Ms Ujjain Steel Processors Through Its Partner Vikash Kumar Singh vs. The State Of Jharkhand

Held

The Court held that the adjudication order dated 15.09.2020 was passed in utter violation of the principles of natural justice and the mandate of the JGST Act, specifically Section 75(4) and Section 75(5). The Court noted that no relied-upon documents were provided to the petitioner, nor was an opportunity for personal hearing granted. This obligation to serve documents and provide a hearing is a fundamental aspect of proceedings. The Court referred to the Supreme Court's decision in Ayaaubkhan Noorkhan Pathan Versus State of Maharashtra & Ors. and its own decision in M/s. Godavari Commodities Ltd. Vs. The State of Jharkhand & Ors. The Court also observed that no order sheet was drawn, and the respondent submitted that no record of assessment proceedings was maintained by the State Tax office. Consequently, the Court quashed and set aside the adjudication order dated 15.09.2020. The matter was remitted back to the concerned respondent to issue a fresh notice, provide relied-upon documents, grant a personal hearing, and pass a fresh order in compliance with the principles of natural justice and the provisions of Section 75(4) of the JGST Act. The issue regarding the blocking of the credit ledger was implicitly addressed by the remittance of the matter for fresh adjudication.

Facts

The petitioner, M/s. Ujjain Steel Processors, a partnership firm, challenged a show cause notice dated 30.07.2020 under Section 73(1) and Rule 142(1) of the Jharkhand Goods and Services Taxes (JGST) Act, and an ex-parte order dated 15.09.2020 under Section 73(9) of the JGST Act, along with DRC-07 dated 18.09.2020. The petitioner also sought to unblock their credit ledger, which was blocked on 14.02.2020 for Rs. 5,18,731/-. The dispute arose from the petitioner's purchase of steel worth Rs. 34,00,571/- (including tax) in March 2018 from M/s Maa Kali Steel. The department alleged that M/s Maa Kali Steel was a non-existing entity and the Input Tax Credit (ITC) availed by the petitioner was wrongly claimed. The credit ledger was blocked without prior notice. Subsequently, proceedings under Section 74(1) were dropped, and proceedings under Section 73(1) were initiated.

Key Issues

1. Whether the ex-parte adjudication order dated 15.09.2020, passed under Section 73(9) of the JGST Act, is liable to be quashed for violation of principles of natural justice, specifically for not providing an opportunity of hearing and not supplying relied-upon documents, as contended by the petitioner? 2. Whether the blocking of the petitioner's credit ledger on 14.02.2020, to the tune of Rs. 5,18,731/-, was justified and in accordance with the JGST Act, as argued by the petitioner? Petitioner's arguments: The petitioner contended that the initiation of proceedings under Section 73 indicated no fraud or willful misstatement. They argued that the supplier, M/s Maa Kali Steel, had a valid registration and filed returns, and its registration was active during the period of transaction (March 2018), only being cancelled later on 27.06.2019. The petitioner asserted that the adjudication order was passed ex-parte without providing an opportunity of hearing as required by Section 75(4) of the JGST Act, and without appreciating the documents on record or verifying electronic forms, merely on the direction of a superior authority. They relied on Annexures-6 and 7 (GSTR-1 and GSTR-3B of the supplier). They prayed for the quashing of the ex-parte order and remittance of the matter for adjudication following principles of natural justice. Revenue's arguments: The State argued that intelligence notes and scrutiny of returns revealed fraudulent availment of ITC by a non-existent dealer. They stated that an intimation under Rule 142(1)(a) was sent, but the petitioner did not pay the liability. A show cause notice under Section 73(1) and Rule 142(1) was issued, followed by an order under Section 73(9). The State denied the petitioner's claim of no proper opportunity of hearing, asserting that ample opportunity was given. They also argued that the writ application should be dismissed as an alternative remedy of appeal exists under the Act. However, the counsel could not produce any document showing that a personal hearing was granted.