In a significant ruling, a division bench of the Jharkhand High Court, while quashing an order, held that the investigation report by the officials cannot be treated as a proper show cause notice for the purpose of the Central GST Act, 2017.
The assessee, M/s Shyam Hardware Store, approached the Court seeking a direction to quash the summary of the order contained in Form GST DRC 07 dated 04.12.2020 as well as Summary of rectification/withdrawal order contained in Form GST DRC 08 dated 07.12.2020 issued by the department wherein the petitioner was directed to make payment of tax, interest and penalty.
Holding in favor of the assessee, Justice Aparesh Kumar Singh and Justice Deepak Roshan held that “At the outset it is clarified that though petitioner has challenged the summary of the order contained in Form of GST DRC 07 dated 4.12.2020 as well as summary of rectification/withdrawal order contained in Form GST DRC 08 dated 7.12.2020 issued by the respondent No.5 pertaining to the period Financial Year 2017-18, 2018- 19, 2019-20 and 2020-21; however, the order dated 30.6.2020 clearly indicates that the issue in hand is with respect to Financial Year 2017-18, 2018-19 and 2019-20 and there is no reference of 2020-21. As such, this Court is dealing the issue in hand only with respect to the Financial Year 2017-18, 2018-19 and 2019-20 only and not giving any finding with respect to contention raised by the petitioner in connection with Financial Year 2020-21.”
Finding that the department have unsuccessfully tried to defend their action, and the concluding paras of the inspection report dated 11.01.2020, were treated as notice under Section 73 upon the petitioner, the Court observed that “the above statements show that the petitioner has been only informed that if he fails to appear before the prescribed authority on prescribed date, the proceeding under Sections 73, 50(1) and 125 will be initiated.”
Quashing the order, the Court held that “As a matter of fact, in series of judgments passed by this Court it has been categorically held that any adjudication order is non-est in the eye of law if the same is passed without issuance of proper show-cause notice being dehors principle of natural justice. In the instant case admittedly, the procedure has not been followed.”
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