The Hon’ble High Court of Madras vide its order dated 27.09.2022 in the matter of M/s Vadivel Pyrotech Private Limited Vs. The Assistant Commissioner (ST), Circle – II, Commercial Tax Department, NGO Colony, Satchiyapuram, Sivakasi West in W.P.(MD)No.22642 of 2022 and W.M.P.(MD)Nos.16803 and 16804 of 2022, set aside the order passed in FORM DRC  07 pursuant to issuance of summary of show cause notice in FORM DRC 01, where the GST ASMT 10 was not issued after the scrutiny of returns on the issues, on which later on the aforesaid DRC 01 and DRC 07 was issued.

The Petitioner filed the writ petition before the Hon’ble High Court challenging the order in Ref.No:33AADCV5898H1ZV dated 09.05.2022 passed by the Respondent in gross violation of principles of natural justice and the procedure prescribed under the Tamil Nadu Goods and Service Tax Act, 2017.

Facts of the Case: –

• The petitioner is engaged in the business of manufacture and supply of pyrotechnic products (fireworks) and is registered under the TNGST Act. The petitioner had duly filed its returns under the GST periodically discharging appropriate taxes, while availing the Input Tax Credit in terms of Section 16 of the TNGST Act.
• That a Scrutiny of GST returns was undertaken by the Respondent in terms of Section 61 of the TNGST Act and a notice in Form ASMT 10 dated 22.12.2021 was issued pointing out certain discrepancies between GSTR3B, GSTR 1 and GSTR 2A returns filed by the petitioner for the year 2018-19 calling upon the petitioner to pay taxes to the extent of Rs.13,54,250/- along with interest.
• That the petitioner in response paid the interest and furnished GST DRC – 03 dated 27.12.2021, while submitting its explanation in Form ASMT 11 on 18.01.2022, with other relevant details.
• After more than Six months, the petitioner was enquired over telephone by the office of the Respondent as to whether the petitioner had paid taxes, interest and penalty demanded vide order dated 09.05.2022.
• However, the petitioner was unaware of any proceedings other than the Scrutiny under Section 61 of the Act resulting in the issuance of Form ASMT 10 dated 22.12.2021, which was duly responded to by the petitioner in Form ASMT 11 dated 18.01.2022.
• Thereafter, on enquiring about the same from the office of the Respondent on 12.08.2022, it came to the knowledge of the petitioner that an order dated 09.05.2022 was passed in pursuance to a Summary of Notice in DRC 01 and also been uploaded in the GST portal.
• On getting the information, the petitioner logged in to the GST portal and found that the Notice and Order had in fact been uploaded, thereafter, GST DRC-01 and GST DRC-07 was downloaded by the petitioner.
• Further on perusal of DRC -01 & DRC -07, it was found by the petitioner that pursuant to the alleged Scrutiny of returns, six defects were noticed, which were different from the defects/discrepancy which were pointed out in the Form ASMT 10 issued on 22.12.2021.

Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the entire proceedings have been made behind their back and they were completely unaware of either the summary of the Notice in GST DRC-01 or the Order in GST DRC-07 until being informed by the Respondent.
• It was submitted that the entire proceedings stand vitiated for violation of principles of natural justice as neither the show cause notice nor the orders under GST DRC-07 passed under Section 74 of the Act was served on the petitioner.
• Reliance was placed on the decision of the Hon’ble Court in W.P.No.27651 of 2021 to submit that it has been suggested by this Court that though Section 169 prescribes different modes for service of orders, summons, notice etc., in view of the technical difficulties in implementing GST, unless the technical issues are resolved, a physical copy through registered post or speed post or courier with acknowledgement may be followed for service of orders, summons, notices etc.
• Further it was submitted that the impugned proceeding is in gross violation of the procedure contemplated under Rule 99 of the Tamil Nadu Goods and Service Tax Rules, which prescribes the method and the manner for verification of the correctness of the returns and to correct any discrepancy that may be noticed or to initiate appropriate proceedings under Sections 65, 66, 67, 73 or 74 of the GST Act pursuant to a Scrutiny under Section 61 of the Act.

On the other hand, it was admitted on the behalf of the respondent that form ASMT 10 was not issued other than the one issued on 22.12.2021, which does not cover the issue raised in the impugned proceeding.  Therefore, sought leave to issue notice in Form ASMT 10 in respect of the aspects forming the subject matter of the impugned proceedings and thereafter to assess in compliance with the procedure contemplated under the Act including Section 61.

Held: –

• The Hon’ble Court after considering the submissions made, facts of the case and the law applicable, found that it is evident from the preamble of the Show Cause Notice in GST DRC 01 that the impugned order has been passed pursuant to the Scrutiny of GST returns filed by the petitioner under Section 61 of the TNGST Act, 2017.
• The Hon’ble Court taking note, and on cumulative reading of the law stated in Section 61, 74 and Rule 100(2), found that ‘The proper officer may scrutinize returns and related particulars and in case any discrepancies are noticed, the same shall be informed in ASMT 10 seeking explanation from the taxable person (which in the present case was issued on 22.12.2021). If the explanation offered by the petitioner in ASMT 11 is acceptable, no further action shall be taken (which in the present case was submitted by the petitioner in response to ASMT dated 22.12.2021).  Further it the explanation is not satisfactory, the proper officer may proceed to initiate appropriate action under Section 65, 66, 67, 73 or 74 of the Act and thereafter, the proper officer shall proceed to pass an order in GST DRC 07 under Section 73 and 74 after issuing GST DRC-01A in terms of Rule 142 (1A) and GST DRC-01.  It is thus clear that any proceeding in GST DRC-01A/1 culminating in an Order in GST DRC-07, if pursuant to Scrutiny under Section 61 of the TNGST Act, ought to be preceded by issuance of Form ASMT 10.’
• That in the present case though ASMT 10 was issued on 22.12.2021 pointing out certain discrepancies, the GST DRC-01 dated 15.02.2022 and the impugned order in GST DRC-07 dated 09.05.2022 are made on the basis of issues that are completely different from what was set out in Form ASMT 10 dated 22.12.2021.
• Therefore, it was held by the Hon’ble Court that ASMT 10 is mandatory before proceeding to issue GST DRC-01 and failure to issue the same in respect of the discrepancies forming the subject matter in GST DRC-01 dated 15.02.2022 culminating in GST DRC-07 dated 09.05.2022 would vitiate the entire proceedings.

The Hon’ble Court with the above findings, disposed of the writ petition by setting aside the impugned order dated 09.05.2022 and remitted the matter back to the Assessing Officer for carrying on the assessment once again.  Further It is open to the Respondent to issue appropriate Form (Form ASMT 10) and after affording a reasonable opportunity to the petitioner in the manner contemplated under the Act proceed further in accordance with law. The petitioner shall also co-operate in the proceedings.

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