M/S Thriveni Earthmovers Private Limited Through Shri Harish Agrawal vs. The State Of Jharkhand Deptt Of Finance Through The Principal Secretary

Held

The Court held that the impugned summary of show cause notice dated 03.11.2020, issued in Form DRC-01, was not a substitute for a proper show cause notice as required by Section 73 of the JGST Act read with Rule 142(1) of the JGST Rules. The respondents admitted that a detailed show cause notice was not served to the petitioner before the issuance of the summary notice. The Court reiterated that the law is well-settled by various judgments of this Court that a summary of show cause notice cannot be deemed as a proper show cause notice. Furthermore, the Court noted that in the case of M/s Godavari Commodities Ltd., it was held that a personal hearing is mandatory if the petitioner disputes the liability. The Court found that in the present case, neither a proper show cause notice was given nor a personal hearing was granted to the petitioner. This was considered a violation of the principles of natural justice and the mandatory procedure prescribed under law. Consequently, the Court quashed the summary of show cause notice, the impugned order, and the demand notice. The respondents were granted liberty to initiate fresh proceedings from the stage of issuing a show-cause notice in terms of Section 73 read with Rule 142(1) of the JGST Rules. The Court explicitly stated that it had not gone into the merits of the case.

Facts

M/s. Thriveni Earthmovers Private Limited (the petitioner) filed a writ application challenging an order dated 04.08.2021 and a demand notice in Form DRC-07 dated 05.08.2021, along with a summary of show cause notice dated 03.11.2020. The petitioner claimed these were issued without following the Jharkhand Goods and Service Tax (JGST) Act. The petitioner had claimed input tax credit (ITC) for the financial year 2019-20 on goods and services received in 2018-19, and also for invoices raised or goods received in 2019-20 for supplies made in 2018-19. This led to a mismatch between GSTR 2A and GSTR 3B returns. The State GST authority issued a summary of show cause notice alleging excess ITC of Rs. 5,60,47,266.51 for 2019-20. The petitioner contended that no proper show cause notice was served, only a summary, and that a personal hearing was not granted.

Key Issues

1. Whether the summary of show cause notice dated 03.11.2020, issued in Form DRC-01, can substitute for a proper show cause notice required under Section 73(1) of the JGST Act, read with Rule 142(1) of the JGST Rules? 2. Whether the impugned order dated 04.08.2021 and the demand notice dated 05.08.2021 are liable to be quashed for non-compliance with the principles of natural justice, specifically the absence of a proper show cause notice and a personal hearing? Petitioner's Arguments: The petitioner argued that the proceedings were not conducted in accordance with the JGST Act, as only a summary of show cause notice was issued, not a proper show cause notice under Section 73(1). They relied on Form ASMT-10, which indicated proceedings would be initiated if no explanation was received, but a detailed show cause notice was never served. The petitioner also contended that they were not afforded a personal hearing, which is mandatory under Section 75(4) and 75(5) of the Act. They cited judgments in M/s NKAS Service Private Ltd. Vs. State of Jharkhand & others and M/s Godavari Commodities Ltd. Vs. The State of Jharkhand & others, which held that personal hearing is mandatory. Respondents' Arguments: The respondents defended the impugned order, stating that a notice in Form ASMT-10 was served intimating discrepancies. Since the petitioner failed to respond, proceedings under Section 73 were initiated as per Section 61(3). While admitting that a proper show cause notice was not served before issuing the summary notice in Form DRC-01, they attempted to justify the action by stating that the gist of the acquisition was communicated through the summary notice. They also argued that prior to this Court's view, there was a general perception that a summary of show cause notice was sufficient for initiating proceedings under Section 73.