2025 (6) TMI 669 - HC - GST

Violation of principles of natural justice - Challenge to summary of show cause notice - SCN issued without passing any order under Section 73(1) of the AGST Act 2017 - opportunity of hearing was not provided - HELD THAT - This writ petition is having similar issue the determination made in said Construction Catalysers Pvt. Ltd 2024 (10) TMI 279 - GAUHATI HIGH COURT shall cover the present case where it was held that The issuance of the Summary of the Show Cause Notice Summary of the Statement and Summary of the Order do not dispense with the requirement of issuance of a proper Show Cause Notice and Statement as well as Page passing of the Order as per the mandate of Section 73 by the Proper Officer. As initiation of a proceedings under Section 73 and passing of an order under the same provision have consequences. The Show Cause Notice Statement as well as the Order are all required to be authenticated in the manner stipulated in Rule 26 (3) of the Rules of 2017. The issue raised in Construction Catalysers Pvt. Ltd. and the present petition is similar and therefore the determination made in Construction Catalysers Pvt. Ltd shall accordingly cover the present petition and as agreed to by the learned counsel for the parties the present writ petition stands disposed of by setting aside the summary of order dated 27.02.2025 and the summary of show cause notice dated 26.11.2024 in terms of the determination and conclusion arrived at para 29 of Construction Catalysers Pvt. Ltd. Conclusion - The period from issuance of Summary to service of certified copy of judgment is excluded for limitation computation under Section 73(10). Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the procedural validity and statutory compliance in issuance of notices and orders under Section 73 of the Assam Goods and Services Tax (AGST) Act, 2017. Specifically:

• Whether a Summary of Show Cause Notice issued under Section 73 without issuance of a formal Show Cause Notice under Section 73(1) is legally valid.
• Whether the Statement of determination of tax issued under Section 73(3) can substitute the requirement of issuance of a Show Cause Notice under Section 73(1).
• Whether the procedural requirements under Section 73, including the issuance of Show Cause Notice, Statement, and Order by the Proper Officer as defined under Section 2(91), were complied with.
• Whether the petitioner was entitled to an opportunity of hearing before passing the order under Section 73(9), and whether failure to provide such hearing violates Section 75(4).
• The consequences of non-compliance with the procedural safeguards mandated under the AGST Act and the appropriate remedy.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Summary of Show Cause Notice without formal Show Cause Notice under Section 73(1)

Relevant Legal Framework and Precedents: Section 73(1) of the AGST Act, 2017 requires the issuance of a Show Cause Notice to initiate proceedings for recovery of tax not paid or short paid. The Summary of Show Cause Notice (GST DRC-01) is a procedural document but does not replace the formal Show Cause Notice. The Court referred to a prior decision in Construction Catalysers Pvt. Ltd., which dealt extensively with this issue.

Court's Interpretation and Reasoning: The Court held that the Summary of Show Cause Notice cannot substitute the formal Show Cause Notice under Section 73(1). The Summary is merely a precursor and does not initiate proceedings. The Proper Officer must issue the Show Cause Notice to activate the statutory process.

Key Evidence and Findings: The petitioner contended that no formal Show Cause Notice was issued, only a Summary was provided. The Court noted that the impugned order was passed without issuance of the formal Show Cause Notice.

Application of Law to Facts: Since the formal Show Cause Notice was not issued, the initiation of proceedings under Section 73 was invalid and bad in law.

Treatment of Competing Arguments: The respondent authorities argued that attachment of the Statement of determination to the Summary constituted a valid Show Cause Notice. The Court rejected this, clarifying the distinct roles of the Summary and formal Show Cause Notice.

Conclusion: The issuance of Summary alone without formal Show Cause Notice under Section 73(1) is legally insufficient and vitiates the proceedings.

Issue 2: Whether Statement of determination under Section 73(3) substitutes the Show Cause Notice

Relevant Legal Framework and Precedents: Section 73(3) mandates issuance of a Statement of determination of tax after the Show Cause Notice. The Statement is distinct and cannot replace the Show Cause Notice.

Court's Interpretation and Reasoning: The Court emphasized that the Statement of determination is not a substitute for the Show Cause Notice. The Statement follows the Show Cause Notice and is part of the procedural chain.

Key Evidence and Findings: The impugned Summary of Show Cause Notice included the Statement of determination as an attachment. The Court found that this attachment cannot fulfill the statutory requirement of issuing the Show Cause Notice.

Application of Law to Facts: The absence of a formal Show Cause Notice renders the proceedings invalid despite the presence of the Statement of determination.

Treatment of Competing Arguments: Respondents relied on the attachment to the Summary as sufficient. The Court rejected this, clarifying the statutory sequence and requirements.

Conclusion: The Statement under Section 73(3) is not a substitute for the Show Cause Notice under Section 73(1).

Issue 3: Requirement of issuance by Proper Officer and authentication under Rule 26(3)

Relevant Legal Framework and Precedents: Section 2(91) defines the Proper Officer who is authorized to issue notices and orders under the AGST Act. Rule 26(3) of the Rules, 2017 prescribes authentication requirements for such documents.

Court's Interpretation and Reasoning: The Court noted that issuance of Show Cause Notice, Statement, and Order must be by the Proper Officer and authenticated as per Rule 26(3). The Summary documents (GST DRC-01, GST DRC-02, GST DRC-07) are summaries and do not dispense with this requirement.

Key Evidence and Findings: The impugned orders were issued without proper adherence to these requirements.

Application of Law to Facts: Non-compliance with authentication and issuance by Proper Officer invalidates the orders.

Treatment of Competing Arguments: The respondent did not effectively dispute this procedural requirement.

Conclusion: Compliance with issuance by Proper Officer and authentication under Rule 26(3) is mandatory.

Issue 4: Violation of opportunity of hearing under Section 75(4)

Relevant Legal Framework and Precedents: Section 75(4) guarantees the right to a hearing before passing any order affecting the taxpayer.

Court's Interpretation and Reasoning: The Court found that the petitioner was not given any opportunity of hearing before passing the order dated 27.02.2025, violating Section 75(4).

Key Evidence and Findings: The petitioner had requested hearing but was denied the same.

Application of Law to Facts: The failure to provide hearing renders the order illegal and liable to be quashed.

Treatment of Competing Arguments: Respondents did not justify the denial of hearing.

Conclusion: Violation of Section 75(4) mandates setting aside the impugned order.

Issue 5: Remedy and consequences of procedural lapses

Court's Interpretation and Reasoning: The Court set aside and quashed the impugned Summary of Show Cause Notice and order. It recognized that the lapses were technical and due to misunderstanding by authorities regarding procedural requirements.

Key Evidence and Findings: The Court acknowledged that the authorities believed the attachment of the Statement to the Summary sufficed as Show Cause Notice.

Application of Law to Facts: The Court granted liberty to the respondent authorities to initiate de novo proceedings under Section 73, if deemed fit, for the relevant financial year.

Treatment of Competing Arguments: The Court balanced the need for procedural compliance with the interest of justice, allowing fresh proceedings.

Conclusion: The impugned orders are quashed but fresh proceedings may be initiated. The period from issuance of Summary to service of certified copy of judgment is excluded for limitation computation under Section 73(10).

3. SIGNIFICANT HOLDINGS

The Court's key legal reasoning is preserved verbatim from Para 29 of the Construction Catalysers Pvt. Ltd. judgment, which governs the present case:

"(A) The Summary of the Show Cause Notice in GST DRC-01 is not a substitute to the Show Cause Notice to be issued in terms with Section 73(1) of the Central Act as well as the State Act. Irrespective of issuance of the Summary of the Show Cause Notice, the Proper Officer has to issue a Show Cause Notice to put the provision of Section 73 into motion.

(B) The Show Cause Notice to be issued in terms with Section 73(1) of the Central Act or State Act cannot be confused with the Statement of the determination of tax to be issued in terms with Section 73(3) of the Central Act or the State Act. In the instant writ petitions, the attachment to the Summary of Show Cause Notice in GST DRC-01 is only the Statement of the determination of tax in terms with Section 73(3). The said Statement of determination of tax cannot substitute the requirement for issuance of the Show Cause Notice by the Proper Officer in terms with Section 73(1) of the Central or the State Act. Under such circumstances, initiation of the proceedings under Section 73 against the petitioners in the instant batch of writ petitions without the Show Cause Notice is bad in law and interfered with.

(C) It is also noticed that the Show Cause Notice and the Statement in terms with Section 73(1) and 73(3) of both the Central Act or the State Act respectively are required to be issued only by the Proper Officer as defined in Section 2(91). Additionally, the order under Section 73(9) is also required to be passed by the Proper officer. The Summary of the Show Cause Notice, the Summary of the Statement