Order Without Issuance Of Show Cause Notice And Without Providing Opportunity Of Hearing Is Not Valid – Jharkhand High Court

The Hon’ble High Court of vide its order dated 18th April 2022 in the matter of M/s Godavari Commodities Vs. State of Jharkhand and others in W.P.(T) No. 3908 of 2020 with W.P.(T) No. 3909 of 2020, set aside and quashed the order which was passed on basis of summary of show cause notice issued, and no-show cause notice was issued to the petitioner. Further, it was held that the order passed without providing the opportunity of hearing is not sustainable being a violation of principles of natural justice.

The Petitioner preferred the Writ Petition in both the cases, i.e., Writ Petition No. 3908 of 2020 pertaining to Financial Year 2017-18 and Writ Petition No. 3909 of 2020 for the Financial Year 2018-19, praying for setting aside and quashing the ‘summary of order’ in FORM GST DRC-07 dated 11.09.2018.

Facts:

  • That as both Writ Petitions are inter-connected and issue involved is same, both the matters were heard and disposed of by the Hon’ble High Court at the same time.
  • The Writ Petitioner is a Public Limited Company and primarily engaged in the business of trading of Coal and purchases coal from various subsidiaries of Coal India Limited including various Government Entities like Jharkhand State Mineral Development Corporation, Heavy Engineering Corporation Limited as well as other similar traders.
  • The Petitioner sells the purchased coal to its customers which are Government Undertakings like MSTC Limited, West Bengal Mineral Development and Trading Corporation Limited etc., and regular work orders are issued by these entities to the Petitioner for supply of coal.
  • Further, the petitioner purchases coal from other traders like R.S. Fuels Private Limited; Sandoz Impex Limited, Shri Ram Coal Traders and Sendoz Commercials to fulfil its commitments in case of shortage of coal. Similarly, these traders, in case of shortage of coal, may procure coal from the petitioner.
  • That an inspection under Section 67 of JGST Act, 2017 was carried out at the registered premises of the petitioner and in exercise of powers under Section 71(2) of the CGST Act, the petitioner was directed to produce documents pertaining to movement of goods relating to purchase and sale transactions.
  • Further, it was mentioned in the inspection report dated 28.01.2019 that if the petitioner fails to produce the relevant documents, proceeding under Section 73/74 would be initiated against it.
  • Thereafter, the Petitioner provided various documents to substantiate genuineness of the transactions of purchase and sale of coal, however the respondent-authorities were not convinced with the documents furnished.
  • That based on above, an intimation in GST DRC-01A dated 29.01.2020 was issued to the petitioner in terms of Section 73/74 read with rule 142(1A) directing the petitioner to pay the amount of tax along with penalty, interest, and if not paid show cause notice will be issued to the petitioner under Section 74(1) of the GST Act.
  • Thereafter a summary of show cause notice in FORM DRC – 01 was issued to the petitioner on 14th March 2020 in terms of Rule 142(1) of the GST Rules. That no show cause notice was issued to the petitioner however only summary of show cause notice was issued and that to without mentioning any date or time line for filing the reply.
  • Then ‘a summary of order’ dated 11.09.2020 in Form GST DRC-07 was issued, however the copy of adjudication order was not communicated to the Petitioner.
  • That it is evident from the order sheet annexed by the petitioner, there is a recording on 14th March 2020 that the petitioner was issued a ‘Summary of show cause notice’ in Form GST DRC 01. Thereafter straightaway next date mentioned is 14th August 2020 in the order sheet and it was recorded that despite the service of DRC-01, no steps have been taken by the petitioner for due amount, further in view of COVID-19 more than one opportunity has been granted.
  • Accordingly, it was recorded that Form DRC-07 should be issued against the Petitioner.
  • That in the counter affidavit filed by the respondents, the adjudication order enclosed was dated 13th August, 2020, however in the Form GST DRC-07 the date of adjudication order was mentioned as 11.09.2020. The petitioner in pursuance of the same filed amendment applications, as the said adjudication order was never communicated to the petitioner and applications in both writ petitions were allowed by the Hon’ble Court.  Further, there was no mention of order dated 13th August, 2020 in the said order- sheets (supra) filed by the respondents.
  • The fact that no show cause notice was issued and only ‘Summary of show cause notice’ was issued as well as no mention of said order 13th August 2020 in the order-sheets, was admitted on the behalf of the respondents.

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