Ms Shyam Udyog Through Its Sole Proprietor Mr Suresh Kumar Agarwal vs. The State Of Jharkhand Through The Commissioner State Goods And Service Tax

Held

The Court held that the adjudication proceedings were vitiated due to the non-compliance with the principles of natural justice. Specifically, it was found that proper show-cause notices in terms of Section 73(1) of the JGST Act were not issued; instead, only a summary of the show cause notice in GST DRC-01 was issued, which the petitioners claimed was never served. This aligns with the Court's previous ruling in *NKAS Service Private Ltd. Vs. State of Jharkhand & Ors.*. Furthermore, the Court noted that in none of the cases was a personal hearing granted to the petitioners, which is a mandatory requirement under Sections 75(4) and 75(5) of the JGST Act when an adverse order is to be passed. The Court referred to its judgment in *Unity Infraprojects Ltd. Vs. State of Jharkhand Ors.*, emphasizing that passing an adjudication order without following the prescribed procedure, including providing opportunities for reply and personal hearing, vitiates the proceedings. Consequently, the summary show cause notices (DRC-01), summary orders (DRC-07), and all consequential adjudication orders were quashed and set aside. The Court also took note of the Supreme Court's decision in *FILCO Trade Centre Pvt. Ltd.*, allowing a window period for filing or revising TRAN-1/TRAN-II forms, and directed that the petitioners would be entitled to revise their TRAN-1 forms to claim short-claimed ITC or correct any excess claims within the extended period granted by the Apex Court. The respondents were directed to abide by the Ministry of Finance Circular No.182/14/2022-GST dated 10.11.2022 and proceed accordingly after scrutiny of any revised TRAN-1 forms.

Facts

The petitioners, M/s Vinayak Metal and Chemicals and others, challenged summary notices (GST DRC-01) and summary orders (DRC-07) issued under the Jharkhand Goods and Services Tax (JGST) Act, 2017, and consequential proceedings. They also sought directions to unblock their Input Tax Credit (ITC) from their Electronic Credit Ledger. The petitioners, previously registered under the Value Added Tax (VAT) regime, migrated to GST and filed TRAN-1 forms to carry forward excess ITC. In one case, M/s Vinayak Metal and Chemicals, an inadvertent mistake in claiming ITC was identified, and a request to revise TRAN-1 was denied. The petitioners allege that proper show-cause notices were not served, and personal hearings were not granted, violating principles of natural justice. The respondents contended that an alternative remedy of appeal was available and that ITC was blocked under Rule 86A.

Key Issues

1. Whether the summary notices in Form GST DRC-01, issued under Rule 142 of the JGST Rules, and the subsequent summary orders in Form DRC-07, vitiated the adjudication proceedings due to non-compliance with statutory provisions regarding the issuance and service of show-cause notices under Section 73(1) of the JGST Act? 2. Whether the adjudication orders passed without granting personal hearing opportunities, as mandated by Sections 75(4) and 75(5) of the JGST Act, violated the principles of natural justice? Petitioner's Arguments: The petitioners argued that the proceedings were vitiated due to the non-compliance of statutory provisions, specifically the issuance of a summary of show cause notice (DRC-01) instead of a proper show-cause notice under Section 73(1) of the JGST Act, which they claim was never served. They relied on this Court's judgments in *NKAS Services Pvt. Ltd. Vrs. State of Jharkhand & Ors.* and *M/s Unity Infraproject Ltd. Vrs. State of Jharkhand & Ors.*. They also highlighted the Supreme Court's decision in *Union of India & Anr. Vrs. FILCO Trade Centre Pvt. Ltd. &Anr.*, which allowed a window period for filing or revising TRAN-1/TRAN-II forms, and argued that the impugned orders prevented them from availing this liberty. Respondents' Arguments: The respondents contended that an alternative remedy of appeal under Section 107(1) of the GST Act was available. They also stated that since no documents were made available despite DRC-01 being uploaded, the final order was passed. They asserted that ITC was blocked in terms of Rule 86A and that show cause notices were issued via email, with petitioners appearing and producing invoices.