M/s Techno Electric & Engineering Company Limited v. 1. The State of Jharkhand through the Commissioner of State Taxes, having its office
Case Details
IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 2249 of 2023 ------ M/s Techno Electric & Engineering Company Limited. --- Petitioner Versus 1. The State of Jharkhand through the Commissioner of State Taxes, having its office at Project Bhawan, Dhurwa, Ranchi. 2. The State Tax Officer, Ranchi South, Ranchi having his office at Central Revenue Building, P.O. Chutia, P.S. Kotwali, District-Ranchi. . --- Respondents ------
Legal Reasoning
“24. This Court finds that there is a lot of substance in the aforesaid contention. It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating a show-cause proceeding. A showcause proceeding is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice. 25. Expressions like “a reasonable opportunity of making objection” or “a reasonable opportunity of defence” have come up for consideration before this Court in the context of several statutes. A Constitution Bench of this Court in Khem Chand v. Union of India, of course in the 8 context of service jurisprudence, reiterated certain principles which are applicable in the present case also. 26. S.R. Das, C.J. speaking for the unanimous Constitution Bench in Khem Chand held that the concept of “reasonable various safeguards and one of them, in the words of the learned Chief Justice, is: (AIR p. 307, para 19) “(a) An opportunity to deny his guilt and establish his innocence, which he can only do if he is told what the charges levelled against him are and the allegations on which such charges are based; 27. It is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in this instant case, the entire proceeding initiated by the show-cause notice gets vitiated by unfairness and bias and the subsequent idle ceremony.” proceedings opportunity” includes become an 15. The Apex Court has held that the concept of reasonable opportunity includes various safeguards and one of them is to afford opportunity to the person to deny his guilt and establish his innocence, which he can only do if he is told what the charges leveled against him are and the allegations on which such charges are based. 17. As observed herein above, the impugned notice completely lacks in fulfilling the ingredients of a proper show- cause notice under Section 74 of the Act. Proceedings under Section 74 of the Act have to be preceded by a proper show- cause notice. A summary of show-cause notice as issued in Form GST DRC-01 in terms of Rule 142(1) of the JGST impugned herein) cannot Rules, 2017 substitute the requirement of a proper show-cause notice. This court, however, is not inclined to be drawn into the issue whether the requirement of issuance of Form GST ASMT-10 is a condition precedent for invocation of Section 73 or 74 of the JGST Act for the purposes of deciding the instant case. This Court finds that upon perusal of Annexure2 which is the (Annexure-2 -4- statutory form GST DRC-01 issued to the petitioner, although it has been mentioned that there is mismatch between GSTR-3B and 2A, but that is not sufficient as the foundational allegation for issuance of notice under Section 74 is totally missing and the notice continues to be vague.” 13. The Apex Court in the case of Gorkha Securities (supra) concerning an order of blacklisting has laid down the ingredients of a proper show cause notice at para 21 and 22 of the report, which are extracted herein below: “21. The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The 9 fundamental purpose behind the serving of show-cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 22. The High Court has simply stated that the purpose of showcause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz: (i) The material/grounds to be stated which according to the department necessitates an action; (ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit. We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement.” As held there in, the requirement of principles of natural justice can only be met if (i) a show cause notice contains the materials / grounds, which according to the Department necessitate an action; (ii) the particular penalty/ action which is proposed to be taken. Even if it is not specifically mentioned in the show cause notice, but it can be clearly and safely discerned from the reading thereof that would be sufficient to meet this requirement. 14. We find that the show cause notice is completely silent on the violation or contravention alleged to have been done by the petitioner regarding which he has to defend himself. The summary of show cause notice at annexure-2 though cannot be a substitute to a show cause notice, also fails to describe the necessary facts which could give an inkling as to the contravention done by the petitioner. As noted herein above, the brief facts of the case do not disclose as to which work contract, services were completed or partly completed by the -5- petitioner regarding which he had not reflected his liability in the filed return as per GSTR-3B for the period in question. It needs no reiteration that a 10 summary of show cause notice in Form DRC-01 could not substitute the requirement of a proper show cause notice. At the same time, if a show cause notice does not specify the grounds for proceeding against a person no amount of tax, interest or penalty can be imposed in excess of the amount specified in the notice or on grounds other than the grounds specified in the notice as per section 75(7) of the JGST Act. 15. Learned counsel for the petitioner has relying upon the case of Bharti Airtel Ltd. (supra) and contended that the Apex Court has observed that the common portal of GSTN is only a facilitator. The format GST DRC-01 or 01A are prescribed format on the online portal to follow up the proceedings being undertaken against an assessee. They themselves cannot substitute the ingredient of a proper show cause notice. If the show cause notice does not specify a ground, the Revenue cannot be allowed to raise a fresh plea at the time of adjudication, as has been held by the Apex Court in a matter arising under Central Excise Act in the case of Shital International (supra) at para 19, extracted herein below: “19. As regards the process of electrifying polish, now pressed into service by the Revenue, it is trite law that unless the foundation of the case is laid in the show-cause notice, the Revenue cannot be permitted to build up a new case against the assessee. (See Commr. of Customs v. Toyo Engg. India Ltd., CCE v. Ballarpur Industries Ltd. and CCE v. Champdany Industries Ltd.) Admittedly, in the instant case, no such objection was raised by the adjudicating authority in the showcause notice dated 22-6-2001 relating to Assessment Years 1988-1989 to 2000-2001. However, in the show-cause notice dated 12-12-2000, the process of electrifying polish finds a brief mention. Therefore, in the light of the settled legal position, the plea of the learned counsel for the Revenue in that behalf cannot be entertained as the Revenue cannot be allowed to raise a fresh plea, which has not been raised in the show-cause notice nor can it be allowed to take contradictory stands in relation to the same assessee.” In a notice under Section 74 of the JGST Act, the necessary ingredients relating to fraud or willful misstatement of suppression of fact to evade tax have to be impleaded whereas in a notice under Section 73 of the same act the Revenue has to specifically allege the violations or contraventions, which has led to tax not being paid or short paid or erroneously refunded or Input Tax Credit wrongly availed or utilized. It is trite law that unless the foundation of a case is laid down in a show cause notice, the assessee would be precluded from defending the charges in a vague show cause notice. That would entail violation of 11 principles of natural justice. He can only do so, if he is told as to what the charges levelled against him are and the allegations on which such charges are based. Reliance is placed on the opinion of the Constitution Bench of the Apex Court in the case of Khem Chand versus Union of India [AIR 1958 SC 300], which has also been relied upon in the case of Oryx Fisheries P. Ltd. Vs. Union of India reported in (2010) 13 SCC 427 and profitably quoted in our decision rendered in the case of the same petitioner in W.P (T) No. 2444 of 2021. 16. We are thus of the considered view that the impugned show cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show cause notice and amounts to violation of principles of natural justice. The challenge is entertainable in exercise of writ jurisdiction of this Court on the specified grounds as clearly held by the decision of the Apex -6- Court in the case of Magadh Sugar & Energy Ltd. Vrs. State of Bihar & others reported in 2021 SCC Online SC 801, para 24 and 25. Accordingly, the impugned notice at annexure-1 and the summary of show cause notice at annexure-2 in Form GST DRC-01 is quashed. This Court, however is not inclined to be drawn into the issue whether the requirement of issuance of Form GST ASMT-10 is a condition precedent for invocation of Section 73 or 74 of the JGST Act for the purposes of deciding the instant case. Since the Court has not gone into the merits of the challenge, respondents are at liberty to initiate fresh proceedings from the same stage in accordance with law within a period of four weeks from today”. 6. Since it has not been disputed that the case of the petitioner is similarly situated to that of the case of M/s NKAS Services Pvt. Ltd, we, therefore, quash the Summary Order dated 5.8.2021 bearing reference no. ZD2008210004429 issued under Rule 142 along with the order passed under section 73 of the JGST Act, 2017dated 4.8.2021. However, at the cost of repetition we highlight the fact that the Court has not gone into the merits of the challenge and the respondents are at liberty to initiate fresh proceedings from the same stage in accordance with law within a period of four weeks from today. 7. This writ petition is allowed to the extent mentioned hereinabove. (Rongon Mukhopadhyay,J) (Deepak Roshan, J) Rakesh/-
Arguments
Coram: THE HON’BLE MR. JUSTICE RONGON MUKHOPADHYAY THE HON’BLE MR. JUSTICE DEEPAK ROSHAN For the Petitioner For the Respondents : Mr. N.K. Pasari, Advocate : Mr. Rahul Saboo, G.P. II -------- 03/25.8.2023 Heard the parties. ------- 2. The petitioner has prayed for the following reliefs in this writ application. (A) For issuance of an appropriate writ, order or direction, directing upon the respondents to show cause as to why and under what authority of law, a Summary Order in Form DRC-07 could be passed without issuance and service of DRC—01 much less any notice under Section 73(1) of CGST Act, 2017 and an order under Section 73 of the Act. (B) Consequent upon showing cause if any, and on being satisfied that the department could not have passed summary order in Form DRC-07 without following the modalities prescribed under the law and without affording any opportunity of hearing to the petitioner, the Summary Order dated 5.8.2021 bearing Reference No. ZD2008210004429(Annexure-1) issued under Rule 142 along with Order passed under section 73 of the JGST Act, 2017 dated 4.8.2021 be quashed as set aside, as being illegal, arbitrary and bad in law. (C) For issuance of further appropriate writ, order or direction, restraining the respondents from taking any action pursuant to the Summary Order dated 5.8.2021 being Reference No. ZD2008210004429(Annexure-1). (D) For issuance of any other appropriate writ(s)/order(s)direction(s) as Your Lordships may deem fit and proper in the facts and circumstances of the case for doing justice to the petitioners. -2- 3. It has been submitted at the outset by Mr. N.K. Pasari, learned counsel appearing for the petitioner, that the case of the petitioner is squarely covered by the judgement rendered in the case of M/s NKAS Services Pvt. Ltd Vs. State of Jharkhand & others in W.P.(T) No. 2659 of 2021. 4. Mr. Rahul Saboo, learned G.P. II has accepted the said contention of the learned counsel for the petitioner. 5. In W.P.(T) No. 2659 of 2021, this Court while dealing with the similar issue had come to the following conclusions:- “11. We have considered the submission of learned counsel for the parties. A perusal of the impugned show cause notice at Annexure-1 creates a clear impression that it is a notice issued in a format without even striking out any relevant portions and without stating the contraventions committed by the petitioner. The summary of the show cause notice under DRC-01 indicates that as per the statistics received from the headquarter/ government treasury, it has come to the notice of the department that the petitioner has received a sum as payment from the government treasury against works contracts services completed / partly completed during the above mentioned period April 2020 to March 2021 whereas the liability reflected by him through filed returns is less than the above mentioned sum as per GSTR-3B. As such, he was not reflecting the total payment received and consequent total liability accrued in the filed returns just to evade payment of due tax to the 7 government. It needs to be mentioned here that even the summary of the show cause notice does not disclose the information as received from the headquarter / government treasury as to against which works contract service completed or partly completed the petitioner has not disclosed its liability in the returns filed under GSTR-3B. We have held in the case of the same petitioner in W.P.(T) No. 2444 of 2021 related to a show cause notice under Section 74 of the JGST Act that a summary of show cause notice as issued in Form GST DRC-01 in terms of rule 142(1) of the JGST Rule, 2017 (Annexure-2 impugned herein) cannot substitute the requirement of proper show cause notice. 12. It would be profitable to reproduce the opinion of this Court in the case of the same petitioner on the general principles governing the issuance of a proper show cause notice. Para 14, 15 and 17 of the judgment is quoted herein below: the contraventions committed by 14. A bare perusal of the impugned show-case notice creates a clear impression that it is a notice issued in a format without even striking out any irrelevant portions and the without stating petitioner i.e. whether its actuated by reason of fraud or any willful misstatement or suppression of facts in order to evade tax. Needless to say that the proceedings under Section 74 they allege punitive have a serious connotation as consequences on account of fraud or any willful misstatement or suppression of facts employed by the person chargeable with tax. In absence of clear charges which the person so alleged is required to answer, the noticee is bound to be denied proper opportunity to defend itself. This would entail violation of principles of natural justice which is a wellrecognized exception for invocation of writ jurisdiction despite availability of alternative remedy. In this regard, it is profitable to quote the opinion of the Apex Court in the case of Oryx Fisheries P. Ltd. (supra) at para 24 to 27 wherein the opinion of the Constitution Bench of the Apex Court in the case of Khem Chand versus Union of India [AIR 1958 SC 300] has been relied upon as well : -3-