considered as the actual Show Cause Notice and Order. It was emphasized that the attachments lacked authentication by the Proper Officer, violating Rule 26 (3) of the Central Goods and Services Tax Rules, 2017. The court referred to precedents from various High Courts, underscoring the necessity for digital or e-signature authentication. The court determined that without proper authentication, the attachments were ineffective and could not replace the requirement for a properly issued Show Cause Notice and Order.(iii) Conformity with Section 75 (4) and Natural Justice:The court examined whether the impugned orders complied with Section 75 (4) of the State Act, which mandates an opportunity for a hearing when requested or when an adverse decision is contemplated. It was found that in some cases, taxpayers had requested a hearing, which was not granted, violating the statutory requirement. The court emphasized that the absence of a hearing opportunity, even when not explicitly requested, contravenes the principles of natural justice. The court highlighted that the statutory mandate for a hearing is essential to ensure fairness in the adjudication process.Conclusion:The court concluded that the impugned orders were invalid due to the lack of proper Show Cause Notices, unauthorized attachments, and the absence of hearing opportunities, violating statutory provisions and principles of natural justice. The orders were set aside and quashed. The court granted liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit, while excluding the period from the issuance of the Summary of the Show Cause Notices to the date of serving the judgment's certified copy for computing the statutory period for passing orders under Section 73 (10).