Ms Shyam Hardware Store Through Its Proprietor Radhe Shyam Modi vs. The State Of Jharkhand Through The Secretary Cum Commissioner State Tax Department

Held

The Court held that the respondents had unsuccessfully attempted to defend their actions. The Court found that the respondents' assertion that the concluding paragraphs of the inspection report should be treated as a notice under Section 73 was untenable. The inspection report merely informed the petitioner that proceedings would be initiated if they failed to appear, and did not constitute a proper show-cause notice. The Court noted that the petitioner had appeared as directed and there was no indication of non-appearance. The Court further held that the respondents' argument of a 'deemed notice' was unacceptable, especially when principles of natural justice were at stake. Citing Rule 142 of the JGST Rules, 2017, which prescribes the procedure for issuing notices under Section 73, the Court stated that any 'deemed notice' not adhering to this rule would be invalid. The Court relied on its previous judgment in M/s Godavari Commodities Ltd. Vs. the State of Jharkhand & Ors., which held that any order passed without complying with Rule 142 is against natural justice and non-est in the eyes of law. Consequently, the Court quashed the summary of orders in Form GST DRC-07 and summary of rectification/withdrawal orders in Form GST DRC-08 for the financial years 2017-18, 2018-19, and 2019-20. The respondents were granted liberty to initiate fresh proceedings by issuing a proper show-cause notice and following the prescribed procedures and principles of natural justice. No finding was given regarding the financial year 2020-21.

Facts

The petitioner, M/s Shyam Hardware Store, filed a writ application challenging summary orders in Form GST DRC-07 dated 04.12.2020 and summary of rectification/withdrawal orders in Form GST DRC-08 dated 07.12.2020, issued by Respondent No. 5. These orders, pertaining to tax periods 2017-18, 2018-19, 2019-20, and 2020-21, directed payment of tax, interest, and penalty based on an alleged adjudication order by Respondent No. 3. The petitioner contended that these actions were illegal and arbitrary, violating the JGST Act and principles of natural justice. The dispute arose from an inspection conducted on 11.01.2020, which reported discrepancies in stock and failure to declare an additional place of business. The petitioner was directed to appear before the Joint Commissioner of State Tax (Admin) on 17.01.2020, failing which proceedings under Sections 73, 50(1), and 125 of the JGST Act would be initiated.

Key Issues

1. Whether the summary of orders in Form GST DRC-07 and summary of rectification/withdrawal orders in Form GST DRC-08, issued by Respondent No. 5, are illegal and arbitrary for being passed in violation of the JGST Act and principles of natural justice, specifically concerning the alleged adjudication order passed by Respondent No. 3 under Section 61 & 73 of the JGST Act? Petitioner's arguments: The petitioner argued that no pre-show cause notice in Form GST DRC-01A was issued, nor was a show-cause notice under Section 73(1) of the JGST Act served. This prevented the petitioner from filing objections and prejudiced them due to a violation of natural justice. The petitioner also questioned the jurisdiction of the proper officers. Revenue's arguments: The State relied on the supplementary counter affidavit, arguing that the concluding paragraphs of the inspection report dated 11.01.2020, which mentioned potential proceedings under Sections 73, 50(1), and 125 of the JGST Act, should be treated as a notice already issued and served upon the petitioner. They further contended that these directions in the inspection report should be deemed as a notice.