Jharkhand High Court
M/S Jai Jawan Kastha Bhandar vs The State Of Jharkhand & Ors on 21 June, 2022
Author: Aparesh Kumar Singh
Bench: Aparesh Kumar Singh, Deepak Roshan
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(T) No. 3153 of 2020
With
W.P.(T) No. 3154 of 2020
With
W.P.(T) No. 3179 of 2020
M/s Jai Jawan Kastha Bhandar --- --- Petitioner
Versus
The State of Jharkhand & Ors. -- --- Respondents
With
W.P.(T) No. 3210 of 2020
With
W.P.(T) No. 3211 of 2020
M/s Priti Enterprises --- --- Petitioner
Versus
The State of Jharkhand & Ors. -- --- Respondents
With
W.P.(T) No. 3262 of 2020
With
W.P.(T) No. 3278 of 2020
M/s Nisha Enterprises --- --- Petitioner
Versus
The State of Jharkhand & Ors. -- --- Respondents
With
W.P.(T) No. 1051 of 2021
With
W.P.(T) No. 1067 of 2021
With
W.P.(T) No. 1082 of 2021
With
W.P.(T) No. 1083 of 2021
M/s Mahaveer Steel Industries --- --- Petitioner
Versus
The State of Jharkhand & Ors. -- --- Respondents
---
CORAM: Hon'ble Mr. Justice Aparesh Kumar Singh
Hon'ble Mr. Justice Deepak Roshan
---
For the Petitioners : Mr. Sumeet Gadodia, Adv.
Mr. Ranjeet Kushwaha, Adv.
Ms. Aakansha Mittal, Adv.
For the Respondents : Mr. Sachin Kumar, AAG-II
Mr. P.A.S. Pati, G.A.-II
For the CGST : Mr. Amit Kumar, Sr. S.C.
Mr. Ashish Kr. Shekhar, Jr. S.C.
---
10/21.06.2022 Heard learned counsel for the petitioners Mr. Sumeet Gadodia
assisted by Mr. Ranjeet Kushwaha, Mr. Sachin Kumar, learned A.A.G.-II
appearing for the State in all these writ petitions and Mr. Ashish Kr. Shekhar
learned counsel appearing for the CGST in W.P.(T) Nos. 3153 of 2020, 3154
of 2020 and 3179 of 2020. Since common issues are involved in all these writ
2
petitions, therefore they have been tagged together and are being decided by
this common judgment.
2. Writ petitioners have prayed for quashing of the summary of
show-cause notice issued in Form GST DRC-01 by the respondent State Tax
Officer on the ground that the summary of show-cause notice has pre-judged
and pre-decided the entire issue and has in fact fastened the liability towards
tax, interest and penalty upon the individual petitioners. The petitioners in
their individual writ petitions have also sought for quashing of the
adjudication order passed under Section 74(9) of the Jharkhand Goods and
Services Tax Act, 2017 (hereinafter referred to as 'JGST Act' for short) on the
ground that without granting any opportunity of hearing, tax, interest and
penalty has been fastened upon the petitioners in a pre-judged and pre-decided
manner. Petitioners have also challenged the consequential Demand Notices
dated 25.02.2020 issued in Form GST DRC-07 wherein the demand of tax,
interest and penalty has been levied.
3. Petitioners contend that no proper show-cause notice has been
issued in terms of Section 74(1) of the JGST Act read with Rule 142 of the
JGST Rules, 2017. The petitioners allege that the show-cause notices do not
even indicate any date of hearing. Reference is made to Section 75 Sub-
section (4) which provides that when a request is received in writing from the
person chargeable with tax or penalty or where any adverse decision is
contemplated against such person opportunity of hearing is to be granted.
Under Section 75(5) the proper officer is obliged to grant time on sufficient
cause shown by the person chargeable with tax for reason to be recorded in
writing provided that no adjournment shall be granted for more than three
times to a person during the proceedings.
4. Learned counsel for the petitioners submits that none of the
relied upon documents in the intelligence note have been supplied to the
petitioners. As such, the adjudication order is in violation of principles of
natural justice. It is submitted that the entire proceedings up to the
adjudication order is in violation of Section 74 read with Section 75 of the
JGST Act, 2017.
5. Each of these writ petitioners are registered under the GST Act.
The impugned proceedings have been initiated in case of each of the
individual writ petitioners on the basis of inspection carried out in terms of
3
Section 67 of the JGST Act, 2017 on different dates by the jurisdictional
authority wherein allegedly irregularities were noticed. The relevant
inspection reports are enclosed to the individual writ petitions which refer to
the prima-facie observation of the inspecting team that the individual
petitioners are involved in paper transaction of purchase and sale of goods.
Certain irregularities relating to short payment of tax were also noticed.
Learned counsel for the petitioners has also submitted that individual
petitioners were directed to appear in the office of the Deputy Commissioner
of State Tax of the concerned circles with books of accounts including sale
invoices, stock register, transportation details, etc. by a particular date asking
individual petitioners to satisfy as to why appropriate proceedings either
under Section 73 or 74 of the JGST Act be not initiated. It is the case of the
individual petitioners that despite appearance of their representatives before
the respondent Deputy Commissioner of State Tax, concerned circles, no
documents were examined nor any inquiry was undertaken. None of the
petitioners have received any summon whatsoever in terms of Section 70 of
the Act for giving evidence. Individual petitioners therefore were under a
bonafide belief that the authority was satisfied with the documents and such
accounts produced at the time of inspection and no further proceedings would
be undertaken. However, to their surprise, a summary of show-cause notice
was issued bearing separate reference number of the same date or of different
date in case of some of the petitioners. A perusal of this summary of show-
cause notice issued in Form GST DRC-01 under Rule 142(1) of the JGST
Rules would show that the respondent State Tax Officer has, in fact, come to a
finding that input tax credit has been wrongly availed or utilized by reason or
fraud or any willful misstatement or suppression of fact and therefore
individual petitioners are liable for tax, interest under Section 50 of the Act
and penalty as well furnished in the form of a chart. None of the show-cause
notices bore any date of hearing. Petitioners did not get any opportunity to file
their reply nor was any proper show-cause notice issued under Section 74(1)
of the Act. The respondent Deputy Commissioner of State Tax of concerned
circle has straightaway passed the adjudication order under Section 74(9) in
the case of individual petitioners adjudging the same amount of tax, interest
and penalty upon individual petitioners on the ground that they had wrongly
availed input tax credit or utilized it by reason or fraud or any wilful
misstatement or suppression of fact. A summary of the order was also issued
4
in Form GST DRC 07 in case of each of the petitioners quantifying the details
of the demand as indicated in the adjudication order. Petitioners have
approached this Court individually in the respective writ petitions, though all
the writ petitions involved common issues of facts and law. It is submitted
that the impugned proceedings without initiation of a proper show-cause
notice under Section 74(1) of the JGST Act, 2017 is bad in law in view of the
decision rendered by this Court in W.P.(T) No.2444 of 2021 (M/s Nkas
Services Private Limited Vs. The State of Jharkhand & Ors.) reported in
2021 VIL 732 JHR (Para-12 to 19). Learned counsel for the petitioners has
also relied upon the judgment rendered by this Court in W.P.(T) No.3908 of
2020 along with W.P.(T) No.3909 of 2020 (M/s Godavari Commodities
Limited Vs. The State of Jharkhand & Ors.) wherein the application of
Section 75(4) and (5) of the Act regarding opportunity of hearing has also
been discussed. Learned counsel for the petitioners submits that the writ
petitions are maintainable under Article 226 of the Constitution of India as the
impugned adjudication order has been passed in violation of principles of
natural justice. Reliance has been placed on the judgment rendered in the case
of Maharashtra Chess Association Vrs. Union of India, reported in 2019
SCC Online SC 932, paragraphs 25 and 26. Learned counsel for the
petitioners has also relied upon the judgment rendered in the case of
Ayaaubkhan Noorkhan Pathan Vrs. State of Maharashtra & Ors., reported
in (2013) 4 SCC 465 to support the proposition that in such a case where the
respondents have relied upon the documents obtained during the inspection in
the premises of the petitioners on the basis of intelligence note such
documents should have been given to the petitioners to enable them to
properly answer the charges based thereupon. The petitioners have also been
denied the principles of natural justice by denying opportunity to cross-
examine such witnesses who support the inspection report and the intelligence
note. He has also placed reliance on the case of Jharkhand Ispat Pvt. Ltd.
Vrs. Union of India & Ors. [W.P.(T) No.4241 of 2018] judgment dated 16 th
April 2019 in support of the same proposition. Learned counsel for the
petitioners submits that in terms of Section 74 Sub-section (2) and Sub-
section (10), any fresh proceedings shall not be barred by limitation even in
some of the present cases where the tax period relates to 2017-18. The cut-off
date for initiation of proceeding i.e., 5 years would expire six months prior to
the time limit specified in Sub-section 10 for issuance of an order i.e. 31st
5
December 2023. Learned counsel for the petitioners has also placed Section
75(3) of the Act which provides that if an order is required to be issued in
pursuance of the direction of the appellate authority or appellate tribunal or a
court, such order shall be issued within two years from the date of
communication of the said direction. Thus, it is submitted that the initiation of
fresh proceedings with a proper show-cause notice would not be barred in
time if the matter is remanded to the respondent authorities. Learned counsel
for the petitioners has submitted that in terms of the previous order passed by
this Court, the State has produced the compilation of records of proceedings
as certified to be true from the original records in individual cases starting
from the inspection till the adjudication order and issuance of DRC-07 which
substantiate the plea raised on facts by the petitioner. The respondents have
not been able to show that any proper show-cause notice was issued in terms
of Section 74(1) of the Act or any opportunity to file reply or hearing was
granted to individual petitioners before the adjudication order was passed
under Section 74(9) of the Act.
6. While summarizing the above proposition of law in the facts of
the present cases, learned counsel for the petitioners has prayed that the
impugned summary of show-cause notice, adjudication order and the demand
issued in DRC-07 deserve to be quashed. The matter may be remanded to the
Adjudication Officer to take a fresh decision in accordance with law.
7. Mr. Sachin Kumar, learned A.A.G.-II appearing for the
respondent State in all the writ petitions has inter-alia relied upon the contents
of the counter affidavit filed in each of the writ petitions to defend the
impugned proceedings and the adjudication order. He has referred to the
provisions of Sections 67, 71 and 74 of the JGST Act and also Rule 142(1)
whereunder a summary of show-cause notice was issued upon each of the
individual petitioners in Form GST DRC-01 specifying the contraventions
and the details of the amount of tax, penalty and interest to which the
individual petitioners were liable to pay. It is submitted that in each of these
cases, upon intelligence notes received from the headquarters of the State Tax
Department to the District Circles/Division offices, it was detected that many
tax payers under GST are though physically non-existent but have filed
GSTR-1 and allowed the other dealers to utilize the said ITC. Based on these
intelligence notes in individual cases investigation was carried out in the
business premises of the dealer/person in accordance with law. The
6
intelligence note also indicated that the transaction of the petitioners like M/s.
Mahaveer Steel Industries, M/s Nisha Enterprises and others appeared to be a
case of bill trading/circular trading. Based on such inspection carried out at
the business premises of the individual dealers/petitioners upon proper
authorization, inspection report was prepared and copy whereof was handed
over to the representative of the petitioner firm which was duly received by
him. The inspection report made out a prima-facie case of bill trading /
circular transaction in case of the individual petitioners who were asked to
produce the documents in this regard. It appeared from the documents made
available by the petitioners that the transactions were not supported by proper
e-way bills. There were apparent discrepancies in the returns filed by the
petitioners in Form GSTR- 2A, GSTR-1 and GSTR-3B which showed
sham/circular transactions with few dealers. The inward supply and outward
supply were shown to have been made with the same dealer/person. Time was
granted to the individual petitioners on their request to produce the documents
with intimation as to why proceedings under Section 73/74 of the JGST Act
be not initiated. On the basis of the facts determined in course of inspection, a
summary of show-cause notice was issued to individual petitioners under
Section 74(1) of the JGST Act, 2017 relating to the relevant tax periods
specifying the amount of tax, interest and penalty payable by the petitioners.
Section 74(1) of the JGST Act, 2017 empowers the proper officer to issue
show-cause notice in the case of fraud or any kind of willful misstatement or
suppression of facts with intent to evade the payment of tax. No satisfactory
response was provided by the petitioners neither the amount specified in the
notice under Section 74(1) was deposited nor did they submit any
representation in the prescribed form. It has been stated in the counter
affidavit that after giving opportunity to the petitioners, the order under
Section 74(9) of the JGST Act was passed in case of individual petitioners. It
was found that the petitioners have made transaction on paper involving
circular trading between the same dealer showing inward as well as outward
supplies. Since these transactions were suspicious and were sham between
these petitioners' firms without actually receiving the goods or supplying the
goods, the ITC claimed by them were in violation of the conditions under
Section 16 of the JGST Act which provides for eligibility and conditions for
availing input tax credit. The determination of tax, liability, penalty and
interest has therefore been made after thorough evaluation of documents
7
produced by the petitioners, intelligence notes and inspection reports. As such,
the order was proper in the eyes of law. The consequent demand notice in
Form GST DRC-07 in individual cases are also legally valid.
8. Learned A.A.G.-II has, however, on being specifically
confronted not been able to show that any proper show-cause notice was
issued to the individual petitioners under Section 74(1) of the JGST Act.
Learned counsel for the State has also not been able to show that any date for
filing any reply to the summary of show-cause notice issued in Form GST
DRC-01 was indicated to any of the petitioners. Learned counsel for the State
has also not been able to overcome the lacunae pointed out on the part of the
petitioners that the summary of show-cause notice in Form GST DRC-01 does
not even seek a reply from the petitioners to show-cause as to why the
proposed tax, penalty and interest be not imposed upon him. The language of
the impugned show-cause notice are in the nature of a pre-judged and pre-
determined liability of tax, penalty and interest. The compilation of the
records certified to be true from the original records produced by learned State
Counsel in respect of each of the writ petitioners pursuant to the order dated
5th May 2022 do not disprove the specific lacunae pointed out by the
petitioners in initiation and conduct of the proceedings leading up to the
adjudication order which has confirmed the tax, penalty and interest indicated
in each of the show-cause notice in its totality without any variation. Learned
A.A.G.-II however submits that in case the impugned show-cause notice and
adjudication order and the demand notices are set aside, the matter may be
remanded to the competent State Tax Officer to initiate fresh proceeding for
the relevant tax period in accordance with law and take a fresh decision.
Learned counsel for the State also agrees to the contentions of the petitioners
that any initiation of fresh proceeding upon remand would not be hit by
limitation in view of the specific provisions of Section 74(2) read with
Section 74(10) and 75(3) of the JGST Act, 2017. Learned counsel for the
State is not in a position to refute the maintainability of the writ petitions on
the grounds of violation of principles of natural justice and the procedure
prescribed in law under the JGST Act in conduct of the impugned
proceedings.
9. Learned counsel for the CGST has filed counter affidavit in
W.P.(T) Nos. 3153 of 2020, 3154 of 2020 and 3179 of 2020. In substance, it is
their stand that the impugned proceedings relate to the State tax authorities.
8
However, as a proposition of law emerging on the application of relevant
provisions of Sections 74 and 75 of the JGST Act, it is stated that at least 3
opportunities are required to be granted to a dealer/person to reply to the
show-cause notice.
10. We have considered the submissions of learned counsel for the
parties, taken note of the materials relied upon from the pleadings on record
including the summary of show-cause notice issued in Form GST DRC - 01,
the adjudication order and the demand notices issued in Form GST DRC - 07
in case of individual petitioners. For convenience sake, the relevant details
relating to the tax period, the date of inspection, the date of issuance of
summary show-cause notice in DRC-01, date of adjudication order and the
date of demand notice issued in DRC-07 along with the relevant annexures
relating to the individual writ petitioners are being indicated in the form of
tabular chart hereunder:
Case No. Party Name Period Date of Date of Date of Date of Date of
Inspection DRC-01A/ DRC-01 adjudication DRC-07
ASMT order
WPT No. M/s Jai Jawan 2018-19 9.7.2019 25.10.2019 25.2.2020 25.2.2020
3153/2020 Kastha Bhandar (An-2, Pg. (An-3, Pg- (An-4, Pg-36) (An-4/1,
30 to 34) 35) pg 39)
WPT No. M/s Jai Jawan 2019-20 Common 25.10.2019 25.2.2020 25.2.2020
3154/2020 Kastha Bhandar (An-2, Pg. (An-3, Pg- (An-4, Pg-36) (An-4/1,
30 to 34) 35) pg 39)
WPT No. M/s Jai Jawan 2017-18 Common 25.10.2019 25.2.2020 25.2.2020
3179/2020 Kastha Bhandar (An-2, Pg. (An-3, Pg- (An-4, Pg-36) (An-4/1,
30 to 34) 35) pg 39)
WPT No. M/s Priti 2018-19 28.6.2019 25.10.2019 25.2.2020 25.2.2020
3210/2020 Enterprises (An-2, Pg. (An-3, Pg- (An-5, Pg-41) (An-5/1,
34 to 38) 39) pg 44)
WPT No. M/s Priti 2017-18 Common 25.10.2019 25.2.2020 25.2.2020
3211/2020 Enterprises (An-2, Pg. (An-3, Pg- (An-5, Pg-41) (An-5/1,
34 to 38) 39) pg 44)
WPT No. Nisha 2017-18 1.7.2019 25.10.2019 25.2.2020 25.2.2020
3262/2020 Enterprises (An-2, (An-3, Pg- (An-5, Pg-44) (An-5/1,
Pg.36) 41) pg 47)
WPT No. Nisha 2018-19 Common 25.10.2019 25.2.2020 25.2.2020
3278/2020 Enterprises (An-2, (An-3, Pg- (An-5, Pg-44) (An-5/1,
Pg.36) 41) pg 47)
WPT No. M/s Mahaveer 2018-19 8.9.2018 ASMT-10 1.9.2020 16.09.2020/20 20.10.2020
1051/2021 Steel Industries (related to (An-6, issued on (An-3, Pg- .10.2020 (Part (An-5/1,
M/s Sri Sai Pg.59) 28.1.2020 46) of An-5, Pg-52 pg 58)
Enterprises (An-2, Pg- to 57)
45)
WPT No. M/s Mahaveer 2018-19 Common ASMT-10 1.9.2020 16.09.2020/20 20.10.2020
1067/2021 Steel Industries (related to (An-6, issued on (An-3, Pg- .10.2020 (Part (An-5/1,
M/s SG Pg.57) 11.3.2020 47) of An-5, Pg-54 Pg 56)
Enterprises (An-2, Pg- to 55)
45)
WPT No. M/s Mahaveer 2019-20 Common ASMT-10 1.9.2020 16.09.2020/ 02.12.2020
1082/2021 Steel Industries (related to (An-6, issued on (An-3, Pg- 02.12.2020 (An-5/1,
9
M/s SG Pg.52) 11.3.2020 43) (Part of An-5, Pg 51)
Enterprises (An-2, Pg- Pg-49 to 50)
42)
WPT No. M/s Mahaveer 2017-18 Common ASMT-10 1.9.2020 16.09.2020/ 20.10.2020
1083/2021 Steel Industries (related to (An-6, dated (An-3, Pg- 20.10.2020 (An-5/1,
M/s SG Pg.54) 11.3.2020 45) (Part of An-5, Pg 53)
Enterprises (An-2, Pg- Pg- 50 to 52)
44)
11. The pleadings in the case of individual writ petitioners and the
documents enclosed thereto, as referred to above, show that the adjudication
proceedings in each case were based upon inspection undertaken on the basis
of the intelligence inputs provided to the concerned circles by the
headquarters of the State Tax Department. It is also evident from the records
and the stand taken by the respondents in the counter affidavit that no relied
upon documents in the inspection report were supplied to the petitioners.
Respondents have now after producing the compilation of records of the
proceedings in individual cases, not been able to dispute that no proper show-
cause notice was issued in terms of Section 74(1) of the JGST Act to the
individual petitioners.
Section 74(1) reads as under :-
"(1) Where it appears to the proper officer that any tax has
not been paid or short paid or erroneously refunded or where
input tax credit has been wrongly availed or utilised by reason of
fraud, or any wilful-misstatement or suppression of facts to
evade tax, he shall serve notice on the person chargeable with
tax which has not been so paid or which has been so short paid
or to whom the refund has erroneously been made, or who has
wrongly availed or utilised input tax credit, requiring him to
show cause as to why he should not pay the amount specified in
the notice along with interest payable thereon under Section
50 and a penalty equivalent to the tax specified in the notice."
12. It provides that if any tax has not been paid or short paid or
erroneously refunded or where input tax credit has been wrongly availed or
utilised by reason of fraud, or any wilful-misstatement or suppression of facts
to evade tax, the proper officer shall serve notice on the person chargeable
with tax requiring him to show cause as to why he should not pay the amount
specified in the notice along with interest payable thereon under Section
50 and a penalty equivalent to the tax specified in the notice. Under Sub-
section (2) thereof such notice is to be issued at least six months prior to the
time limit specified in sub-section (10) for issuance of an order. Sub-section
(10) provides that the order under sub-section (9) shall be issued within a
10
period of five years from the due date for furnishing of annual return for the
financial year to which the tax is not paid or short paid or input tax credit has
been wrongly availed or utilised within five years from the date of erroneous
refund. The requirement of issuance of a proper show-cause has been held to
be a sine qua non while initiating such proceeding in the case of M/s Nkas
Services Private Limited (supra). The opinion of this Court contained in
paragraphs 14 to 18 are being extracted hereunder :-
"14. A bare perusal of the impugned show-case notice
creates a clear impression that it is a notice issued in a format
without even striking out any irrelevant portions and without
stating the contraventions committed by the petitioner whether
actuated by reason of fraud or any willful misstatement or
suppression of facts in order to evade tax. Needless to say that the
proceedings under Section 74 have a serious connotation as they
allege punitive consequences on account of fraud or any willful
misstatement or suppression of facts employed by the person
chargeable with tax. In absence of clear charges which the person
so alleged is required to answer, the noticee is bound to be denied
proper opportunity to defend itself. This would entail violation of
principles of natural justice which is a well-recognized exception
for invocation of writ jurisdiction despite availability of alternative
remedy. In this regard, it is profitable to quote the opinion of the
Apex Court in the case of Oryx Fisheries P. Ltd. (supra) at para 24
to 27 wherein the opinion of the Constitution Bench of the Apex
Court in the case of Khem Chand versus Union of India [AIR
1958 SC 300] has been relied upon as well :
"24. This Court finds that there is a lot of substance in the
aforesaid contention. It is well settled that a quasi-judicial
authority, while acting in exercise of its statutory power must
act fairly and must act with an open mind while initiating a
show-cause proceeding. A show-cause proceeding is meant to
give the person proceeded against a reasonable opportunity of
making his objection against the proposed charges indicated
in the notice.
25. Expressions like "a reasonable opportunity of making
objection" or "a reasonable opportunity of defence" have
come up for consideration before this Court in the context of
several statutes. A Constitution Bench of this Court in Khem
Chand v. Union of India, of course in the context of service
jurisprudence, reiterated certain principles which are
applicable in the present case also.
26. S.R. Das, C.J. speaking for the unanimous Constitution
Bench in Khem Chand held that the concept of "reasonable
opportunity" includes various safeguards and one of them, in
the words of the learned Chief Justice, is: (AIR p. 307, para
19)
"(a) An opportunity to deny his guilt and establish his
innocence, which he can only do if he is told what the
charges levelled against him are and the allegations on
which such charges are based;"
27. It is no doubt true that at the stage of show cause, the
11
person proceeded against must be told the charges against him
so that he can take his defence and prove his innocence. It is
obvious that at that stage the authority issuing the charge-
sheet, cannot, instead of telling him the charges, confront him
with definite conclusions of his alleged guilt. If that is done, as
has been done in this instant case, the entire proceeding
initiated by the show-cause notice gets vitiated by unfairness
and bias and the subsequent proceedings become an idle
ceremony."
15. The Apex Court has held that the concept of
reasonable opportunity includes various safeguards and one of
them is to afford opportunity to the person to deny his guilt and
establish his innocence, which he can only do if he is told what the
charges leveled against him are and the allegations on which such
charges are based.
16. It is also true that acts of fraud or suppression are to
be specifically pleaded so that it is clear and explicit to the noticee
to reply thereto effectively [See Larsen & Toubro Ltd. Vs. CCE,
(2007) 9 SCC 617 (para 14)]. Further in the case of CCE Vs.
Brindavan Beverages (P) Ltd. reported in (2007) 5 SCC 388
relied upon by the petitioner, the Apex Court at para-14 of the
judgment has held that if the allegations in the show-cause notice
are not specific and are on the contrary, vague, lack details and/or
unintelligible i.e. sufficient to hold that the noticee was not given
proper opportunity to meet the allegations indicated in the show-
cause notice. We do not agree with the contention of the respondent
that the notice ought not to be struck down if in substance it
contains the matters which a notice must contain. In order to
proceed under the provisions of Section 74 of the Act, the specific
ingredients enumerated thereunder have to be clearly asserted in
the notice so that the noticee has an opportunity to explain and
defend himself.
17. As observed herein above, the impugned notice
completely lacks in fulfilling the ingredients of a proper show-
cause notice under Section 74 of the Act. Proceedings under
Section 74 of the Act have to be preceded by a proper show-cause
notice. A summary of show-cause notice as issued in Form GST
DRC-01 in terms of Rule 142(1) of the JGST Rules, 2017
(Annexure-2 impugned herein) cannot substitute the requirement of
a proper show-cause notice. This court, however, is not inclined to
be drawn into the issue whether the requirement of issuance of
Form GST ASMT-10 is a condition precedent through invocation of
Section 73 or 74 of the JGST Act for the purposes of deciding the
instant case. This Court finds that upon perusal of Annexure-2
which is the statutory form GST DRC-01 issued to the petitioner,
although it has been mentioned that there is mismatch between
GSTR-3B and 2A, but that is not sufficient as the foundational
allegation for issuance of notice under Section 74 is totally missing
and the notice continues to be vague.
18. Since we are of the considered view that the
12
impugned show-cause notice as contained in Annexure-1 does not
fulfill the ingredients of a proper show-cause notice and thus
amounts to violation of principles of natural justice, the challenge
is entertainable in exercise of writ jurisdiction of this Court.
Accordingly, the impugned notice at Annexure-1 and the summary
of show-cause notice at Annexure-2 in Form GST DRC-01 are
quashed. However, since this Court has not gone into the merits of
the challenge, respondents are at liberty to initiate fresh
proceedings from the same stage in accordance with law within a
period of four weeks from today."
13. In the absence of a proper show-cause notice the petitioners
herein have been denied proper opportunity to defend themselves of the
charges. The requirement of affording opportunity of hearing as contemplated
in Section 75(4) of the JGST Act has also been denied. Section 75(5) provides
that in case sufficient show-cause is shown by the person chargeable with tax,
the proper officer shall grant time to the said person and adjourn the hearing
for reasons to be recorded in writing provided that no such adjournment shall
be granted for more than three times to a person during the proceedings.
14. This issue has attracted the attention of this Court in the case of
(M/s Godavari Commodities Limited (supra) wherein at paragraphs-21 to 23
it has been held as under :-
"21. At this stage, we deem it appropriate to quote the provisions of
Section 75(4) and 75(5) of the CGST/JGST Act:- "75. General
provisions relating to determination of tax (4)An opportunity of
hearing shall be granted where a request is received in writing from
the person chargeable with tax or penalty, or where any adverse
decision is contemplated against such person. (5)The proper officer
shall, if sufficient cause is shown by the person chargeable with tax,
grant time to the said person and adjourn the hearing for reasons to
be recorded in writing: PROVIDED that no such adjournment shall
be granted for more than three times to a person during the
proceedings."
22. A conjoint reading of the provisions of Sections 75(4) and
75(5) would reveal as under:- (i) Opportunity of hearing' shall be
granted on request. (ii) Opportunity of hearing shall be granted
where any adverse decision is contemplated. (iv) If sufficient cause is
shown, the proper officer can adjourn the hearing for reasons to be
recorded in writing. (v) However, no such adjournment shall be
granted for more than three times during the proceedings.
23. From the facts of the present proceedings, it would transpire
that on 14th March, 2020, Form GST DRC 01 was issued without
specifying any date of hearing and, thereafter, straightaway, an
Adjudication Order was allegedly passed on 13th August, 2020
fastening liability of tax, interest and penalty upon the Petitioner.
From the order sheet, it is evident that no opportunity of personal
13
hearing was granted to the petitioner and the purported Adjudication
Order was passed on 13.08.2020 i.e. on the first date itself after
issuance of the summary of show cause notice. This itself clearly
reveals that the entire adjudication proceedings have been carried out
in stark disregard to the mandatory provisions of the GST Act and in
violation of the principles of natural justice and, thus, the
Adjudication Orders, allegedly dated 13.08.2020, are liable to be
quashed and set aside on this ground also."
15. We may usefully point out at this stage that the summary of
show-cause notice in case of each of the writ petitioners is in the same format
and language. It does not indicate any date for filing reply. The language
employed also creates a clear impression that the liability towards tax, penalty
and interest has been already pre-determined. None of the petitioners got any
opportunity to reply to the summary of the show-cause notice either as no date
or time was indicated therein. The adjudication order has been passed
thereafter confirming this liability towards tax, penalty and interest indicated
in the summary of show-cause notice in case of each of the writ petitioners.
The extract of one of the summary of show-cause notice and the adjudication
order passed in the case of one of the petitioners M/s. Jai Jawan Kastha
Bhandar in relation to the tax period 2018-19 relating to W.P.(T) No.3153 of
2020 is being extracted hereunder which shows that the impugned summary
of show-cause notice neither did specify any date or time for furnishing of
reply nor was in the nature of a proper show-cause notice as the liability
towards tax, penalty and interest were already determined. Learned counsel
for the State has not been able to dispute that the summary of show-cause
notice in Form GST DRC-01 in case of individual petitioners and the
adjudication order also in case of individual petitioners are in the same
language and format and that no opportunity whatsoever was given to the
individual petitioners to furnish reply to the summary of show-cause notice.
16. Annexure-3 being summary of show-cause notice in Form GST
DRC-01 bearing Ref. No.2018 dated 25th October 2019 relating to tax period
2018-19 and the adjudication order at Annexure-4 under Section 74(9) of the
Act bearing Ref. No.46 dated 25th February 2020 in the case of the petitioner
M/s Jai Jawan Kastha Bhandar i.e. W.P.(T) No.3153 of 2020 are reproduced
hereunder :-
"Annexure-3
Office of the Deputy Commissioner of State Tax, Bokaro Circle, Bokaro
From GST DRC-01
[See Rule 142(1)]
Ref. ...2018 Date. ...25.10.2019
14
GSTIN :20AERPR7894A1Z7
NAME : M/S JAI JAWAN KASTHA BHANDAR
TAX PERIOD : 2018-19 ACT:- JGST 2017
Section / Sub-section under which SCN is being issued - 74(1)
SUMMARY OF SHOW CAUSE NOTICE
A. BRIEF FACTS OF THE CASE:-
M/s Abhikriti Enterprises, M/s Om Sai CGST SGST
Ram Enterprises, M/s Mahaveer Steel
Industries, M/s Esh Ispat Pvt. Ltd and
M/s Nisha Enterprises ls [kjhn dh fooj.kh
jkf"k
6,59,42,594.50 59,34,833.51 59,34,833.51
B. GROUNDS:- INS la[;k 591 fnukad 28.06.2019 ds vkyksd esa fd;s x;s fujh{k.k
ds Øe esa izfr'Bku ds }kjk ,d j.kuhfr ds vUrxZr ftu izfr'Bku ls vkod vkiwfrZ (Inward
Supply) izkIr dh tk jgh gS] deksos"k mUgh izfr'Bkkuksa dks Outward supply dh tk jgh gSA
izfr'Bku }kjk dj dk Hkqxrku Cash Ledger ls u djds Credit Ledger ls fd;k x;k gSA
lquokbZ ds Øe esa fo}ku vf/koDrk }kjk ifjogu fo'k;d dkxtkr rFkk VªkUliksVZ fcYVh] pkyku]
yksfMax] vuyksfMax iphZ] dkaVk Lyhi] HkkM+k Hkqxrku lk{;] RCM ds rgr fd;k x;k Hkqxrku
miLFkkfir ugha fd;k tk ldkA blls izFke n`'V;k ,slk yxrk gS fd blesa eky dk u rks
Movement gqvk gS vkSj u gh recipient }kjk eky dh lqiqnZxh izkIr dh x;h gSA eq[;ky; ls
izkIr Intelligence Note la[;k 78 fnukad 13-06-2019 ,oa izfr'Bku ds fujh{k.k ds Øe esa ;g
ik;k x;k fd loZJh t; toku dk'B HkaMkj foRrh;&o'kZ 2017&18] 2018&19 ,oa 2019&20 esa M/s
Abhikriti Enterprises, GSTIN-20AKJPD6340C1ZY, M/s Om Sai Ram
Enterprises, GSTIN-20BBLPK7292M1Z8, M/s Mahaveer Steel Industries,
GSTIN-20ELMPS2227C1ZF, M/s Esh Ispat Pvt. Ltd, GSTIN-
20AAGCM2298D1ZS and M/s Nisha Enterprises, GSTIN-20AFZPD5393P1ZQ
ls vkil esa Inward/Outward Supply dh x;h gSA vr% ijLij dh x;h vkiwfrZ;ksa lansgkLin
rFkk dkxth laO;ogkj dks LFkkfir djrk gSA vr% fcuk eky dh izkfIr lqfuf"pr fd;s ITC dk
Utilization >kj[k.M eky ,oa lsok dj vf/kfu;e 2017 dh /kkjk 16 dk mYya?ku 16¼2½
Notwithstanding anything contained in this reason, no registered person shall be
entitled to the credit of any input tax in respect of any supply of goods or
services or both to him unless- (b) has received the goods or services or both.
B. bl rjg loZJh t; toku dk'B dk foRrh;&o'kZ 2018&19 esa bu izfr'Bkkuks a ls izkIr
Inward Supply fo'k;d ITC dks vLohdkj fd;k tkrk gSA M/s Abhikriti Enterprises,
GSTIN-20AKJPD6340C1ZY, M/s Om Sai Ram Enterprises, GSTIN-
20BBLPK7292M1Z8, M/s Mahaveer Steel Industries, GSTIN-
20ELMPS2227C1ZF, M/s Esh Ispat Pvt. Ltd. GSTIN-20AAGCM2298D1ZS
and M/s Nisha Enterprise, GSTIN-20AFZPD5393P1ZQ ls CGST- Rs.
59,34,833.51 rFkk SGST- Rs. 59,34,833.51 dks Wrongly availment of ITC ekurs
gq, >kj[k.M eky ,oa lsok dk vf/kfu;e 2017 dh /kkjk 74¼1½ ds vUrxZr Input tax credit
wrongly availed or utilized by reason or fraud or any willful misstatement or
suppression of fact ekurs gq, dj jkf"k ds cjkcj "kkfLr rFkk /kkjk 50 ds vUrxZr C;kt
vf/kjksi.k dh dkjZokbZ fuEuor~ dh tkrh gS %&
Tax Act Place of supply Tax/Cess Interest Penalty Total
Period (name of State)
2 3 4 5 6 7 8
2018-19 SGST Jharkhand 59,34,833.51 8,51,703.62 59,34,833.51 1,27,21,370.64
CGST Jharkhand 59,34,833.51 8,51,703.62 59,34,833.51 1,27,21,370.64
Total 1,18,69,667.02 17,03,407.24 1,18,69,667.02 2,54,42,741.28
¼g0@&vLi"V½
jkT; dj inkf/kdkjh]
cksdkjks vapy] cksdkjksA
Annexure-4
OFFICE OF DY. COMMISSIONER OF STATE TAX, BOKARO CIRCLE
(JHARKHAND)
(UNDER THE GST ACT 2017 AND RULES THEREUNDER)
ORDER
[Under section 74(9)] Ref. No. ......46...... Dated: 25.02.2020 15 O;olk;h dk uke % loZJh t; toku dk'B HkaMkj irk % I-C/43-119, vkS|ksfxd {ks=] cksdkjks fuca/ku la[;k % 20AERPR7894A1Z7 bZesy % [email protected] vof/k % 2018-19 eq[;ky; ls izkIr Intelligence Note la[;k 78 fnukad 13-06-2019 rFkk jkT; dj la;qDr vk;qDr ¼iz"kklu½] /kuckn ize.My] /kuckn ds }kjk fuxZr INS-01 Øekad 591 fnukad 09- 07-2019 ds vuqikyu esa O;olkf;d izfr'Bku dk fujh{k.k fnukad 09-07-2019 dks] cksdkjks vapy] cksdkjks ds inkf/kdkfj;ksa ds }kjk fd;k x;kA fujh{k.k ds Øe esa >kj[k.M eky ,oa lsok dj vf/kfu;e 2017 dh /kkjk 35 ,oa rRlacaf/kr fu;ekoyh ds fu;e 56 ds izko/kkuksa ds vUrxZr izfr'Bku ls lacaf/kr fofgr ys[kk&iqLr ,oa vfHkys[kksa dh ek¡x dh xbZA ftlds vkyksd esa mifLFkr O;fDr ds }kjk ek= vkaf"kd :i ls dqN vof/k ls lacaf/kr Invoice ,oa Ewaybill izLrqr fd;k x;kA vU; dksbZ Hkh ys[kk&iqLr@vfHkys[k muds }kjk miyC/k ugha djk;k x;k vkSj u gh miyC/k ugha jgus ds laca/k esa dksbZ larks'ktud Li'Vhdj.k izLrqr fd;k x;kA mYys[kuh; gS fd oS/kkfud izko/kkukuqlkj fofgr ys[kk&iqLr@vfHkys[k dk la/kkj.k ,oa miyC/krk O;olkf;d izfr'Bku ds eq[; fucaf/kr O;olk; LFky ij miyC/k jguk vfuok;Z gS ,oa ek¡x fd, tkus ij mls l{ke izkf/kdkjh ds le{k miyC/k djk;k tkuk vfuok;Z gSA fujh{k.k ds le; izfr'Bku ds mifLFkr izfrfuf/k ds }kjk O;olkf;d izfr'Bku ls lacaf/kr lHkh okafNr ys[kk&iqLr@vfHkys[k izLrqr djus ds fufeRr le; dh ek¡x fd, tkus ij] fujh{kh ny ds }kjk fujh{k.k izfrosnu ds ek/;e ls fnukad 15-07-2019 fu/kkZfjr djrs gq,] O;olkf;d izfr'Bku ls lacaf/kr lHkh okafNr ys[kk&iqLr@vfHkys[k miLFkkfir djus ds lkFk&lkFk viuk i{k@Li'Vhdj.k lefiZr djus dk Hkh funs"k fn;k x;kA mDr fujh{k.k ds i"pkr~ fujh{k.k izfrosnu ds ek/;e ls fu/kkZfjr dh xbZ frfFk dks O;olkf;d izfr'Bku dh vksj ls ys[kk&iqLr miLFkkfir djus gsrq dksbZ dkjZokbZ ugha dh xbZA O;olk;h dks lquokbZ dk volj fn, tkus ds mijkar Hkh O;olk;h dh vksj ls ys[kk&iqLr miLFkkfir ugha fd;k tkuk] bl rF; dks lEiq'V djrk gS fd buds }kjk GST vf/kfu;e 2017 ds vUrxZr fofgr ys[kk&iqLr@vfHkys[k dk la/kkj.k ugha fd;k tkrk gS] vkSj ;fn ys[kk&iqLr dk la/kkj.k fd;k Hkh tkrk gS] rks og dj vioapu dh ea"kk ls euekus rjhds ls rFkk vfu;fer :i la/kkfjr fd;k tkrk gS] ftlds dkj.k O;olk;h ds }kjk ys[kk&iqLr izLrqr ugha fd;k tk jgk gSA blh Øe esa GSTN Portal ij O;olk;h ds O;olk; ls lacaf/kr laO;ogkjksa dh tkap dh xbZA lkFk gh] foHkkxh; Intelligence Note }kjk fo'ks"k :i ls fufnZ"V] tks fo'ks"kdj O;olk;h ds Circular Bill Trading esa lafyIrrk dh vk'kadk O;Dr dh xbZ] ds lEcU/k esa tkap dh xbZA izfr"Bku ifjlj esa yksgk&bLikr ds [kjhn&fcdzh ls lacaf/kr dksbZ lk{; ugha ik;k x;kA fujh{k.k ds le; izfr"Bku LFky esa ydM+h dk LVkWd ;Fkk Log (m3-41.575 rFkk Sawn (M3) - 337.858 ik;k x;kA yksgk&bLikr dk dksbZ LVkWd ugha ik;k x;kA GSTN Portal ij miyC/k vkadM+ksa ,oa foHkkxh; Intelligence Note ds vuqlkj izfr"Bku ds }kjk ,d j.kuhfr ds varxZr ftu izfr"Bkuksa ls yksgk&bLikr dk vkod vkiwfrZ (Inward Supply) izkIr dh tk jgh gS] deksos'k mUgha izfr"Bkuksa dks yksgk&bLikr dk Outward Supply dh tk jgh gSA izfr"Bku }kjk कर dk Hkqxrku Cash Ledger ls u djds Credit Ledger ls fd;k x;k gSA lquokbZ ds Øe esa yksgk&bLikr ifjogu fo"k;d dkxtkr ;Fkk VªkUliksVZ fcYVh] pkyku] yksfMax] vuyksfMax] iphZ] dkaVk Lyhi] HkkM+k Hkqxrku lk{;] RCM ds rgr fd;k x;k Hkqxrku miLFkkfir ugha fd;k tk ldkA lkFk gh] tSlk fd iwoksZDr dafMdkvksa esa mYys[k fd;k x;k gS fd O;olk;h ds }kjk GST vf/kfu;e 2017 }kjk fofgr fd;s x;s vf/kdka'k ys[kk@vfHkys[k dks u rks la/kkfjr fd;k x;k gS vkSj u gh ekaxs tkus ij miLFkkfir fd;k x;kA bu rF;ksa ds vk/kkj ij ;g ;qfDr;q Dr ववववववव gksrk gS fd O;olk;h ds }kjk yksgk&bLikr dk Movement ugha fd;k x;k gS vkSj u gh recipient }kjk eky dh lqiqnZxh izkIr dh x;h gSA izfr"Bku ds }kjk foÙkh;&o"kZ 2017&18 ,oa 2018&19 esa M/s Abhikriti Enterprises, GSTIN-20AKJPD6340C1ZY, M/s Om Sai Ram Enterprises, GSTIN-20BBLPK7292M1Z8, M/s Mahaveer Steel Industries, GSTIN-20ELMPS2227C1ZF, M/s Esh Ispat Pvt. Ltd, GSTIN-20AAGCM2298D1ZS and M/s Nisha Enterprises, GSTIN-20AFZPD5393P1ZQ esa vkil esa yksgk&bLikr dk Inward/Outward Supply dh x;h gSA vr% yksgk&bLikr dh ijLij dh x;h vkiwfrZ;ka lanksgkLin rFkk dkxth laO;ogkj dks LFkkfir djrk gSA vr% fcuk eky dh izkfIr lqfuf'pr fd;s ITC dk Utilization >kj[k.M eky ,oa lsok dj vf/kfu;e 2017 dh /kkjk 16 ds izfrdwy gSA /kkjk 16¼2½ fuEuor~ gS%& Notwithstanding anything contained in this reason, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless-(b) has received the goods or services or both.
16bl izdkj foÙkh;&o"kZ 2018&19 esa mDr izfr"Bkuksa ls izkIr yksgk&bLikr ls lacaf/kr Inward Supply fo"k;d ITC dks vLohdkj fd;k tkrk gSA fopkjk/khu vof/k esa M/s Abhikriti Enterprises, GSTIN-20AKJPD6340C1ZY, M/s Om Sai Ram Enterprises, GSTIN-20BBLPK7292M1Z8, M/s Mahaveer Steel Industries, GSTIN-20ELMPS2227C1ZF, M/s Esh Ispat Pvt. Ltd, GSTIN-20AAGCM2298D1ZS and M/s Nisha Enterprises, GSTIN-20AFZPD5393P1ZQ ls fd;s x;s yksgk&bLikr ds dkxth [kjhn ds fo:) CGST-Rs. 59,34,833.51 rFkk SGST-Rs. 59,34,833.51 esa fy;s x;s ITC dks Wrongly availment of ITC ekurs gq, >kj[k.M eky ,oa lsok dj vf/kfu;e 2017 dh /kkjk 74(1) ds varxZr Input tax credit wrongly availed or utilized by reason or fraud or any wilful misstatement or suppression of fact ekurs gq,] ITC dh jkf'k ds cjkcj 'kkfLr rFkk /kkjk 50 ds varxZr fofgr nj ls C;kt vf/kjksi.k dh dkjZokbZ djrs gq,] SCN-DRC 01/Ref.2018 dated 25.10.2019 fuxZr fd;k x;kA mDr lwpuk ds vkyksd esa O;olk;h ds }kjk /kkjk 74¼8½ dk iz;ksx dj fdlh Hkh izdkj dk Hkqxrku ugha fd;k x;k vkSj u gh muds }kjk /kkjk 74¼9½ esa pfpZr vH;kosnu gh lefiZr fd;k x;kA ekeys ds fu"iknu esa O;olk;h ds vlg;ksxkRed joS;s viuk;s tkus rFkk mDr dkjZokbZ ds i'pkr~ vU; dksbZ fodYi miyC/k ugha jgus rFkk jkT; ds jktLo n`f"Vdks.k ls] vafre :i ls izfr"Bku ds fo:) dj] C;kt ,oa 'kkfLr dk fu/kkZj.k fuEuor~ fd;k tkrk gS%& Tax Act Place of Tax/Cess Interest Penalty Total Period supply (name of State) 2 3 4 5 6 7 8 2018-19 SGST Jharkhand 59,34,833.51 8,51,703.62 59,34,833.51 1,27,21,370.64 CGST Jharkhand 59,34,833.51 8,51,703.62 59,34,833.51 1,27,21,370.64 Total 1,18,69,667.02 17,03,407.24 1,18,69,667.02 2,54,42,741.28 bl vkns'k ds vkyksd esa GSTN ds ek/;e ls O;olk;h ds dj nkf;Ro dks DRC-07 ds ek/;e ls lalwfpr@izsf"kr fd;k tk,A ys[kkfir ,oa la'kksf/kr ¼g0@&vLi"V½ ¼g0@&vLi"V½ 25-02-2020 25-02-2020 jkT; dj inkf/kdkjh] jkT; dj inkf/kdkjh] cksdkjks vapy] cksdkjksA cksdkjks vapy] cksdkjksA"
17. The summary of the order in Form GST DRC 07 has been issued in individual cases conveying the assessment of liability towards tax, interest and penalty adjudged by the State Tax Officer on wrongful availment of ITC without receipt of goods in contravention of Section 16(2) using fraudulent methods in case of individual petitioners in like manner. It is evident that without proper opportunity of furnishing reply to the show-cause notice and without supplying the relied upon documents referred to in the inspection report, the petitioners have been prejudiced in defending themselves. The petitioners may have also lost the opportunity to cross-examine such persons as are relied upon by the tax authorities to support the impugned proceedings. Since the impugned proceedings are clearly in violation of principles of natural justice and the procedure prescribed under the JGST Act, the petitioners are justified in approaching this Court in writ jurisdiction. The writ petitions are held to be maintainable in view of the principles laid down by the Apex Court 17 in the case of Magadh Sugar & Energy Ltd. Vs. State of Bihar & Ors. reported in 2021 SCC Online SC 801, para-25 to 27. We have also taken note of the provisions of Section 74(2) read with Section 74(10) and Section 75(3) of the JGST Act whereunder initiation of fresh proceedings in respect of the tax periods in question would not be time-barred. The earliest tax period in case of some of the petitioners like W.P.(T) Nos.3179 of 2020, 3262 of 2020 and 1083 of 2021 relates to 2017-18. Initiation of proceedings would be permissible within a period of 6 months prior to expiry of 5 years from the date of filing of the annual returns i.e. 31st December 2018.
18. As an upshot of the discussions made herein above and for the reasons recorded, the impugned show-cause notice, the adjudication orders and the summary of the order/demand notice in DRC-07 in the case of the individual petitioners cannot be sustained in the eyes of law and on facts. They are accordingly set aside. The respondents State Tax authorities are at liberty to initiate fresh proceedings by issuing a proper show-cause notice in respect of the individual writ petitioners relating to the relevant tax periods and take a decision thereupon in accordance with law. It is abundantly made clear that this Court has not gone into the merits of the case of any of the petitioners herein. The Adjudicating Officer shall be entitled to take a fresh decision without being prejudiced by any observation made hereinabove whatsoever.
19. The writ petitions are allowed in the manner and to the extent indicated herein above.
(Aparesh Kumar Singh, J) (Deepak Roshan, J) Shamim/