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.
- 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.
Petitioner’s Submissions: –
- That No show cause notice in terms of Section 74 of the JGST Act, 2017 read with Rule 142(1) of the JGST Rules, 2017 was issued to the petitioner and thus, the entire proceeding is bad in law.
- The impugned orders dated 11.09.20202 & 13.08.2020 are in violation of the principles of natural justice and are not in consonance with Section 75(4) and 75(5) of the Act.
Respondents Submissions: –
- That supporting the adjudication proceeding, it was submitted that the petitioner did not provide the relevant documents for movement of goods as directed during investigation.
- Thereafter an intimation to petitioner issued in terms of Rule 142 (1) (A) of JGST Rules on 29.01.2020 and subsequently ‘summary of show cause notice’ in Form GST DRC-01in terms of Rule 142(1) was issued on 14.03.2020, however no steps were taken by the petitioner towards payment of amount due and moreover, no reply was filed. Therefore, ultimately the respondents were no left with any other option but to pass an adjudication order dated 13th August, 2020.
- It was admitted on the behalf of the respondents that first order recorded after issuance of show cause notice was on 14th August 2020 and there is no mention of passing of said adjudication order on 13th August 2020.
- Further it was submitted that order-sheet was made on 14th August 2020, which is after the date of passing the adjudication, hence, it cannot be said that said order is antedated.
- That no satisfactory reason could be given regarding mentioning of date in Form GST DRC 07 as 11.09.2020 instead of 13.08.2020.
- It was submitted relying on Section 67 & 71(2) of the Act, it was submitted that the provisions of natural justice were properly complied.
- The Hon’ble Court after considering the submissions from the both sides, facts of the case observed that the inspection under Section 67 against the petitioner were initiated with allegation of availment of ITC without actual movement of goods.
- The Hon’ble Court deciding on the first issue, i.e., ‘the very initiation of the adjudication proceedings without issuance of show cause notice is void ab initio and consequential adjudication proceedings thereto is non-est in the eyes of law’ considered the judgment passed by the Coordinate Bench of the same court in the matter of M/s NKAS Services Private Limited Vs. State of Jharkhand and ors, reported in 2021-VIL-732-Jhr, wherein ‘similar issue was involved and only ‘Summary of Show Cause notice was issued and subsequently Adjudication order was passed’.
- That relying on the above judgment it was held that the issue in the present case is squarely covered by the law laid down in M/s NKAS Services Private Limited. Thus, the Adjudication order is non est in the eye of law and in violation of principles of natural justice as passed without issuance of proper show cause notice.
- That the Hon’ble Court dealing with the other issues raised by the learned counsel observed that we would have refrained ourselves for further adjudicating the other issues, but we are of the opinion that those issues also required to be dealt with in our judgment as the Court is flooded with the petitions where the procedure prescribed under GST is not being followed by the GST authorities. The serious lacuna in the impugned order, left no option with us but to entertain the present writ-application straightaway without relegating the Writ petitioner to avail alternate remedy.
- The Hon’ble Court taking reference of the decisions relied upon by the Petitioner in M/s. Prime Alloys Vs. The State Tax Officer being W.P. Nos. 26250 & 26252 of 2021 and W.M.P. Nos. 27700 & 27701 of 2021 (Madras High Court), Akanksha Distributers Private Limited Vs. Assistant Commissioner (ST), Chennai being W.P. Nos. 22507 & 22512 of 2021 and W.M.P. Nos. 23732 of 2021 (Madras high Court), Benq Catering and Allied Services Private Limited Vs. Assistant Commissioner reported in 2021-VIL-479-AP, M/s. OCEAN SPARKLE LIMITED Vs. ASSISTANT COMMISSIONER (ST) reported in 2021- VIL-356-AP, Korrapathi Janardhana Naidu Vs. State of Andhra Pradesh reported in (2021) 35 TAXLOC.COM 100 (AP), B.M. Patel and Company Vs. State Tax Officer being Writ Petition No. 13652 of 2020 and WMP No. 16973 of 2020 (Madras High Court), Enprocom Enterprises Ltd. Vs. The Assistant Commissioner of State Tax reported in 2020- VIL-25-GUJ, Cera Sanitaryware Limited Vs. State of Gujarat reported in 2020-VIL-310-GUJ, and taking note of the law stated in Section 75(4) and Section 75(5) observed that in the instant matter DRC 01 was issued on 14th March 2020 and then adjudication order was passed on 13th August, 2020 fastening liability of tax, penalty and interest upon the Petitioner.
- Further considering the overall facts of the case, as stated above, the Hon’ble Court found that the entire adjudication proceedings have been carried in stark disregard of the mandatory provision of GST Act and in violation of principle of natural justice. Thus, the Adjudication order dated 13.08.2020 is liable to set aside and quashed on this ground also.
- The Hon’ble Court after considering the contentions on the behalf of petitioner that ‘the adjudication order is antedated and same has been passed with malice in law’ as well as ‘the adjudication order brought on record by the respondents is 13.08.2020 however the date mentioned in the original ‘Summary of order’ was 11.09.2020, for which no explanation could be given by the respondents and it was merely stated it was by mistake’ held that there is serious lacuna in the proceedings conducted under JGST Act which has ultimately adverse consequences upon the Petitioner. The original record produced before us leave no iota of doubt that the proceedings have been carried out in stark disregard to the mandatory provisions of GST Act.
- Further, the Hon’ble Court directed the State Tax Department to issue appropriate guidelines/circular/notification elaborating the procedures to be adopted by the State Tax Authorities regarding the manner or issuance of Show Cause notice, adjudication and recovery proceedings, as huge revenue of the State is involved and it would be in ultimate interest of the Respondent-State of Jharkhand itself.
The Hon’ble Court with the above findings, set aside and quashed the summary of show cause notice dated 14.03.2020, adjudication order dated 13.08.2020 and summary of order dated 11.09.2020 with a liberty to the respondent to initiate fresh proceedings in accordance with law.
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