M/S Shri Sharma Steeltech INDIA PVT. LTD. vs. State Of Rajasthan

Held

The Court held that Rule 142(1A) and 142(2A) of the RGST/CGST Rules, 2017, indicate that it is discretionary for the proper officer to issue a communication under Rule 142(1A). The Court found that while a communication was issued in this case and the petitioner filed submissions, there is no provision within the Rules for adjudicating these submissions at that stage. The Court differed from the petitioner's cited Calcutta High Court judgments, reasoning that the Rules do not provide for an opportunity of hearing or deciding submissions against a proposed liability before the issuance of a show cause notice under Rule 142(1)(a). The Court emphasized that the right to a hearing arises only after the issuance of a show cause notice under Rule 142(1)(a). Interpreting taxing statutes strictly, as per the Apex Court in Ajmera Housing Corporation & Ors. Vs. Commissioner of Income Tax, the Court concluded that since only a communication was issued and no show cause notice, there was no reason to entertain the writ petition, which appeared to be filed to stall proceedings. Therefore, the writ petition was dismissed.

Facts

M/s Shri Sharma Steeltech India Pvt. Ltd. (the petitioner) filed a writ petition before the Rajasthan High Court, Jaipur Bench, challenging the non-consideration of its reply submitted in response to a notice issued under GST DRC-01A. The petitioner contended that Rule 142(1A) and 142(2A) of the Rajasthan Goods & Service Tax (RGST)/Central Goods & Service Tax (CGST) Rules, 2017, mandate consideration of replies before issuing a show cause notice under Rule 142(1)(a). The petitioner relied on Calcutta High Court judgments in Eden Real Estate Pvt. Ltd. & Anr. and Diamond Beverages Private Limited & Anr. The respondents argued that Rule 142(1A) is discretionary, and there is no provision for affording a hearing at the pre-show cause notice stage, citing an Apex Court judgment in Commissioner of Central Excise, Haldia Vs. Krishna Wax Private Limited.

Key Issues

1. Whether Rule 142(1A) and 142(2A) of the RGST/CGST Rules, 2017, require the proper officer to consider the reply submitted by a person in response to a communication under Rule 142(1A) before issuing a show cause notice under Rule 142(1)(a)? Petitioner's contention: Yes, the petitioner argued that the rules mandate consideration of the reply. They relied on Calcutta High Court judgments which held that an opportunity of hearing is required even at the pre-show cause intimation stage. The petitioner stated their reply was not considered. Revenue's contention: No, the revenue contended that Rule 142(1A) is discretionary ('proper officer may') and that there is no provision under the Rules for affording an opportunity of hearing or adjudicating submissions made against a proposed liability at this stage. They argued that the right to a hearing arises only after a show cause notice under Rule 142(1)(a) is issued. They cited the Apex Court judgment in Commissioner of Central Excise, Haldia Vs. Krishna Wax Private Limited, stating that writ petitions should not normally be entertained against a mere show cause notice, and in this case, no show cause notice had even been issued.