Laxmi Traders Proprietor Dipanshu Garg vs. Principal Commissioner Of GST Department Of Trade And Taxes & Anr.
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The petitioner, Laxmi Traders, proprietor Dipanshu Garg, challenged an order dated 07.02.2024 passed by the Principal Commissioner of GST Department of Trade and Taxes & Anr. This order created a demand against the petitioner and set off the same against blocked Input Tax Credit (ITC). The petitioner contended that no show cause notice or DRC-01 was issued prior to the impugned order. The respondents, through their counsel, admitted that no show cause notice appeared to have been issued to the petitioner before the impugned order was passed. A prior show cause notice dated 16.06.2023 proposing cancellation of GST registration was dropped on 25.08.2023.
Held
The Court held that the impugned order dated 07.02.2024 was liable to be set aside on the technical ground of non-issuance of a show cause notice prior to its passing. The Court noted that Section 73 of the Central Goods and Services Tax Act, 2017, mandates the issuance of a show cause notice before passing an order creating a demand. Since it was admitted by the respondents that no such notice was issued, the order was quashed on the ground of infraction of the principles of natural justice. The Court clarified that it had not considered or commented on the merits of the contentions of either party. The respondents were granted the liberty to pass an appropriate order after issuing a proper show cause notice and providing an opportunity of personal hearing to the petitioner. All rights and contentions of the parties were reserved.
Key Issues
1. Whether the impugned order dated 07.02.2024, purportedly passed under Section 73 of the Central Goods and Services Tax Act, 2017, is liable to be set aside on the ground of violation of principles of natural justice, specifically for non-issuance of a show cause notice prior to its passing? Petitioner's arguments: The petitioner argued that the impugned order is bad in law as it was passed without issuing a show cause notice or DRC-01, thus violating the principles of natural justice. They relied on the mandate of Section 73 of the Act requiring such notice. Respondents' arguments: The respondents, through their counsel, conceded that there did not appear to be any show cause notice or DRC-01 issued to the petitioner prior to the passing of the impugned order.
Sections Cited
Section 73
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Cause title — parties, addresses and appearances
JUDGMENT SANJEEV SACHDEVA, J. (ORAL)
Petitioner impugns order dated 07.02.2024, whereby a demand has been created against the petitioner and the same has been set off against blocked ITC.
Issue notice. Notice is accepted by learned counsel appearing for respondents.
With the consent of parties, petition is taken up for final disposal. W.P. (C) 4977/2024 4. Learned counsel for respondent No.1, under instructions submits that there does not appear to be any show cause notice or DRC-01 issued to the petitioner prior to passing of the impugned order.
The impugned order is purportedly an order passed under Section 73 of the Central Goods and Services Tax Act, 2017 [“the Act”], creating a demand.
Section 73 of the Act mandates issuance of show cause notice prior to passing an order creating a demand. In the instant case, admittedly, no show cause notice was issued to the petitioner prior to impugned order being passed.
A show cause notice dated 16.06.2023 was issued proposing to cancel the GST registration of the petitioner, however, the said proceedings were dropped by order dated 25.08.2023 upon consideration of the reply of the petitioner.
Since no show cause notice was issued prior to passing of impugned order, on the said technical ground alone, this order is liable to be set aside. The same is accordingly quashed.
It is clarified that it would be open to the respondents to pass an appropriate order after giving a proper show cause notice and an opportunity of personal hearing to the petitioner.
It is clarified that this Court has neither considered nor commented on the merits of contentions of either party and the W.P. (C) 4977/2024 impugned order has been set aside solely on the ground of infraction of principles of natural justice. All rights and contentions of the parties are reserved
Petition is accordingly disposed of in the above terms. SANJEEV SACHDEVA, J RAVINDER DUDEJA, J APRIL 05, 2024/vp
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.