Ms Sona Traders Through Its Proprietor Nandlal Prasad Gupta vs. The State Of Jharkhand Through The Secretary Cum Commissioner State Tax Department
Original PDF →Facts
M/s. Sona Traders, a proprietorship firm, inadvertently used its GSTIN for its mining business (M/s. Sona Stone Chips) on tax invoices issued by its supplier, Hindustan Coca-Cola Beverages Private Limited, for the period April 2018 to July 2018. This led to excess Input Tax Credit (ITC) being auto-populated in the petitioner's GSTR-2A. The petitioner was issued FORM GSTR ASMT-10 for excess ITC, followed by DRC-01 and an adjudication order dated December 5, 2019, with a summary uploaded on December 12, 2019. Subsequently, a garnishee notice was issued on February 15, 2021, to the petitioner's banker for an amount of Rs. 31,54,892.30. The petitioner contended that the proceedings were conducted without proper opportunity of hearing and without following the prescribed procedure under the JGST Act.
Held
The Court held that the adjudication proceedings violated the principles of natural justice and the procedure prescribed under the JGST Act. Specifically, it was found that after the issuance of ASMT-10, no proper show cause notice was issued under Section 73(1) of the JGST Act. Instead, a summary of the show cause notice was issued in DRC-01, which the Court held cannot be a substitute for a proper show cause notice. Furthermore, the summary of the show cause notice did not provide a specific date for the petitioner to furnish a reply, leading to a violation of natural justice. The Court relied on its previous decisions in M/s NKAS Services Private Limited v. State of Jharkhand & Ors. and M/s Godavari Commodities Ltd. versus The State of Jharkhand & Ors. The Court refrained from commenting on the merits of the case, confining its interference to the procedural violations. Consequently, the adjudication order dated December 5, 2019, the summary of the order dated December 12, 2019, and the garnishee notice dated February 15, 2021, were quashed. However, the authorities were permitted to issue a proper show cause notice under Section 73(1) and conclude proceedings in accordance with the law and prescribed time limits.
Key Issues
1. Whether the summary of show cause notice issued in DRC-01, instead of a proper show cause notice under Section 73(1) of the JGST Act, 2017, violates the principles of natural justice and the procedure prescribed by law? 2. Whether the adjudication order passed without providing the petitioner with an adequate opportunity to file a reply and be heard, as required by Section 75(4) of the JGST Act, 2017, is vitiated? Petitioner's Arguments: The petitioner argued that no proper show cause notice under Section 73(1) was issued, and the summary in DRC-01 was insufficient. They contended that an opportunity of hearing should have been provided under Section 75(4). The excess ITC arose from an inadvertent error by their supplier due to two GSTINs appearing under the same firm name, which could have been explained if an opportunity was given. They relied on the case of M/s NKAS Services Private Limited v. State of Jharkhand & Ors. Respondents' Arguments: The respondent State argued that the petitioner could have corrected errors within the prescribed time and failed to establish any technical glitch. They invoked Section 160 of the JGST Act, stating that proceedings should not be invalidated due to minor mistakes if they conform to the Act's intent. They also argued that the garnishee notice was issued under Section 79(1)(c) as the petitioner failed to deposit the tax liability after DRC-07, and the petitioner had a statutory remedy of appeal which was not availed.
Sections Cited
Section 73, Section 75(4), Section 160, Section 79(1)(c), Section 107, Rule 99(1)
AI-generated summary — verify with the full judgment below
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(T) No. 1824 of 2021
M/S. SONA TRADERS, a proprietorship firm, having its principal place of business at Japla Road, Chhattarpur, P.O. & P.S. Chhattarpur, District- Palamau-822113, through its Proprietor, namely, Nandlal Prasad Gupta, aged about 46 years, son of Late Baijnath Prasad Sahu, resident of Japla Road, Chhattarpur, P.O. & P.S. Chhattarpur, District Palamau-822113 (Jharkhand).
..… Petitioner
Versus
The State of Jharkhand through the Secretary-cum-Commissioner, State Tax Department, having its office at Project Building, P.O. Dhurwa, P.S. Jagannathpur, District Ranchi-834004 (Jharkhand).
Joint Commissioner of State Tax (Administration), Ranchi Division, Ranchi, P.O. G.P.O, P.S. Kotwali, District Ranchi-834001 (Jharkhand).
Deputy Commissioner of State Tax, Palamu Circle, Daltonganj, P.O. & P.S. Medininagar, District Palamu at Daltonganj (Jharkhand).
Assistant Commissioner of State Tax, Palamu Circle, Daltonganj, P.O. & P.S. Medininagar, District Palamu at Daltonganj (Jharkhand).
Sales Tax Officer of State Tax, Palamu Circle, Daltonganj, P.O. & P.S. Medininagar, District Palamu at Daltonganj (Jharkhand).
..... Respondents
--------- CORAM: Hon’ble Mr. Justice Aparesh Kumar Singh
Hon’ble Mr. Justice Deepak Roshan
---------
For the Petitioner
: Mr. Ranjeet Kushwaha, Advocate For the Respondents : Mr. Deepak Kr. Dubey, AC to AAG-II
--------- 07/ 28.07.2022
Heard learned counsel for the parties.
Petitioner M/s. Sona Traders is a proprietorship concern, having GSTIN Registration No. 20AJBPG8127C2ZY. It is engaged in the business of trading of food grains and is also a dealer of Hindustan Coca-Cola Beverages Private Limited. The proprietor of this petitioner firm is also engaged in business of mining and is holder of stone mining lease in the district of Palamau carried in the proprietorship, name and style of M/s. Sona Stone Chips. The registration certificate for the mining business was inadvertently issued in the name of M/s. Sona Traders instead of M/s. Sona Stone Chips vide registration No. 20AJBPG8127C1ZZ. After noticing this inadvertent error in the GSTIN registration certificate, on-line application was made by the proprietor on 18th November, 2017 for amendment of the registration
-2- certificate by changing the name of the firm pertaining to mining business from M/s. Sona Traders to M/s. Sona Stone Chips. Pursuant thereto, the registration certificate of M/s. Sona Traders was amended and the amended registration certificate in the name of M/s. Sona Stone Chips was issued on 9th July, 2018. During the period April, 2018 to July, 2018, two separate GSTIN numbers, but both in the name of M/s. Sona Traders were occurring. Resultantly, petitioner’s supplier Hindustan Coca-Cola Beverage Private Limited entered the GSTIN number of the mining business in the Tax invoices for the period April, 2018 to July, 2018. Because of this error, in its return in GSTR-1 for the said period petitioner got excess ITC as was auto populated in the GSTR-2A of the petitioner firm. Since GSTR-2 and GSTR-1A had not been put into place, the petitioner could not make any correction on its own. Since GSTR-2 and GSTR-1A were not brought into effect as required under Sections 37 and 38 of the JGST Act, 2017, such error could neither be discovered immediately nor corrected by the petitioner.
Thereafter, on detecting excess ITC in the electronic credit ledger of the petitioner firm, FORM GSTR ASMT-10 was issued upon scrutiny of his returns in exercise of the power under Section 61 of the JGST Act read with Rule 99 (1) of the JGST Rules, 2017 intimating the petitioner that the petitioner has the ITC in its GSTR-3B return in excess of the amount of ITC reflected in its GSTR-2A Statement. Petitioner contends that this notice was not received by it. Thereafter, DRC-01 was issued upon the petitioner on 9th July, 2019 to which petitioner could not reply because father of the proprietor was not well. The petitioner was taken by utter surprise on issuance of a garnishee notice on 15th February, 2021 (Annexure-9) upon its banker-
-3- State Bank of India, Palamau branch in form GST DRC-13 bearing reference No. 69 asking the banker to attach a sum of Rs. 31,54,892.30/- as liability of the petitioner to the State exchequer. Petitioner’s banker was directed to discharge the said liability.
Summary of the order dated 12th December, 2019 was uploaded on the GSTIN portal of the petitioner. Petitioner applied for obtaining the certified copy of the adjudication order dated 5th December, 2019 on 20th February, 2021 and the same was issued on 20th February, 2021. On the basis of these chronology of dates and events it is contended by the petitioner that the proceedings have been conducted without following the procedure prescribed under the JGST Act and without any opportunity of hearing to the petitioner. The certified copy of the order at Annexure-12 shows that after ASMT-10 was issued on 18th June, 2019 (Annexure-7). No show cause notice was issued under Section 73 (1) instead the order dated 7th September, 2019 shows that summary of the show cause has been issued in DRC-01 which is reflecting the difference of Tax liability including interest under Section 50 of the JGST Act together with the penalty. However, on the next date, 5th December, 2019, the summary of this order was issued in DRC-07 showing tax liability of Rs.31,54,892.30/- including interest @ 18% per annum under Section 50 of the Act and penalty under Section 73 (9). Thereafter, the garnishee notice was issued on 15th February, 2021 upon the petitioner’s banker.
Learned counsel for the petitioner has submitted that the order sheet of the adjudication proceedings (Annexure-12) indisputably shows that no proper show cause notice was given to the petitioner under Section 73 (1) of the Act which is a requirement of the law as -4- held in the case of M/s NKAS Services Private Limited v. State of Jharkhand & Ors. reported in 2021-VIL-732-Jhr. Petitioner ought to have been given at least three opportunities to furnish its reply and since an adverse order was being passed an opportunity of hearing also ought to have been given in terms of Section 75 (4) of the JGST Act, 2017. The reflection of excess ITC in the GSTR-2A of the petitioner not corresponding to the GSTR-3B return filed by the petitioner for the said period is not on account of any error on the part of the petitioner but on account of the two GSTIN numbers reflecting in the case of the same petitioner firm at the relevant point of time which led to inadvertent filling up of GSTIN number and the name of the petitioner firm by one of its supplier-M/s Coca-Cola Beverage Limited. This inadvertent error by the petitioner’s supplier has led to reflection of excess ITC in the petitioner’s electronic credit ledger to which petitioner is not liable or entitled to avail. This error could have been easily corrected had proper opportunity been given to the petitioner to explain. Department itself made amendment in the name of the petitioner firm as GSTIN number of the two firms were shown in the name of the same petitioner. The impugned proceedings have led to serious violation of principles of natural justice, therefore, the petitioner has approached this Court.
Learned counsel for the respondent State has referred to the counter affidavit of the respondents. As per the statements made therein petitioner could have well corrected the errors within the prescribed time limit in its GST-3B return. Petitioner has failed to establish any technical glitch in the GSTIN portal. The ITC claimed in the GSTR-3B return was more than as reflecting in GSTR-2A
-5- statement. This situation has arisen due to the lapses committed by the petitioner. Section 160 of the JGST Act provides that no assessment proceeding would be invalid on certain grounds, such as by reason of any mistake, defect or omission therein, if such assessment, re- assessment, adjudication, review, revision, appeal, rectification, notice, summons or other proceedings are in substance and effect in conformity with or according to the intents, purposes and requirements of this act or any existing law. The service of notice or communication shall also not be called in question as if the notice, order etc. has already been acted upon by the person to whom it was issued or where such service has not been called in question at or in the earlier proceedings commenced, continued or finalized pursuant to such notice. Petitioner, having failed to deposit the tax liability after issuance of DRC-07 on 18th December, 2019, the department had no other option than to issue the garnishee notice under Section 79 (1) (c) of the JGST Act upon the petitioner’s banker. Petitioner also had a remedy of statutory appeal which he has failed to avail.
Learned counsel for the petitioner submits that the period for filing appeal was going to expire during the COVID period on 17th April, 2020 as provided under Section 107 of the JGST Act and since the period of limitation has been extended by the Apex Court in suo- motu writ petition SMWP (C) No. 3 of 2020 vide order dated 23rd March, 2020 and subsequent orders, there was no delay in filing the writ petition on 17th April, 2021. If the matter is remanded to the adjudication authority, petitioner is in a position to demonstrate its bonafide and seek all relief available in law and facts.
We have considered the submission of learned counsel for -6- the parties and taken note of the materials placed on record. The conspectus of facts and the pleadings and the record of proceedings at Annexure-12 do substantiate the case of the petitioner that after issuance of ASMT-10 no show cause notice in terms of Section 73 (1) was issued upon the petitioner as per order dated 7th September, 2019. Instead, summary of the show cause notice was issued in DRC-01. Thereafter, the adjudication order has been passed on 5th December, 2019 and summary of the order has been issued straightaway in DRC-
Petitioner has contended that because of certain illness in his family the reply to summary of show cause notice could not be filed but the respondents have also not given further opportunity to file reply in terms of Section 74 (4) of the JGST Act. This Court has, in the case of M/s NKAS Services Private Limited v. State of Jharkhand & Ors. (W.P.(T) 2444 of 2021), has categorically held that the summary of show cause notice cannot be a substitute to the show cause notice. Similar view has been expressed by this Court in the case of M/s Godavari Commodities Ltd. versus The State of Jharkhand & Ors. (W.P.(T) No. 3908 of 2020 with 3909 of 2020). The summary of the show cause notice also does not give any date on which reply could be furnished by the petitioner (Annexure-8). In effect, the procedure prescribed under Section 73 of the JGST Act has not been followed. In absence of proper date for furnishing reply in the summary of show cause notice, principles of natural justice stood violated. We, however, refrain from making any comments on the merits of the case of the petitioner as the grounds of interference in the impugned order and the adjudication proceedings are confined to the violation of principles of natural justice and procedure prescribed under the JGST Act, 2017. -7-
Having regard to the aforesaid facts and circumstances and the reasons recorded above, the adjudication order dated 5th December, 2019 (Annexure-10), the summary of the order dated 12th December, 2019 (Annexure-11) and the garnishee notice dated 15th February, 2021 (Annexure-9) are quashed. However, it is permissible for the authorities to issue proper show cause notice under Section 73 (1) of the JGST Act, 2019 and conclude the proceedings in accordance with law within the time limit prescribed under the Act.
This writ petition is allowed in the manner and to the extent indicated herein above.
(Aparesh Kumar Singh, J.)
(Deepak Roshan, J.)
sm/pramanik
Reproduced from the public record of the Jharkhand High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.