The Jharkhand High Court held that the Show Cause Notice under Section 74 of Jharkhand Goods and Services Tax Act, 2017 (JGST Act) is mandatory along with the Form GST DRC-01.
The final orders in the writ petitions submitted in different years, as well as the show-cause notices issued in Form GST DRC-01, were all annulled by the bench of Acting Chief Justice Aparesh Kumar Singh and Justice Deepak Roshan.
The both the writ applications (W.P.(T) No. 1071 of 2022 With W.P.(T) No. 1091 of 2022) were related to the same Assessee for different periods and the nature of the challenge is also the same. Thus the bench took the case together to dispose of.
According to the case’s facts, an inspection conducted against the petitioner in accordance with Section 67 of the Jharkhand Goods and Services Tax Act for erroneous Input Tax Credit Availment This was done primarily because several consignments related to inward supply and outward supply were shown to have been transported through a vehicle bearing either no registration number or registration number incorrectly.
The Petitioner submitted a reply in DRC-06 in both the cases explaining that the ITC have been properly claimed and the goods have been physically received by them. However, rejecting their reply the impugned summary of the order has been passed under Section 74 (9) of the JGST Act imposing the demand of tax, interest and penalty upon them.
The summary of the show cause notice and the summary of the order have been criticised by the petitioners on the grounds that they violate Section 74 of the Jharkhand Goods and Services Tax Act.
Further, the petitioner side asserted that the proper show cause notice cannot be substituted for the Summary of the show cause notice in Form GST DRC-01. The substantive irregularity in the procedures’ foundation will not be fixed by participation. The petitioners also claimed that natural justice principles had been broken.
The disputed show cause notice in both cases, according to the bench, does not meet the requirements of a proper show cause notice and so amounts to a violation of natural justice principles; hence, the challenge is maintainable in the exercise of this Court’s writ authority.
Conversely, Rahul Saboo, counsel appeared for the respondent-state submitted that the impugned proceedings an issuance of summary of show cause notice and summary of the order in GST DRC-07 have been defended inter alia on the ground that petitioner did participate in the proceedings by furnishing a reply in Form GST DRC-06 before the adjudicating authority.
The bench observed that the Rule 142(1)(a) of the JGST Rules provides that the summary of show cause notice in Form DRC-01 should be issued “along with” the show cause notice under Section 74(1) of Jharkhand Goods and Services Tax Act. The law is no more res integra.
As per Rule 142(1)(a) of the JGST Rules, the summary of show cause notice has to be issued electronically to keep track of the proceeding initiated against the registered persona whereas a show cause notice need not necessarily be issued electronically.
Also, in the case of M/S NKAS Services Pvt. Ltd. vs. State of Jharkhand & Ors.,,the same court has held that Summary of Show Cause Notice in Form DRC-01 is not a substitute of show cause notice under Section 74(1) of Jharkhand Goods and Services Tax Act.
Accordingly, the Division bench observed that the foundation of the proceeding in both the cases suffers from material irregularity and hence not sustainable being contrary to Section 74(1) of the Jharkhand Goods and Services Tax Act; thus, the subsequent proceedings/impugned Orders cannot sanctify the same.
The matter was remanded to the adjudicating authority to pass a fresh order in accordance with law from the stage of issuance of proper show cause notice under Section 74 (1) of the Jharkhand Goods and Services Tax Act.
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