Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR & THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH FRIDAY, THE 19TH DAY OF JANUARY 2024 / 29TH POUSHA, 1945 WA NO. 22 OF 2024 AGAINST THE JUDGMENT WP(C) 42265/2023 OF HIGH COURT OF KERALA APPELLANT/PETITIONER:
VADAKKOOT CHACKOO DEVASSY, AGED 79 YEARS S/O. LATE V.L. CHACKOO, VADUKKOOTT HOUSE, PAVARATTY P.O, THRISSUR DISTRICT. PROPRIETOR OF SADHU HARDWARE, DOOR NO.472, PAVARATTY P.O, THRISSUR DISTRICT, PIN - 680507 BY ADVS.
K.J.ABRAHAM ARAVINDAKSHAN K.R.
NIKHIL JOHN RESPONDENTS/RESPONDENTS:
1 ASSISTANT STATE TAX OFFICER, STATE GST DEPARTMENT, TAX PAYER SERVICES CIRCLE, MINI CIVIL STATION, CHAVAKAD, THRISSUR DISTRICT, PIN - 680004 2 CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, REPRESENTED BY PRINCIPLE COMMISSIONER (GST).GST POLICY WING, NORTH BLOCK, NEW DELHI, PIN - 110001 3 THE GOODS AND SERVICE TAX COUNCIL, 5TH FLOOR, TOWER II, JEEVAN BHARATI BUILDING, JANPATH ROAD, CANNAUGHT PLACE, NEW DELHI, REPRESENTED BY ITS CHAIRPERSON, PIN - 110001
WA No.22/2024 -:2:- 4 STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO GOVERNMENT, FINANCE DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM DISTRICT, PIN - 695001 5 UNION OF INDIA, REPRESENTED BY SECRETARY (REVENUE),MINISTRY OF FINANCE, DEPARTMENT OF REVENUE,NORTH BLOCK, NEW DELHI, PIN - 110001 OTHER PRESENT:
SR.GP-V.K.SHAMSUDHEEN,SC-SREELAL.N.WARRIER THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 19.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WA No.22/2024 -:3:- J U D G M E N T Dr. Kauser Edappagath, J.
The appellant is the writ petitioner. He filed the writ petition challenging Exts.P5 and P6 orders passed by the 1st respondent under Section 73(9) of the Central Goods and Services Tax Act, 2017 (for short, the CGST Act) mainly on the ground of limitation.
2.
The appellant was a registered dealer under the CGST/SGST Act, 2017, engaged in the supply of hardware items, paint, etc. As per the request of the appellant, his registration under the GST Act was cancelled w.e.f. 31/3/2021. He filed returns in Form GSTR-3B for the financial year 2017-18 belatedly and remitted tax with interest and late fee. After scrutiny, on 29/9/2023, the 1st respondent issued Ext.P2 notice under Section 61 of the CGST Act and Rules, 2017, to the appellant, pointing out the discrepancies in return for the year 2017-18. The
WA No.22/2024 -:4:- appellant was directed to give a reply on or before 30/10/2023.
On the next day of issuance of Ext.P2 notice, i.e., on 30/9/2023, the 1st respondent issued Ext.P3 show cause notice to the appellant under Section 73(1) of the CGST Act alleging that the input tax claimed for the financial year 2017-18 was proposed to be disallowed quoting the provisions of Section 16(4) of the CGST/SGST Act, 2017. Simultaneously, the 1st respondent issued a summary of show cause notice in Form GST DRC-01 dated 30/9/2023 (Ext.P4) by quantifying the tax and interest for the year 2017-18. According to the appellant, since his registration was cancelled w.e.f. 31/3/2021, Exts.P2, P3 and P4 notices were not properly communicated to him, and the same was only uploaded in his GST web portal. Thereafter, the 1st respondent concluded the proceedings under Section 73(9) of the GST Act and issued Ext.P5 assessment order. Along with Ext.P5, the 1st respondent passed Ext.P6, a summary of the order under Rule 142(5) of the CGST Rules, 2017, demanding tax, interest, and penalty for the year 2017-2018. The appellant challenged Exts.P5
WA No.22/2024 -:5:- and P6 before the learned Single Judge mainly on two grounds, i.e., the demand in Exts.P5 and P6 was barred by limitation, and Exts.P5 and P6 were passed violating the principles of natural justice without giving him a proper opportunity to be heard. The learned Single Judge found that the 1st respondent did not give sufficient time to the appellant to reply to Ext.P2 notice; hence, Ext.P5 order was passed violating the principles of natural justice.
Accordingly, the learned Single Judge set aside Ext.P5 and remitted the matter back to the 1st respondent to pass a fresh order after giving sufficient opportunity to the appellant to file a reply to the show cause notice and for a hearing. However, the learned Single Judge held that the appellant would not take any ground regarding the limitation in finalising the assessment for the assessment year 2017-18. With these observations, the writ petition was disposed of. The appellant is before us challenging the judgment of the learned Single Judge.
3.
We have heard Sri. Abraham K.J., the learned counsel for the appellant, Sri. V.K.Shamsudheen, the learned Senior
WA No.22/2024 -:6:- Government Pleader, Sri.Sreelal N.Warrier, the learned standing counsel for the Central Board of Excise and Sri.S.Manu, the learned DSGI.
4.
Admittedly, the 1st respondent accepted the return filed by the appellant for the financial year 2017-18 under Section 59 of the CGST Act and completed the self-assessment. Section 61 of the CGST Act deals with the scrutiny of returns. Sub section (1) of Section 61 says that the proper officer may scrutinise the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, and seek his explanation. Rule 99 of the CGST/SGST Rules mandates that where any return furnished by a registered person is selected for scrutiny, the proper officer shall scrutinise the same, and he shall issue a notice to the said person seeking explanation to it within such time, not exceeding thirty days from the date of service of the notice. Section 73 of the CGST Act provides for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed
WA No.22/2024 -:7:- or utilized for any reason other than fraud or any willful misstatement or suppression of facts. To proceed under Section 73, the proper officer shall issue show cause notice under sub section (1) of Section 73 at least three months before the time limit specified in sub section (10) of Section 73. The time limit specified in sub section (10) of Section 73 is three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund. In the instant case, it is not in dispute before us that the time limit under Section 73(10) expired on 31/12/2023 consequent to an extension granted vide Notification No.09/2023.
5. The scrutiny of the return submitted by the appellant under Section 61 commenced as per Ext.P2 notice only on 29/9/2023. The appellant had to be allowed at least one month time to file a statutory reply. Only thereafter could a show cause notice have been issued, i.e. after 30/10/2023. Ext.P3 show cause notice however was issued on 30/9/2023, i.e., on the very
WA No.22/2024 -:8:- next day of Ext.P2 notice issued under Section 61, probably to bypass the statutory time limit contemplated under sub section (2) of Section 73. As per sub section (2) of section 73, notice has to be issued three months prior to the limitation period prescribed under sub section (10) of section 73. The proceedings were initiated by notice dated 29/9/2023. Ext.P5 order under Section 73(9) of the CGST Act was passed on 3/11/2023. In this connection, it is necessary to notice the provisions of Section 73(5) and (8) of the CGST Act, which read as follows:
“(5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.” “(8) Where any person chargeable with tax under sub- section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.”
WA No.22/2024 -:9:- 6. It is apparent therefore that the thirty day period that is envisaged from the date of the notice under Section 73(2) is for the purpose of enabling an assessee to pay tax along with interest payable under Section 50 so as to avoid the payment of penalty. This opportunity was not extended to the appellant herein and virtually amounted to non-compliance with the mandatory procedure envisaged under the Statute.
Further, since the last date for passing the order under Section 73(9) expired on 31/12/2023, we cannot uphold the finding of the learned Single Judge that virtually grants an opportunity to the respondents to overcome their lapses by extending the time limit for passing the order under Section 73(9) of the CGST Act. Since the terminal for passing the order under Section 73(9) expired on 31/12/2023 and it was found that Ext.P5 order was passed on 3/11/2023 without complying with the mandatory procedure under Section 73(5) and (8) of the CGST Act, and further, the said defect cannot now be cured since any fresh order passed under Section 73(9) would be beyond
WA No.22/2024 -:10:- 31/12/2023, we are left with no other option than to allow this writ appeal by setting aside the impugned judgment of the learned Single Judge and allowing the Writ Petition by quashing Exts.P5 and P6 orders. The Writ Appeal is allowed as above.
Sd/- DR. A.K.JAYASANKARAN NAMBIAR JUDGE
Sd/- DR. KAUSER EDAPPAGATH JUDGE Rp