Elesh Agrawal vs. Union Of INDIA And 2 Others
Original PDF →Facts
The petitioner, Elesh Agrawal, challenged a demand-cum-notice to show cause (No. 59/2022-23, dated 24.02.2023) issued in Form GST DRC-01, read with Rule 142(1) of the Central GST Act, 2017. The notice proposed penalties totaling Rs. 10,50,50,0498/- under Section 142(1A) and Rs. 25,000/- each under Section 142(3)(a) and (d). The petitioner argued the notice was premature as it was issued before a regular adjudication notice and before being offered the opportunity under Section 74(5) to pay the defaulted amount on a self-assessed basis. The petitioner also contended the notice was not uploaded on the GST portal and not served electronically. The revenue argued that since the petitioner disputed the entire liability, adjudication was necessary, and the use of Form GST DRC-01 instead of DRC-01A caused no real prejudice.
Held
The Court held that while the revenue authorities are obligated to provide a reasonable opportunity of hearing and issue a preliminary notice in the prescribed Form GST DRC-01A, the objection regarding the form number in this case was hyper-technical and not a substantial defect. The Court noted a material distinction from the *Agrometal Vendibles Private Limited* case, where a firm demand had already been created. In the present case, the notice clearly indicated that the petitioner was being asked to show cause why such a demand should not be created, and no firm demand had been established. Since the petitioner disputed the entire penalty amount and did not admit any allegations, the requirement for a preliminary notice under Section 74(5) was rendered largely formal, and its absence did not cause real prejudice. The Court found no good ground to interfere on merits. However, to ensure justice, the petitioner was granted one month to file a reply to the show cause notice. The revenue authorities were directed to upload all required documents on the GST portal and communicate them electronically within 48 hours and to maintain such communication channels for all future proceedings.
Key Issues
1. Whether the demand-cum-notice issued in Form GST DRC-01, instead of Form GST DRC-01A, is a fatal defect rendering the proceedings premature, particularly when the petitioner disputes the entire tax liability and has not been offered the opportunity to pay on a self-assessed basis under Section 74(5) of the CGST Act, 2017? Petitioner's arguments: The notice is premature because the revenue authorities failed to issue a preliminary notice in the prescribed Form GST DRC-01A, as mandated by Section 74(5) of the CGST Act, 2017, which requires offering an opportunity to pay the defaulted amount with interest and penalty on a self-assessed basis before initiating adjudication. The petitioner relied on the Gujarat High Court's decision in *Agrometal Vendibles Private Limited Vs. State of Gujarat*. Additionally, the petitioner argued that the notice was not uploaded on the GST portal and not served electronically, further invalidating the proceedings. Revenue's arguments: The discrepancy in the form number is a technicality and does not cause real prejudice, especially since the petitioner disputes the entire tax liability and is not seeking to avail the opportunity to pay on a self-assessed basis. Adjudication proceedings have become necessary. Any errors regarding portal upload or electronic communication would be rectified within 48 hours, and all future proceedings would comply with the law.
Sections Cited
Section 74(5), Section 142(1A), Section 142(3)(a), Section 142(3)(d), Rule 142(1)
AI-generated summary — verify with the full judgment below
Neutral Citation No. - 2023:AHC:121765-DB Court No. - 42 Case :- WRIT TAX No. - 753 of 2023 Petitioner :- Elesh Agrawal Respondent :- Union Of India And 2 Others Counsel for Petitioner :- Dileep Chandra Mathur Counsel for Respondent :- A.S.G.I.,Dhananjay Awasthi,Gopal Verma Hon'ble Saumitra Dayal Singh,J. Hon'ble Rajendra Kumar-IV,J.
Heard Sri Dileep Chandra Mathur, learned counsel for the petitioner, Sri Dhananjay Awasthi, learned counsel for the revenue and Sri Gopal Verma, learned counsel for the Union of India.
Present petition has been filed to challenge demand cum notice to show cause no. 59/2022-23, dated 24.02.2023 issued on Form GST DRC-01 read with Rule 142 (1) of Central GST Act, 2017. 3. Amongst other that notice is issued to the petitioner. Perusal of the same reveals, by means of contents of paragraph-1 and 2 of that notice, the petitioner has been required to show cause with respect to three penalties proposed to be imposed on the petitioner for Rs. 10,50,50,0498/-, under Section 142(1A) and Rs. 25,000/- each under Section 142 (3) (a) and (d), respectively.
Submission of learned counsel for the petitioner is, present notice has been issued prematurely, before any regular show cause notice may have been issued in any adjudication proceedings. By virtue of Section 74(5) of the Act, revenue authorities were bound to allow the petitioner opportunity to pay up the alleged defaulted amount together with penalties etc., on self assessed basis. If that amount were to be paid by the assessee, no adjudication
proceeding may arise. Here, it has been submitted, clearly, that opportunity has been denied, inasmuch as the show cause notice has been issued on Form GST DRC-01 and not Form GST DRC- 01A. The issue is stated to be dealt with squarely by a Division Bench decision of the Gujarat High Court in Agrometal Vendibles Private Limited Vs. State of Gujarat; R/Special Civil Application No. 6919 of 2022, dated 7.4.2022. 5. The other grievance of the petitioner is that above demand cum notice has not been uploaded on the GST portal and that no notice came to be served on the petitioner through electronic means. Thus, the proceedings are stated to be premature.
On the other hand, learned counsel for the revenue would submit, discrepancy in form description apart, the impugned notice does not suffer from any defect, inasmuch as the petitioner is not desirous of availing any opportunity to pay up defaulted amount or any part thereof, on his own. Here, the petitioner is described to have disputed the entire tax liability. Therefore, it has been submitted, adjudication proceedings have become necessary. At present, no real prejudice has been caused to the petitioner for reason of the discrepancy alleged in issuance of show cause notice on Form GST DRC-01 in place of Form GST DRC-01A. Upon further query made, he states, as of now, no adjudication order has been passed.
As to the other submission advanced by learned counsel for the petitioner, Sri Awasthi assures the Court that error, if any attributable to the GST authorities, would be rectified within 48 hours such that all information required to be uploaded on the GST portal and required to be communicated to the petitioner through electronic means, would be so uploaded and communicated, in accordance with law. Sri Awasthi further assures that the entire proceedings shall henceforth be carried out after complying with all provision and rules made thereunder.
Having heard learned counsel for the parties and perused the record, while it is true that revenue authorities must give reasonable opportunity of hearing in adjudication proceedings, and further preliminary notice may be issued not on Form GST DRC- 01 but on Form GST DRC-01A, as that is the prescribed form, at the same time, in the context of the present facts, that objection appears to be hyper technical and not real.
On pointed query, Sri Mathur states that in the present case, the petitioner is disputing the entire amount of penalty proposed to be imposed. Clearly, the petitioner does not admit any fact allegations being levelled against him. Therefore, the requirement of preliminary notice has largely been rendered formal. If issuance of such notice would not have served any benefit to the assessee, it would be futile on the part of the writ-Court to enforce on the revenue authorities fulfilment of that condition, in the present case, at this stage. No real prejudice has been caused to the petitioner.
Then, there is a material fact distinction in Agrometal Vendibles Private Limited (supra) and the present case. There, not only the first notice had been issued on Form GST DRC-01 but the authority chose to create a firm demand of tax and penalty. That has been duly extracted in the order of the Gujarat High Court. There exists no doubt as to its absence in the present case. No such firm demand has been created. Recitals contained in the notice clearly indicate, at present, the petitioner has been required to show cause, why such demand may not be created. Mere mention of wrong form number, without anything more, may not be fatal to the proceedings.
In view of the above, no good ground is made out to offer any interference on merits, in exercise of extra-ordinary juri iction under Article 226 of the Constitution of India. Thus, prayer made in the writ petition is declined.
At the same time, to ensure that the interest of justice is met, considering the entirety of the submission advanced by the learned counsel for the petitioner and as prayed by learned counsel for the petitioner, a month's time is granted to the petitioner, to file reply to the show cause notice.
Accordingly, the writ petition is disposed of with the direction, the petitioner may file reply to the impugned show cause notice within a period of one month i.e. not later than 30.06.2023. 14. In the meanwhile, the revenue authorities will ensure that all documents required to be uploaded on the GST portal and required to be communicated to the petitioner through electronic mode may be uploaded and communicated within 48 hours. Also, the revenue authorities shall ensure that such communication channels are maintained and all communications pertaining to the pending proceedings are served through electronic mode, and the proceedings are conducted and concluded, in accordance with law. Order Date :- 31.5.2023 SA (Rajendra Kumar-IV, J.) (S. D. Singh, J.) SALMAN ALI High Court of Judicature at Allahabad
Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.