The Hon’ble High Court of Jharkhand vide its order 09.02.2023 in the matter of M/s CJ Darcl Logistics Limited Vs. Union Of India, Commissioner of CGST & CX, Jharkhand & 2 others in W.P. (T) No. 215 of 2022, set aside the show cause notice and the consequent orders, finding that it is a settled principle of law that if an allegation or ground is not made at the time of issuance of show cause notice, the authority cannot go beyond the scope of show cause notice to create new ground at the later stage of adjudication.  Further, it was held that the impugned proceedings are in violation of principles of natural justice as neither proper show cause notice has been issued nor any opportunity of hearing was granted to the petitioner.

The Petitioner filed the writ petition before the Hon’ble High Court seeking order or direction to quash and set aside the impugned Order No. 273/CGST/JSR/2021 dated 08.12.2021 passed by Respondent No.3 whereby the Refund application filed by the Petitioner has been fully rejected.  Further, the directions were also sought to the Respondents to allow the refund claimed by the Petitioner along with interest.

Facts Of The Case: –

• That the petitioner is a public limited company engaged in the business of providing inter-alia goods transportation agency (GTA) services under reverse charge mechanism (RCM) bearing GSTIN 20AAACD2086J2ZZ in State of Jharkhand.
• That the petitioner for the same service was registered vide another registration in the State bearing GSTIN 20AAACD2086J1Z0, but under forward charge mechanism (FCM).
• The Petitioner required two registrations due to commercial necessity of business, wherein certain customers of the Petitioner were willing to discharge the liability under RCM; whereas others were not so willing.
• That under the first registration, the liability to pay output tax, was upon the recipient of services, hence there was no output tax liability to be discharged by the petitioner with respect to GTA services supplied and also no ITC for GTA services was availed. Though, under the second registration, the Petitioner was regularly paying the GST liability for each tax period.
• That the petitioner inadvertently, on account of a bonafide mistake, deposited an amount of IGST of Rs.2,39,705/- CGST of Rs.83,86,310/- and SGST of Rs.83,86,310/- totalling to Rs.1,70,12,325/- in its electronic cash ledger [Pertaining to the RCM registration] instead of depositing it in the cash ledger of the GSTIN 20AAACD20866J1Z0 [pertaining to FCM registration]. Thereafter, the petitioner again deposited the same amount in the electronic cash ledger of the FCM registration to file GSTR-3B return.
• Therefore, as there was double payment and the amount was lying as excess balance in the electronic cash ledger of the petitioner, an application for refund in FORM GST RFD-01 was filed on 18.04.2021.
• Pursuant to which, a show cause notice dated 17th May, 2021, on the application for refund under Section 54 of the CGST Act, 2017 in respect of his registration GSTIN registration No. 20AAACD2086J2ZZ, was issued to the petitioner. According to the Petitioner, a communication was sent to him on his portal to furnish reply within 15 days of the receipt of the notice.
• It was stated in the aforesaid communication that ‘On verification of GSTR-1 and GSTR-3B for the month of August, 2018 to March, 2021 of the applicant, it is observed that the applicant-M/s. CJ DARCL Logistics Limited, having GSTN: 20AAACD2086J2ZZ have showing the value and tax amount for outward supply in the column of ‘4B-REVERSE CHARGE’ in the GSTR-1 Returns, whereas they have showing the same amount for outward supply in the column of “outward taxable supplies (other than zero rated, nil rated and exempted) in the GSTR-3B, which have not been discharged by them for payment of tax liabilities. The reasons may please be explained within 15 days of receipts of this notice.’
• The Petitioner furnished its reply to the allegation of mismatch in the outward tax supplies in GSTR-3B returns compared to GSTR-1 at Annexure-8 filed on 20th May, 2021. However, the claim of the petitioner was rejected by order dated 14^th June, 2021 without providing any opportunity of hearing during the adjudication process.
• That the adjudicating authority on examination of his documents submission and returns which were uploaded in the portal for the period August, 2018 to March, 2021 came to finding that ‘the applicant had taken two registrations of the GST number vide GSTIN No. i) 20AAACD2086J2ZZ, and ii) 20AAACD2086J1Z0 of the same category of services i.e. “Transport of goods by Road”; “Transport of goods by Rail” and “Cargo handling services” in the State of Jharkhand having the same permanent account number, the principal place of business of both GSTIN being the same as well as the books of account were also maintained through the same bank account transaction for both GSTINs which is in teeth of the proviso of sub- Section 2 of the Section 25 of the CGST Act, 2017.’

Petitioner’s Contentions: –

• It was contended on the behalf of the petitioner that the impugned proceedings are vitiated for violation of principles of natural justice as no proper show cause notice has been issued upon him.
• That the communication enclosed with the petition was on a different allegation and the show cause notice in Form GST RFD – 08, which was not served to the petitioner, had no reasons or contraventions to which the petitioner could file a reply.
• It was only after submission of petitioner’s reply that the adjudicating officer proceeded to decide the refund application on grounds or alleged contraventions which were never part of the show cause notice and communicated to him.
• Further, it was submitted that maintaining of two GSTIN numbers is not impermissible either under the pre-amended proviso to subsection 2 of Section 25 or under the amended proviso. Since petitioner is entitled to maintain two GSTIN registrations in view of the definition of business vertical the entire adjudication order rejecting the claim for refund is bad in law
• It was also submitted that the petitioner had duly explained in his defence reply that the amount of tax received against the other GSTIN having with FCM facility @ 12% with ITC was inadvertently deposited in the other GSTIN with RCM facility and having prescribed rate of 5% without ITC. If the main contention of the petitioner would have been accepted there was no basis to refuse and reject the refund application. Petitioner was entitled to refund of the amount with statutory interest in terms of Section 54 read with Section 56 of the CGST Act.

Respondents’ Submissions: –

• It was submitted on the behalf of the respondents that the petitioner was not entitled to have two GSTIN numbers in the same place of business i.e., Jamshedpur in the district of East Singhbhum and that too in respect of the same nature of business. Mere change in the nomenclature of the business did not make any change in the nature of business which was essentially goods and transporting services, GTA and ground cargo handling services.
• The petitioner had taken the defence of two registration numbers in his reply to the show cause notice and that is why the adjudicating authority proceeded to determine the liability taking into account both the GSTINs which are not permissible in law.
• The entire plea raised by the petitioner herein was taken into consideration by the appellate authority which refused to interfere with the order in original as the act of the petitioner in having two GSTINs in the same place of business, in the same nature of business under the same PAN number and maintain to the same Bank account was not proper in the eye of law. Rather, it is against the amended proviso to Section 25(2) of the CGST Act, 2017 and therefore, order in original and the impugned appellate order does not suffer from any infirmity.
• However, the contention of the petitioner that the show cause notice did not make any allegation of contravention of Section 25 (2) proviso to the CGST Act against the petitioner as regards having two GSTIN numbers within the same place of business and in respect of the same nature of business, could not be disputed on the behalf of the respondents. Though, it was submitted in regard that the department was unaware of the two GSTIN registrations of the petitioner at the time of issuance of the show cause notice.
• Also, the contention of the petitioner with respect to absence of any specific contravention indicated in form GST-RFD- 08, which was the basis of the impugned proceedings, could not be disputed on the behalf of the Respondents.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and documents available on record, found that a show cause notice was issued to the petitioner on 17^th May, 2021, for application of refund filed by the petitioner under Section 54 of the CGST Act, 2017, in respect of his Registration GSTIN No. 20AAACD2086J2ZZ. Further, it shows that the petitioner refuted the allegation of the department given in the show cause notice vide his reply by clarifying among other things that returns in FORM GSTR-3B and FORM GSTR-1 have been correctly filed.  However, interestingly, the order in original which was passed pursuant to the reply to the show cause notice did not deliberate with the content of reply, but the adjudicating officer has proceeded to pass an order rejecting the refund application on the grounds which were never part of the original show cause notice.
• In other words, the show cause notice was of different allegation and only after submissions of petitioner’s reply the order in original was passed on the grounds which were never part and parcel of the original show cause notice.
• The Hon’ble Court taking note of the findings of the impugned Order-in-Original which states (i) Two registrations could not have been obtained by the petitioner within the State of Jharkhand under the same PAN and at the same principle place of business in terms of provision of Section 25(2) of the CGST Act; (ii) The petitioner could not have availed the option for both the RCM @ 5% GST as well as FCM @ 12% GST, against the outward supply of GTA services; (iii) Petitioner availed ITC of Rs.7,08,712/- against outward supplied for GTA services charging GST @ 5% RCM by the service recipient, in violation of Notification No. 20/2017-Central Tax (Rate) dt. 05.08.2017; (iv) As far as the petitioner company’s office bearing GSTIN 20AAACD2086J1Z0 is concerned, it has claimed ITC in excess of Rs.3,34,92,342, which is ineligible in terms of Section 17(1), (2) and (3) of the CGST Act; (v) On combining the turnover and ITC availed by both the units paying tax under FCM and RCM, it is observed that the petitioner has taken ITC in excess of Rs.4,57,27,369 by virtue of obtaining two registrations, which has resulted in revenue loss, found that it is quite evident that regarding none of the ground on which OIO has been passed, there is any allegation in the show cause notice.
• It was found by the Hon’ble Court that it is settled principle of law that if an allegation or ground is not made at the time of issuance of show cause notice, the authority cannot go beyond the scope of show cause notice to create new ground at the later stage of adjudication.
• It further shows that the impugned proceedings are also vitiated for violation of principles of natural justice as neither a proper show cause notice has been issued nor any opportunity of hearing was given to the petitioner. And it is also now well settled that before adjudicating any issue which is against the interest of assessee; opportunity of hearing should be granted to him.
• It was found by the Hon’ble Court that only after the submissions of petitioner’s reply, the Adjudicating Officer decided the refund application on the grounds which were not part of the show cause notice.
• The Hon’ble Court without going in to the merits of the case, found that the impugned order of adjudication is bad in law for the reasons that it has been passed beyond the scope of show cause notice. Further, even the order-in-appeal did not consider the issue and simply confirmed the order in original.  Thus, since the show cause notice is vague and cryptic in nature and order in original has been passed beyond the show cause notice, both are liable to be quashed and set aside.

 The Hon’ble Court with the above findings, quashed and set aside the impugned show cause notice and the consequent order-in-original dated 14.06.2021 as well as the order-in-appeal dated 08.12.2021.  Though, the revenue was granted liberty to issue a fresh show cause notice and proceed in accordance with law.

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