M/S. Rasathe Garments vs. The State Tax Officer (St) (Inspn)

Held

The Court held that there is no embargo under the GST enactments on an inspecting officer issuing a Show Cause Notice or adjudicating an issue, provided such officer qualifies as a 'proper officer' under Section 2(91) of the TNGST Act, 2017. The Court acknowledged that the impugned Circular No. 13/2022-TNGST was issued with the intention of eliminating the scope of bias by clarifying the roles of inspecting and adjudicating officers, as detailed in paragraphs 3 and 4 of the circular. Therefore, the Court found no merit in the challenge to the Show Cause Notice and the Circular. However, to ensure adherence to the procedures outlined in the impugned Circular, the Court directed the State Tax Officer (ST) (Inspn.) to transmit the Show Cause Notice to the jurisdictional proper officer for adjudication within two weeks. The proper officer was directed to pass orders on merits within 90 days thereafter, after hearing the petitioner, who was granted 30 days to file a reply.

Facts

M/s. Rasathe Garments (the petitioner) filed two writ petitions. The first petition challenged a Show Cause Notice in Form GST DRC-01 dated September 25, 2023, issued by the State Tax Officer (ST) (Inspn.) following an inspection between June 14-16, 2023. The second petition challenged the vires of Circular No. 13/2022-TNGST dated November 8, 2022, issued by the Commissioner of Commercial Taxes. The petitioner argued that a prior circular (Circular No. 23/2021) had established a procedure where inspection reports were to be sent to the jurisdictional officer for adjudication if adjudication had not been initiated by the inspecting officer. The impugned circular withdrew the earlier one, and the petitioner contended this created scope for bias. The respondent argued that the inspecting officer was a proper officer under Section 2(91) of the TNGST Act and had the authority to issue the notice and adjudicate.

Key Issues

1. Whether the impugned Show Cause Notice in Form GST DRC-01 dated 25.09.2023, issued by the State Tax Officer (ST) (Inspn.), is liable to be quashed on the grounds of potential bias, considering the withdrawal of Circular No. 23/2021 and the issuance of Circular No. 13/2022-TNGST? (Question of law) 2. Whether the impugned Circular No. 13/2022-TNGST dated 08.11.2022, issued by the Commissioner of Commercial Taxes, is ultra vires or liable to be quashed? Petitioner's arguments: The petitioner argued that the withdrawal of Circular No. 23/2021, which mandated the transfer of adjudication to jurisdictional officers in certain cases, and the subsequent issuance of Circular No. 13/2022-TNGST, created a scope for patent bias. They relied on the principles outlined in the withdrawn Circular No. 23/2021 regarding the segregation of inspection and adjudication roles. Respondent's arguments: The respondent contended that the inspecting officer was a proper officer as defined under Section 2(91) of the TNGST Act, 2017, and therefore had the authority to issue the Show Cause Notice and adjudicate the matter. They argued that the impugned Circular No. 13/2022-TNGST provided adequate safeguards, referencing paragraphs 3 and 4 of the circular.