In a significant case, the High Court Of Kerala held that the Assessing Officer (AO) cannot drop proceedings under section 74 of Central Goods and Service Tax (CGST) Act, 2017 citing delay in response to show cause notice (SCN). While setting aside the order, the court restored the matter to pass fresh orders after affording to the petitioner an opportunity of filing a detailed reply.
Arangath Parambil Mohammed Mohammed Shabeer, the petitioner is a registered person under the CGST/SGST Acts. In respect of some transactions of the petitioner for the year 2018-2019, a notice in Form GST ASMT-10 was issued to the petitioner on 22-01-2021. The petitioner did not submit any reply to the said notice, prompting the issuance of a reminder on 26-08-2023. On 15-09-2023, the petitioner submitted a reply. It is stated that on 26-08-2023, the petitioner appeared before the officer and was personally heard as well.
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After considering the reply filed by the petitioner on 15-09-2023 and following the personal hearing held on 26-08-2023, the officer proceeded to issue a show cause notice under Section 73 of the CGST/SGST Acts on 22-12-2023. The proceedings under Section 73 of the CGST/SGST Acts culminated in an order issued on 18-01-2024 by dropping one of the issues raised in the show cause notice and stating that in respect of the other issue, proceedings under Section 74 of the CGST/SGST Acts are being issued, as it was felt that the case of the petitioner was one of suppression. A notice under Section 74 of the CGST/SGST Acts was issued to the petitioner on 08-01-2024, to which admittedly the petitioner did not file any reply.
The counsel appearing for the petitioner would submitted that order is liable to be set aside on a short ground. It was pointed out that the issue raised in the Section 73 notice is identical to the issue raised in the Section 74 notice. It is submitted that while concluding the proceedings under Section 74 of the CGST/SGST Acts, the officer has proceeded on the basis that the petitioner had not submitted any reply.
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While the petitioner had submitted replies to the notice issued in Form GST ASMT-10 as also to the show cause notice under Section 73 of the CGST/SGST Acts. It was submitted that the Section 74 notice was issued barely 16 days after the issuance of the notice under Section 73, and the petitioner was therefore of the belief that the reply submitted by the petitioner to the Section 73 notice will suffice insofar as the Section 74 proceedings are concerned.
It was submitted that since the petitioner had already submitted a reply touching upon the very same issue in reply to the proceedings initiated under Section 73 of the CGST/SGST Acts, the officer could not have proceeded to finalise the proceedings under Section 74 of the CGST/SGST Acts on the basis that the petitioner had not submitted any reply.
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Senior Government Pleader refers to the sequence of events leading to the issuance of the order under Section 74 of the CGST/SGST Acts. It was pointed out that in notice issued under the provisions of Section 73 of the CGST/SGST Acts itself, it has been stated that fresh proceedings have been initiated under Section 74 of the CGST/SGST Acts. It is submitted that proceedings under Section 74 of the CGST/SGST Acts were found warranted as there was clear suppression warranting the initiation of proceedings under Section 74 of the CGST/SGST Acts.
It is submitted that admittedly the petitioner did not file any reply to the show cause notice issued under Section 74 of the CGST/SGST Acts, and therefore the officer cannot be found fault with for concluding the proceedings under Section 74 of the CGST/SGST Acts on the basis that the petitioner had not submitted any reply. It is submitted that there is no illegality in dropping the proceedings under Section 73 of the CGST/SGST Acts and initiating proceedings on the same subject matter under Section 74 of the CGST/SGST Acts.
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A single bench of Justice Gopinath P viewed that technically the learned Senior Government Pleader may be right in contending that since the petitioner did not submit any reply to the notice issued under Section 74 of the CGST/SGST Acts, the officer proceeded to complete the proceedings on the basis that the petitioner had not submitted any reply.
Since the notice was issued by the same officer and on the same issue and since the petitioner had submitted a reply on 17-01-2024, which was after the date on which the show cause notice under Section 74 of the CGST/SGST Acts was issued, the bench viewed that the officer could not have proceeded on the basis that no reply had been submitted by the petitioner to the show cause notice issued under Section 74 of the CGST/SGST Acts.
The Court set aside order on the short ground that it proceeds on the basis that the petitioner had not submitted any reply to the show cause notice issued under Section 74 of the CGST/SGST Acts. The proceedings initiated against the petitioner under Section 74 of the CGST/SGST Acts shall stand restored to the file of the 1st respondent, who shall pass fresh orders after affording to the petitioner an opportunity of filing a detailed reply and after affording an opportunity of hearing to the petitioner.
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