Ms Cj Darcl Logistics Limited Through Marketing Manager Subodh Kumar Bajaj vs. Union Of INDIA Represented Through The Secretary Ministry Of Finance Deptt Of Revenue

Held

The Court held that the impugned order rejecting the refund application was bad in law because it was passed beyond the scope of the show cause notice. The show cause notice issued on May 17, 2021, contained allegations of a mismatch in outward supply reporting between GSTR-1 and GSTR-3B. However, the order in original, passed on June 14, 2021, rejected the refund on grounds not mentioned in the show cause notice, including the illegality of obtaining two GSTINs under Section 25(2) of the CGST Act, improper availing of RCM and FCM options, and excess ITC claims. The Court found that the show cause notice was vague and cryptic, and the adjudicating officer went beyond its scope to create new grounds at the adjudication stage. Additionally, the Court noted a violation of the principles of natural justice as no proper opportunity of hearing was granted to the petitioner. The appellate order also failed to address this issue. Therefore, both the show cause notice and the consequential orders (original and appellate) were quashed and set aside. The revenue was granted liberty to issue a fresh show cause notice and proceed in accordance with law within four months. The ratio decidendi is that an adjudicating authority cannot pass an order on grounds not raised in the show cause notice, and principles of natural justice must be followed.

Facts

M/s. CJ Darcl Logistics Limited, the petitioner, engaged in Goods Transportation Agency (GTA) services, obtained two GST registrations in Jharkhand. One registration (GSTIN 20AAACD2086J2ZZ) was for services under the Reverse Charge Mechanism (RCM), and the other (GSTIN 20AAACD2086J1Z0) was for services under the Forward Charge Mechanism (FCM). Due to a bonafide mistake, the petitioner deposited Rs. 1,70,12,325/- (IGST, CGST, SGST) into the electronic cash ledger of the RCM registration instead of the FCM registration. After depositing the same amount again in the FCM registration's ledger to file GSTR-3B, the petitioner filed a refund application on April 18, 2021, for the excess balance. A show cause notice dated May 17, 2021, was issued regarding the refund application, alleging a mismatch in outward supply reporting between GSTR-1 and GSTR-3B. The petitioner replied, but the Assistant Commissioner rejected the refund application by an order dated June 14, 2021, citing grounds not present in the show cause notice, including obtaining two GSTINs for the same business vertical and place of business, and availing ITC improperly.

Key Issues

1. Whether the impugned order rejecting the refund application is liable to be quashed and set aside for being passed beyond the scope of the show cause notice, contrary to settled legal principles? 2. Whether the impugned proceedings are vitiated for violation of the principles of natural justice, specifically the absence of a proper show cause notice and an opportunity of hearing? Petitioner's Arguments: The petitioner contended that the show cause notice dated May 17, 2021, did not contain any allegations regarding contravention of Section 25(2) of the CGST Act concerning having two GSTIN numbers. Furthermore, the notice in Form GST-RFD-08 did not disclose specific reasons for the inadmissibility of the refund. The petitioner argued that the adjudicating officer passed the order in original on grounds that were never part of the show cause notice. The petitioner also argued that no personal hearing was granted, violating the principles of natural justice. Respondents' Arguments: The respondents contended that the show cause notice was duly uploaded on the petitioner's portal. They also argued that the department was unaware of the two GSTIN registrations at the time of issuing the show cause notice. The respondents' counsel was not in a position to dispute the petitioner's contention regarding the absence of specific contravention indicated in Form GST-RFD-08.