Adjudication Order passed without issuance of Show cause notice and without providing opportunity of being heard amounts to violation of Principles of natural justice.
Facts: In this case, the Petitioner is a Public Limited Company and is primarily engaged in the business of trading of coal. The Petitioner for the purpose of trading of coal, purchases coal primarily 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 similarly situated coal traders. There were inter-state purchases and sales transactions by and between the Petitioner and other coal traders.
The state of Jharkhand tax department (the Respondents) carried out an inspection under Section 67 of the Jharkhand Goods Service Tax Act, 2017 in the registered premises of the Petitioner with primary allegation of having availed ITC on goods without its actual movement. The Petitioner was directed to produce documents pertaining to movement of goods relating to purchase and sale transactions of the Petitioner in exercise of powers.
However, the Respondents were not convinced with the documents furnished by the Petitioner and issued pre-show cause notice consultation in Form GST DRC 01A, directing the Petitioner to make payment of the amount of tax along with applicable interest and penalty. Subsequently, summary of SCN was issued in Form GST DRC-01. Thereafter, straightaway, an Adjudication Order was passed imposing the liability of tax, interest, and penalty upon the Petitioner however, the same was never communicated to the Petitioner and only Form DRC-07 i.e. ‘Summary Order’ was issued. It is evident that no opportunity of personal hearing was granted to the Petitioner.
Issue: Whether the initiation of the adjudication proceeding without issuance of SCN is valid in law.
Held: The Hon’ble Jharkhand high court held as under:
- Relied on the judgement of Hon’ble Jharkhand High Court in M/s. NKAS Services Private Limited v. The State of Jharkhand and Ors, wherein the Court quashed the SCN in respect of wrongful availment of Input Tax Credit as it was vogue, unclear and lacked serious details.
- There is serious lacuna in the proceeding conducted under the Jharkhand GST Act which has ultimately entailed adverse consequences upon the Petitioner stated that the entire adjudication proceedings have been carried out in stark disregard to the mandatory provisions of the CGST Act, 2017 and in violation of the principles of natural justice.
- Quashed and set aside the Summary Order, Adjudication Order and Summary SCN.
- Held that the Adjudication Order is non est in the eye of law, as the same has been passed without issuance of proper SCN and, thus, amounts to violation of principles of natural justice.
- However, the Respondents would have the liberty to initiate a fresh proceeding in accordance with the law, if so advised.