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 or not. The Court found that while a communication was issued and the petitioner filed submissions, there is no provision within the Rules for adjudicating these submissions at the stage of Form GST DRC-01A or its Part B. The Court disagreed with the petitioner's reliance on the Calcutta High Court judgments, stating that the Rules do not provide for an opportunity of hearing or deciding submissions against a proposed liability at this preliminary stage. The Court reasoned that Rule 142(1A) is essentially a communication that the proper officer *may* issue, and the assessee's right to an opportunity of hearing arises only after a show cause notice under Rule 142(1)(a) is issued, for which a provision for hearing exists. The Court emphasized that the RGST/CGST Act and Rules, having financial implications, must be interpreted strictly as promulgated, citing the Supreme Court's observation in Ajmera Housing Corporation & Ors. Vs. Commissioner of Income Tax that taxing statutes are to be construed strictly without room for intendment. The Court concluded that since only a communication had been issued and no show cause notice, the writ petition was not maintainable and 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 argued that Rule 142(1A) and 142(2A) of the RGST/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. and Diamond Beverages Private Limited, which held that an opportunity of hearing should be provided even at the pre-show cause intimation stage. The State (respondents) contended that Rule 142(1A) is discretionary and that there is no provision for an opportunity of hearing at this stage, with such rights arising only after a show cause notice under Rule 142(1)(a) is issued. The respondents also cited the Supreme Court judgment in Commissioner of Central Excise, Haldia Vs. Krishna Wax Private Limited, emphasizing that writ petitions are generally not entertained against mere show cause notices.

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 against a proposed liability communicated via GST DRC-01A before issuing a show cause notice under Rule 142(1)(a)? (Question of law and mixed fact and law, concerning Rule 142(1A) and 142(2A) of the RGST/CGST Rules, 2017). Petitioner's arguments: The petitioner contended that the authorities are required to consider their reply filed under Rule 142(2A) before issuing a show cause notice under Rule 142(1)(a), as per the Rules of 2017. They relied on Calcutta High Court judgments in Eden Real Estate Pvt. Ltd. and Diamond Beverages Private Limited, which interpreted the provisions to mandate an opportunity of hearing even at the pre-show cause intimation stage. The petitioner argued that their case is similar and their reply was not considered. Respondents' arguments: The respondents argued that Rule 142(1A) is discretionary, using the phrase 'proper officer may', and that Rule 142(2A) only allows for submissions. They asserted there is no provision for an opportunity of hearing at this stage, with such rights arising only after a show cause notice under Rule 142(1)(a). They relied on the Supreme Court's decision in Commissioner of Central Excise, Haldia Vs. Krishna Wax Private Limited, stating that writ petitions should not be entertained against mere show cause notices, and that the present case involves only a communication, not a show cause notice.