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2024 (4) TMI 211 - HC - GSTViolation of principles of natural justice - mandatory SCN was not served - provisional attachment of property - HELD THAT - The Central Board of Indirect Taxes and Customs has issued Master Circular No. 1053/2/2017-CX setting out detailed guidelines for the authorities under the Act as to how a show cause notice under Section 11A of Central Excise Act, 1944/ Section 73 of the Chapter V of the Finance Act, 1994 should be issued. In accordance with Section 6 thereof and Section 27 of the Bihar and Orissa General Clauses Act, 1917, the said circular will apply in the case of issuance of show cause notice under the Act - It further transpires from record that an admission in the hands of the answering deponent has been made to the effect that no opportunity of hearing was extended to the Petitioner. It is a settled proposition of law that any proceeding which has civil and penal consequences, principle of natural justice has to be read into before issuing a final order. From record it appears that the order impugned is dated 14.07.2020, which has never been served upon the petitioner in the manner prescribed under the Act and that too during the Covid-19 period. The power to attach the bank account has to be only by way of an order passed by the Commissioner in order to protect the interest of government revenue and the cash credit account not being as asset of the petitioner, the same could not have been attached in any eventuality. The exercise of power purportedly under Section 79 is nothing else, but a misuse of power vested in the authority under the Act. The respondents have failed to say and satisfy as to how the authority of law has been followed and when the petitioner has never been extended any opportunity of hearing before passing of the order complained of, nor have been communicated before attachment of the bank account. Now it is a settled principle of law that any authority has to follow the principle of natural justice and in the instant case the alleged show cause notice in terms of DRC-01 has been issued under Rule 142 of JGST Rule 2017, demanding tax, interest and penalty. However, from record it would transpire that the summary show cause notice in terms of Rule 142 (1) has not been complied with which is mandatory under Section 73/74 of JGST Act 2017. It is clear from the plain language of Section 83(2) of the CGST Act that the operation of an order provisionally attaching the bank account would cease to be operative after the expiry of the statutory period of one year. As stated hereinabove at best only the interest can be recovered from the petitioner for delay filing of return but demand of the entire amount is illegal and liable to be quashed and set aside. The impugned order/notice dated 14.07.2020 and subsequent GST DRC-07 dated 16.07.2020, are hereby, quashed and set aside. Consequently, the letter of attachment/ freezing bank account of the petitioner being account no. 07180500010245 with the UCO Bank, Tata Kandra Rd. Dist. Saraikela-Kharsawa, Jharkhand, is also quashed - matter is remitted back to the Adjudicating Authority to issue statutory notice to the petitioner and pass a fresh order with respect to interest after verifying the records after following due process of law strictly in accordance with the provisions of the Act. Application allowed.
Issues Involved:
1. Issuance of Show Cause Notice under Section 73(1) of the Jharkhand Goods and Services Tax Act, 2017. 2. Validity of Summary of Show Cause Notice in FORM GST DRC-01. 3. Opportunity of Hearing before fastening liability. 4. Quashing of order/notice dated 14.07.2020. 5. Validity of GST DRC-07 issued on 16.07.2020. 6. Authority of law in issuing Summary Notice and Summary Order. 7. Attachment of Cash Credit and Current Account. 8. Recall of attachment/freezing of bank account. 9. Attachment of Cash Credit Account. Summary: 1. Issuance of Show Cause Notice under Section 73(1): The petitioner argued that they were not served with the mandatory Show Cause Notice under Section 73(1) of the Jharkhand Goods and Services Tax Act, 2017, which is a jurisdictional notice. The court found that the proper officer acquires jurisdiction only after serving such a notice, which was not done in this case. 2. Validity of Summary of Show Cause Notice in FORM GST DRC-01: The petitioner contended that the Summary of Show Cause Notice issued under Rule 142(1) without the mandatory Show Cause Notice under Section 73(1) is void ab initio. The court agreed, noting that the provisions of Sections 73 and 74 are mandatory and were not complied with. 3. Opportunity of Hearing: The court observed that no opportunity of hearing was extended to the petitioner, which is a settled principle of law for any proceeding with civil and penal consequences. This lack of hearing rendered the proceedings void. 4. Quashing of order/notice dated 14.07.2020: The court found that the impugned order dated 14.07.2020 was never served upon the petitioner in the prescribed manner and was issued during the Covid-19 period. The order was quashed as it violated principles of natural justice. 5. Validity of GST DRC-07 issued on 16.07.2020: The court noted that the GST DRC-07 was issued manually, fastening liability under taxes, interest, and penalty without proper jurisdiction. This was deemed void ab initio. 6. Authority of law in issuing Summary Notice and Summary Order: The court held that the respondents failed to follow the authority of law, as the petitioner was not given any opportunity of defense/rebuttal before the issuance of the Summary Notice and Order. 7. Attachment of Cash Credit and Current Account: The court found that the attachment of the petitioner's Cash Credit and Current Account was beyond jurisdiction and a misuse of power, as it was done without any order passed by the Commissioner in Form GST DRC-01. 8. Recall of attachment/freezing of bank account: The court directed the respondents to recall the letter of attachment/freezing of the petitioner's bank account, as the attachment was not in compliance with Section 83 of the Act. 9. Attachment of Cash Credit Account: The court clarified that the Cash Credit Account is not an asset of the petitioner and cannot be attached. The exercise of power under Section 79 was deemed a misuse of authority. Conclusion: The court quashed the impugned order/notice dated 14.07.2020 and the subsequent GST DRC-07 dated 16.07.2020. The attachment/freezing of the petitioner's bank account was also quashed. The matter was remitted back to the Adjudicating Authority to issue a statutory notice and pass a fresh order with respect to interest after verifying records, following due process of law. The writ application was allowed.
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