M/S East INDIA Construction Co. vs. The Union Of INDIA And 3 Ors

Held

The Court allowed the writ petition based on the concession made by the learned Departmental Senior Standing Counsel. The Court found that the respondents admitted that no prior show cause notice was issued to the petitioner. Consequently, the Demand-cum-Show Cause Notice dated September 16, 2022, and the Order-in-Original dated November 24, 2023, were set aside. The matter was remanded back to the Additional Commissioner, Central Goods and Services Tax, Dimapur, to draw up appropriate proceedings against the petitioner, if advised, in accordance with law. The ratio decidendi is that proceedings under Section 73 of the GST Act require a proper show cause notice, and failure to issue one renders the subsequent actions invalid. No specific amount was decided upon, and the issue of the petitioner's liability for the alleged ineligible ITC was left to be determined in the fresh proceedings.

Facts

The petitioner, M/s East India Construction Co., challenged a Demand-cum-Show Cause Notice (SCN) dated September 16, 2022, and a consequential Order-in-Original dated November 24, 2023, both issued by the Additional Commissioner, Central Goods and Services Tax, Dimapur. The SCN alleged the petitioner had claimed ineligible Input Tax Credit (ITC) totaling Rs. 52,88,894/- for the period January 2018 to March 2020. The petitioner contended that the proceedings were initiated without a proper show cause notice, relying on a previous judgment of the same High Court. The respondents, represented by the Departmental Senior Standing Counsel, conceded that no prior show cause notice was issued.

Key Issues

1. Whether the proceedings under Section 73 of the GST Act were validly initiated without the issuance of a proper show cause notice, as contended by the petitioner? Petitioner's Argument: The petitioner argued that the initiation of proceedings was invalid because a proper show cause notice was not issued, citing a previous judgment of the High Court in WP(C) 3912/2024 and connected writ petitions. This judgment reportedly held that proceedings under Section 73 of the GST Act cannot be validly initiated without a proper show cause notice. Revenue's Argument: The learned Departmental Senior Standing Counsel, on behalf of the respondents, admitted that no prior show cause notice was issued to the petitioner. The counsel further submitted that they had instructions to consent to the matter being remanded back to the authorities for initiation of appropriate proceedings in accordance with law.