M/S. Institute Of Baking And Cake Art vs. The Additional Commissioner Of Commercial Taxes (Enf), South Zone

Held

The High Court allowed the petition and quashed the impugned order dated October 6, 2023. The Court found merit in the petitioner's contentions regarding the procedural irregularities. Specifically, the Court agreed that the absence of a proper notice under Section 73 of the KGST Act, after the initial notice in FORM GST DRC-01, and the fact that the observation column in the impugned order was left blank, indicated a lack of due opportunity and application of mind by the respondent authority. The Court reasoned that these lapses were significant enough to warrant interference. Consequently, the proceedings were restored for reconsideration by the respondent authority. The respondent is directed to reconsider the matter in light of the observations made by the Court, implying that a proper notice under Section 73 should be issued and the observation column should contain the reasons for the conclusion. The issue of tax liability itself was not decided on merits.

Facts

The petitioner, M/s. Institute of Baking and Cake Art, is challenging an order dated October 6, 2023, passed by the Additional Commissioner of Commercial Taxes (Enforcement), South Zone, under Section 73(9) of the Karnataka Goods and Services Tax Act, 2017. The petitioner contends that while a notice in FORM GST DRC-01 was issued on March 27, 2023, a subsequent notice under Section 73 of the KGST Act was not issued. Furthermore, the petitioner points out that the 'observation column' in the impugned order, which is meant to detail the reasons for the conclusion, was left blank. The petitioner argues that this lack of a proper notice and the blank observation column indicate a denial of due opportunity and a failure to apply the mind by the respondent authority.

Key Issues

1. Whether the respondent authority failed to issue a notice under Section 73 of the Karnataka Goods and Services Tax Act, 2017, after issuing a notice in FORM GST DRC-01, thereby violating principles of natural justice and the procedural requirements of the Act? (Question of law and procedure, turning on Section 73 of the KGST Act). 2. Whether the impugned order dated October 6, 2023, is vitiated by a lack of due application of mind, evidenced by the blank 'observation column' intended to provide reasons for the conclusion? (Question of law and fact, turning on principles of natural justice and procedural fairness). Petitioner's arguments: The petitioner argued that the absence of a formal notice under Section 73 of the KGST Act, following the initial notice in FORM GST DRC-01, constitutes a procedural lapse. They also contended that the blank observation column in the final order demonstrates a failure by the respondent to consider their reply and apply their mind to the case, thereby denying them a fair opportunity to be heard. The petitioner sought interference with the order on these grounds. Respondent's arguments: The respondent, represented by the High Court Government Pleader, did not record specific arguments in the judgment regarding the procedural lapses or the blank observation column.