M/S. Shenoy Traders vs. The Assistant Commissioner (St) (Fac)

Facts

These five writ petitions were filed by M/s. Shenoy Traders against the Assistant Commissioner (ST) (FAC), Madurai Rural (South) Assessment Circle. The petitions challenged proceedings and orders dated December 19, 2023, and December 21, 2023, passed under Section 74 of the CGST/TNGST Act, 2017, for the tax periods 2017-18, 2018-19, 2019-20, 2020-21, and 2022-23. The petitioner sought to quash these orders, alleging they were passed contrary to the provisions of the Act. The impugned orders confirmed demands based on proposals from the Enforcement Wing following an inspection on October 17, 2022. A key factual discrepancy noted was that the confirmed demand amounts exceeded the amounts initially proposed in the DRC01A and DRC01 notices.

Held

The Court held that the impugned orders, dated December 19, 2023, and December 21, 2023, were passed in gross violation of the principles of natural justice. The Court noted that the show cause notices did not contain any reasons for demanding the amounts, and the demands were confirmed based on proposals from the Enforcement Wing. Crucially, the Court observed a significant variation between the amounts intimated/proposed in the DRC01A and DRC01 notices and the amounts confirmed in the impugned orders. This discrepancy was deemed a violation of natural justice. Consequently, the impugned orders were quashed. The Court directed that these quashed orders be treated as corrigendum in DRC01 on specific dates. The petitioner was directed to file a detailed reply within 60 days, and the respondent was to pass fresh orders on merits after hearing the petitioner within 60 days thereafter. The ratio decidendi is that orders confirmed with significant discrepancies between proposed and confirmed demands, without adequate reasoning in show cause notices, violate natural justice.

Key Issues

1. Whether the impugned orders passed under Section 74 of the CGST/TNGST Act, 2017, are liable to be quashed for violating the principles of natural justice, specifically concerning the lack of reasons in the show cause notices and discrepancies between proposed and confirmed demand amounts? (Question of law and fact, turning on Section 74). Petitioner's Arguments: The petitioner contended that the impugned orders were passed in gross violation of the principles of natural justice. They argued that the show cause notices lacked any reasons for demanding the amounts, and the confirmed demand in the final orders was significantly higher than the amounts initially proposed in the DRC01A and DRC01 notices. This discrepancy, they argued, rendered the orders unsustainable. Respondent's Arguments: The respondent, represented by the Additional Government Pleader, did not present specific arguments against the petitioner's contentions regarding the violation of natural justice or the discrepancy in demand amounts. The judgment notes the consent of the learned Additional Government Pleader for disposal at the admission stage.