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2025 (5) TMI 1611 - HC - GSTDemand of GST along with interest and penalty - wrongly availed or utilized input tax credit - Show Cause Notice issued subsequent to the issuance of the order in Form DRC-07 - Violation of the principles of natural justice - Validity and Jurisdiction of the Show Cause Notice and Order under Section 74 of HPGST/CGST Act - HELD THAT - It is not the case where the Court is directing the petitioner to avail of an alternate remedy rather the Court is of the view that the petitioner has to face the show cause notice and reply to the same. Violation of the principles of natural justice will only come into play in case the respondents do not afford a chance to the petitioner to furnish reply to the show cause notice. This is not the fact situation obtaining in the present case. Clearly the present petition is a misadventure and the same is accordingly dismissed so also pending applications if any.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity and Jurisdiction of the Show Cause Notice and Order under Section 74 of HPGST/CGST Act Relevant legal framework and precedents: Section 74 of the CGST Act deals with the determination of tax not paid or short paid or input tax credit wrongly availed or utilized by reason of fraud, willful misstatement, or suppression of facts. The issuance of a Show Cause Notice under this provision is a prerequisite to demanding tax, interest, and penalty. The legal framework mandates that such notices must be issued within the prescribed time limits and must specify the grounds for the demand. Court's interpretation and reasoning: The Court noted that the Show Cause Notice dated 02.06.2023 was issued subsequent to the issuance of the order in Form DRC-07 dated 21.04.2025, which is procedurally unusual as typically the Show Cause Notice precedes such orders. However, the Court did not find any jurisdictional infirmity in the issuance of the Show Cause Notice or the order. The Court observed that the petitioner had not challenged the jurisdiction or validity of the notice on any substantial ground except alleging violation of natural justice. Key evidence and findings: The record indicated that the Show Cause Notice demanded GST amounting to Rs. 12,16,57,928/- including interest and penalty for alleged excess or ineligible input tax credit availed by the petitioner. The order in Form DRC-07 demanded Rs. 1,14,81,344/- on similar grounds. The petitioner had not filed any reply to the Show Cause Notice nor appeared before the authority. Application of law to facts: The Court held that the issuance of Show Cause Notice and order under Section 74 is a statutory procedure and the petitioner is obliged to respond to the allegations before seeking judicial intervention. The Court emphasized that the mere issuance of a notice or order does not amount to illegality or arbitrariness unless the authority acts without jurisdiction or in violation of statutory provisions. Treatment of competing arguments: The petitioner argued that the notices were cryptic, vague, and without application of mind, violating principles of natural justice. The respondents contended that the notices were issued following due procedure and the petitioner had not availed the opportunity to respond. The Court favored the respondents' position, stressing the mandatory nature of the petitioner's participation in the process. Conclusions: The Court concluded that the Show Cause Notice and order were not without jurisdiction or illegal. The petitioner's challenge on these grounds was premature and untenable in the absence of any reply or appearance before the authority. Issue 2: Alleged Violation of Principles of Natural Justice Relevant legal framework and precedents: Principles of natural justice require that a person against whom adverse action is contemplated must be given a fair opportunity to be heard, to present their case, and to respond to allegations before any final order is passed. This is a fundamental procedural safeguard in administrative and quasi-judicial proceedings. Court's interpretation and reasoning: The Court observed that the petitioner had not filed any reply to the Show Cause Notice nor appeared before the authority to contest the allegations. The Court clarified that violation of natural justice arises only if the authority denies the opportunity to be heard. Since the petitioner had not availed of the opportunity to respond, the plea of violation was not maintainable. Key evidence and findings: The absence of any reply or appearance by the petitioner before the tax authority was central to the Court's reasoning. There was no material to suggest that the petitioner was prevented from submitting a reply or appearing in the proceedings. Application of law to facts: The Court applied the principle that the right to be heard is contingent on the petitioner's active participation. Failure to respond does not convert the process into a violation of natural justice. Treatment of competing arguments: The petitioner's contention of violation was rejected on the ground that the opportunity was available but not utilized. The respondents' argument that the process was fair and in accordance with law was accepted. Conclusions: The Court held that there was no violation of natural justice in the issuance and passing of the impugned notices and orders. Issue 3: Interim Relief and Procedural Requests Relevant legal framework and precedents: Courts have discretion to grant interim relief such as stay of operation of impugned orders to prevent irreparable harm during the pendency of litigation.
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