M/S Tripati Ispat Udyog Through Its Proprietor Ramesh Kumar Agarwal vs. The State Of Jharkhand Through Its Secretary Cum Commissioner State Tax Deptt

Held

The Court allowed the writ application, quashing the impugned show cause notice (FORM GST DRC-01) and the summary of order (FORM GST DRC-07). Regarding Issue 1, the Court held that the GST authorities were incorrect in assuming jurisdiction and initiating proceedings under the JGST Act for the transition of ITC from the pre-GST regime, as Section 174(2)(e) of the JGST Act saves investigations and legal proceedings under the repealed JVAT Act. Regarding Issue 2, the Court held that the initiation of adjudication proceedings without a detailed show cause notice, by merely issuing a "Summary of Show Cause Notice" (FORM GST DRC-01), renders the entire proceeding void-ab-initio, violating the Principles of Natural Justice. This was affirmed by referring to previous judgments of the Court. Regarding Issue 3, the Court found that no adjudication order was passed, and FORM GST DRC-07 was issued directly, which is a violation of mandatory provisions and the Principles of Natural Justice, as admitted by the respondent in their counter-affidavit. The Court also noted that no opportunity of hearing was granted. The Court directed the respondents to refund Rs. 19,08,880/- or re-credit it to the petitioner's electronic credit ledger within ten weeks, along with statutory interest. The respondents were granted liberty to re-initiate proceedings if advised and permitted by law, but the illegally deducted amount must be refunded/credited within the stipulated period. The Court refrained from commenting on the merits of the case.

Facts

The petitioner, M/s Tripati Ispat Udyog, a trader of Iron and Steel, sought to carry forward input tax credit (ITC) of Rs. 26,81,541/- from the JVAT regime to the GST regime under Section 140 of the JGST Act and Rule 117 of the JGST Rules. This amount was reflected in their electronic credit ledger. Subsequently, the respondent No. 4 (Assistant Commissioner of State Taxes) issued a "Summary of Show Cause Notice" (FORM GST DRC-01) on 21.07.2018, alleging that the petitioner had not apportioned ITC as per Section 18(8)(xviii) of the JVAT Act and was therefore not entitled to the credit. This was followed by FORM GST DRC-07 dated 23.08.2018, demanding Rs. 35,13,894.43, including penalty and interest, without passing an adjudication order. The petitioner also stated that Rs. 19,08,880/- was suo-moto debited from their credit ledger on 19.01.2021.

Key Issues

1. Whether the respondent GST department had the correct jurisdiction to initiate proceedings under Section 73/74 of the JGST Act concerning the transition of ITC from the JVAT regime, alleging inadmissibility under the JVAT Act? 2. Whether the entire proceeding is void-ab-initio due to the issuance of a "Summary of Show Cause Notice" (FORM GST DRC-01) instead of a detailed show cause notice, lacking essential ingredients? 3. Whether the entire proceeding is hit by the Principles of Natural Justice, as no opportunity of hearing was granted before issuing FORM GST DRC-07, and no adjudication order was passed? Petitioner's arguments: The petitioner contended that the respondent department wrongly assumed jurisdiction as the JVAT Act was repealed, and the transition of credit was governed by Section 140 of the JGST Act. They argued that the show cause notice was vague, lacking essential details like date, time, and venue, and did not strike down irrelevant sections. Furthermore, they argued that Section 18(8)(xviii) of the JVAT Act was inapplicable to traders like themselves, as it pertained to manufacturing processes, and the department's claim of a typographical error was an attempt to cure a wrong provision. The petitioner relied on the judgments in Usha Martin Limited, M/s NKAS Services Private Limited, and M/s Godavari Commodities Ltd. Revenue's arguments: The judgment does not record specific arguments from the revenue or state on these issues.