Jharkhand High Court: A Division Bench of Aparesh Kumar Singh and Anubha Rawat Choudhary, JJ., allowed the petition and directed the respondents to initiate fresh proceedings from the same stage in accordance with law.
The present petition was filed challenging the show-cause notice under Section 74 of the JGST Act, 2017 dated 7-06-2021 for the tax period July 2020 -September 2020 issued by the Deputy Commissioner of State Taxes (respondent 3) along with the summary of show-cause notice issued in exercise of power under Rule 142(1)(a) of the Jharkhand Goods and Services Tax Rules, 2017 on the ground being vague, without jurisidiction and void ab initio.
Counsel for the petitioner submitted that the impugned show-cause notice is vague and does not disclose the offence and a contravention as it is a mere mechanical reproduction of the provisions of Section 74 without striking of the irrelevant portions. It is thus incapable of any reply and does not fulfill the ingredients of a notice in the eyes of law. Petitioner would be denied the opportunity to properly defend itself. It is, therefore, in violation of the principles of natural justice. It was further is submitted that what is not alleged in the show-cause notice under Section 74 cannot be part of such summary of show-cause notice. As per Section 73(1)/74(1) the requirement is of ‘notice’ and not ‘knowledge’. Section 75(7) of the Act contemplates that no demand shall be confirmed on grounds other than the grounds specified in the notice.
Counsel for respondents submitted that the petitioner has an efficacious alternative remedy of appeal after the proceeding is concluded and the order in original is passed. He also reiterated the well recognized exceptions to the invocation of writ jurisdiction in the presence of an alternative remedy. It is further submitted that a notice ought not to be struck down, even if strictly not in the format, but if it contains in substance of the matter which a notice must contain.
A bare perusal of Section 74(1) of the JGST Act, 2017A indicates that in a case where it appears to a proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax, which has not been paid or has been short paid or to whom refund has been erroneously made or who has wrongly availed or utilized input tax credit requiring him to show cause as to why he should not pay the amount specified in the notice along with the interest payable thereupon under Section 50 and a penalty equivalent to the tax specified in the notice. “
“In contradistinction to the provision under Section 73 of the Act under the same Chapter-XIV relating to ‘Demands and Recovery’, the ingredients of Section 74 of the Act require either of the following ingredients to be satisfied for proceeding there under i.e. that the tax in question has not been paid or short paid or erroneously refunded or the ITC has been wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts to evade tax.”
The Court observed that a bare perusal of the impugned show-case notice creates a clear impression that it is a notice issued in a format without even striking out any irrelevant portions and without stating the contraventions committed by the petitioner i.e. whether its actuated by reason of fraud or any willful misstatement or suppression of facts in order to evade tax. Needless to say that the proceedings under Section 74 have a serious connotation as they allege punitive consequences on account of fraud or any willful misstatement or suppression of facts employed by the person chargeable with tax. In absence of clear charges which the person so alleged is required to answer; the noticee is bound to be denied proper opportunity to defend itself. This would entail violation of principles of natural justice which is a well-recognized exception for invocation of writ jurisdiction despite availability of alternative remedy.
The Court thus held “…the impugned notice completely lacks in fulfilling the ingredients of a proper show-cause notice under Section 74 of the Act. Proceedings under Section 74 of the Act have to be preceded by a proper show-cause notice. A summary of show-cause notice as issued in Form GST DRC-01 in terms of Rule 142(1) of the JGST Rules, 2017…”
The Court further held “…the impugned show-cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice, the challenge is entertainable in exercise of writ jurisdiction of this Court. Accordingly, the impugned notice at Annexure-1 and the summary of show-cause notice at Annexure-2 in Form GSTDRC-01 are quashed.”
[Nkas Services Pvt. Ltd. v. State of Jharkhand, WP (T) No.2444 of 2021, decided on 08-10-2021]
Arunima Bose, Editorial Assistant has reported this brief.
For the Petitioner: Adv. Kartik Kurmy and Nitin Kr. Pasari Sidhi Jalan
For the State: Adv. Salona Mittal