Gauhati High Court
Shri Dilip Pathak vs The State Of Assam And Ors on 11 December, 2024
Author: Soumitra Saikia
Bench: Soumitra Saikia
Page No.# 1/16
GAHC010264512024
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THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/6647/2024
SHRI DILIP PATHAK
S/O SRI RAMCHARAN PATHAK,
RESIDENT OF HOUSE NO. 1, RAJGARH LINK ROAD, ANIL NAGAR,
KAMRUP METRO, ASSAM
VERSUS
THE STATE OF ASSAM AND ORS
REPRESENTED BY COMMISSIONER SECRETARY, GOVERNMENT OF
ASSAM, DEPARTMENT OF FINANCE AND TAXATION
2:THE PRINCIPAL COMMISSIONER STATE TAX
KAR BHAWAN
GS ROAD
KAMRUP M GUWAHATI ASSAM
3:THE ASSISTANT COMMISSIONER STATE TAX
GUWAHATI D
GUWAHATI D 4 GUWAHATI ASSA
Advocate for the Petitioner : MR. R S MISHRA, MR. R K MAHANTA,MR. A K GUPTA
Advocate for the Respondent : SC, FINANCE AND TAXATION,
Page No.# 2/16
BEFORE
HONOURABLE MR. JUSTICE SOUMITRA SAIKIA
ORDER
11.12.2024
Heard Ms. M. Nirola, learned counsel for the petitioner. Also heard Mr. B.
Choudhury, learned Standing Counsel for the Finance and Taxation Department.
2] In this case, the petitioner was issued a Summary of the Show Cause Notice
dated 28.09.2024 in the GST DRC-01. In the said Summary of the Show Cause
Notice, it was mentioned that the Show Cause Notice was attached. Along with
the said Summary of the Show Cause Notice, there was an attachment to the
determination of tax dated 28.09.2024. The petitioner did not reply to the Show
Cause Notice in view of the fact that there was no Show Cause Notice attached
to the Summary of the Show Cause Notice. Pursuant thereto, the Order dated
24.12.2024 and 16.08.2024 was issued in GST DRC-07. To the said Order
uploaded in GST DRC-07, there was an attachment stating the manner in which
the determination was made. The reason assigned for passing of the said order
was that the taxpayer had not replied or contested the notice, and as such, had
been agreed with the terms of the notice. It is relevant to mention that the
attachments to both the GST DRC-01 as well as the GST DRC-07 did not contain
any signature of the Proper Officer. It is the grievance of the petitioner that the
petitioner was not provided with the opportunity of hearing as provided under
Section 75 (4) of the CGST/AGST Act, 2017 before passing of the order dated
24.12.2024 and 16.08.2024 and being aggrieved, the writ petition has been
filed.
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3] Learned counsel for the petitioner submits that it is the requirement in terms
of Rule 142 of the Central Goods and Services Tax Rules, 2017 (for short, ‘the
Rules of 2017’) that the notice under Section 73 has to be issued and a
summary thereof is to be additionally issued electronically in Form GST DRC-01.
The learned counsel for the petitioner further submits that under no
circumstances the attachment to the GST DRC-01 can be said to be a Show
Cause Notice in as much as in the said attachment, there is no mention that the
petitioner is required to show cause and that the said attachment to the DRC-01
does not contain the signature of the Proper Officer and it is the mandate of
Rule 26 of the Rules of 2017 that the Show Cause Notice had to be
authenticated with digital signature or through E-signature as specified under
the provisions of the Information Technology Act, 2000 or verified by any other
mode of signature or verification as notified by the Board in that behalf. In that
regard, the learned counsel for the petitioner has submitted that the learned
Division Bench of the Telangana High Court in the case of M/s Silver Oak
Villas LLP vs. the Assistant Commissioner ST {WP(C) No.6671/2024} vide its
judgment and order dated 14.03.2024 had dealt with Rule 26 of the Rules of
2017 and categorically opined that since the impugned order therein was an
unsigned document, it lost its efficacy in the light of Rule 26 (3) of the Rules of
2017 as well as the Telangana Goods and Services Tax Act, 2017 and the Rules
framed therein under. It was also observed therein that the Show Cause Notice
as also the impugned order would not be sustainable and deserved to be set
aside and quashed. The learned counsel further submitted that in the case of
A.V. Bhanoji Row vs. Assistant Commissioner (ST) & Others , reported in (2024)
123 GSTR 432, the learned Division Bench of the Andhra Pradesh High Court
had observed that as there was no signature of the Proper Officer, the same
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was treated to be void and inoperative. (B) The learned counsel further
submitted that in the case of Nkas Services Private Limited vs. State of
Jharkhand & Others, reported in (2022) 99 GSTR 145, the learned Division
Bench of the Jharkhand High Court had dealt with the question as regards
issuance of a Summary of Show Cause Notice in GST Form DRC-01 and held
that the Summary of the Show Cause Notice as issued in Form GST DRC01
cannot be a substitute to the requirement of a proper Show Cause Notice. The
learned counsel had also referred to another judgment of the Karnataka High
Court in the case of LC Infra Projects Pvt. Limited vs. Union of India and Others,
reported in (2020) 73 GSTR 248.
4] Per contra, Mr. B. Gogoi, the learned standing counsel for the Finance and
Taxation Department of the Government of Assam submits that the respondent
authorities have issued the Summary of the Show Cause Notice in Form DRC-01
which was accompanied by the determination of tax which as per the
respondents would have provided all the details so that the petitioners could
have submitted the reply. The learned counsel, however, fairly submits that
there is no separate Show Cause Notice apart from the determination of tax
enclosed to the Summary of the Show Cause Notice. On the question of lack of
signatures in the attachments to the GST DRC-01 as well as the GST DRC-07,
the learned counsel fairly submitted that the materials on record do not show
that there is/are any signature(s) in the attachment to the Summary to the
Show Cause Notice as well as Summary to the Order issued in Forms GST
DRC01 and GST DRC-07 respectively. He however submitted that in the
attachments it is mentioned as ‘Sd- Proper Officer’. The learned counsel further
submitted that when the Summary of the Show Cause Notice as well as the
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Summary of the Order are uploaded in GST DRC-01 and GST DRC-07, the same
are duly authenticated in the portal with digital signatures and without such
authentication, the portal cannot be operated.
5] I have heard the learned counsels for the petitioners as well as the
respondents.
6] From the materials on record as well as the submissions so made by the
learned counsels for the petitioner it appears that the petitioner has approached
this Court alleging infraction to the various provisions of the Central Act, the
State Act as well as the Rules framed thereunder. It is also the case of the
petitioner that the principles of natural justice have been violated as is not only
a statutory mandate but also violative of Article 21 of the Constitution.
7] From the perusal of the records, it would show that in the Summary of the
Show Cause Notices issued in GST DRC-01 to the petitioner in the writ petition,
there is a mention therein that there is a Show Cause Notice attached. It is the
case of the respondents that the said attachment wherein determination of tax
is mentioned is the Show Cause Notice. The question therefore arises as to
whether the said attachment can be said to be a Show Cause Notice as per the
mandate of both the Central Act as well as the State Act and the Rules made
therein under. It would be apposite to take note of that in all these cases, the
Summary of the Show Cause Notices have been issued in terms with Section 73.
At this stage, this Court would briefly take note of Section 73. A perusal of
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Section 73 would show that the said provision is set into motion when it appears
to the Proper Officer that:-
(a) Any tax has not been paid; or
(b) Any tax short paid; or
(c) Any tax erroneously refunded; or
(d) Where input tax credit had been wrongly availed or utilized.
for any reason other than the reason of fraud or any willful misstatement or
suppression of facts to evade tax.
8] Taking into account that it is only in the circumstances referred to above, the
Proper Officer is required to issue a Show Cause Notice, therefore, the Show
Cause Notice is required to specifically mention the reason(s) and the
circumstances why the provision of Section 73 had been set into motion. The
person against whom the said Show Cause Notice is issued would only have an
adequate opportunity to submit a representation justifying that the prerequisites
for issuance of Show Cause Notice is not there if and only if the reason(s) for
issuance of the Show Cause is specifically mentioned in the Show Cause Notice.
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9] Section 73 further stipulates that upon consideration of the representations, if
any, the Proper Officer shall pass the order under Section 73 (9) determining
the amount of tax, interest and penalty.
10] It is also apposite to mention that Section 73 (2) and Section 73 (10) are
interconnected in as much as Section 73 (10) stipulates that within three years
from the due date for furnishing the annual return for the financial year,
the order under Section 73 (9) can be passed. In terms with Section 73 (2), the
Show Cause Notice is to be issued within three months prior to the time limit
prescribed in Section 73 (10).
11] In addition to the above, it would also show from conjoint reading of
Subsection (1) (2) (3) and (4) of Section 73 that the legislature had
categorically distinguished the Show Cause Notice from the Statement which is
required to be issued by the Proper Officer or in other words, irrespective of
Statement to be issued in terms with Sub-section (3) of Section 73, there is a
requirement of issuance of a Show Cause Notice by the Proper Officer.
12] At this stage, it is also pertinent to mention that in Section 73, there is no
mention of issuance of a Summary of Show Cause Notice. The requirement of
issuance of a Summary of the Show Cause Notice is seen in Rule 142 of the
Rules of 2017. Rule 142 (1) (a) and (b) is relevant for which the same is quoted
herein below:-
“142. Notice and order for demand of amounts payable under the Act.-(1) The
Page No.# 8/16proper officer shall serve, along with
(a) notice issued under section 52 or section 73 or section 74 or section 76 or
section 122 or section 123 or section 124 or section 125 or section 127 or
section 129 or section 130, a summary thereof electronically in FORM
GST DRC01,
(b) statement under sub-section (3) of section 73 or sub-section (3) of section
74, a summary thereof electronically in FORM GST DRC-02, specifying therein
the details of the amount payable.”
13] From a perusal of the above quoted Rule, it would show that in addition to
the Show Cause Notice to be issued under Section 73 (1) and the Statement of
determination of tax under Section 73 (3), there is an additional requirement of
issuance of a Summary of the Show Cause Notice in GST DRC-01 and the
Summary of the Statement in GST DRC-02. The natural corollary from the above
analysis is that the issuance of the Show Cause Notice and the Statement of
determination of tax by the Proper Officer are mandatory requirement in
addition to the Summary of Show Cause Notice in GST DRC-01 and Summary of
the Statement in GST DRC-02.
14] The judgment of the learned Division Bench of the Jharkhand High Court in
the case of Nkas Services Private Limited (supra) had also dealt with a similar
issue and categorically held that a Summary of a Show Cause Notice issued
under GST DRC-01 cannot substitute the requirement of a proper Show Cause
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Notice. Similarly, in the case of LC Infra Projects Pvt. Limited (supra), the
learned Single Judge of the Karnataka High Court had also observed that
the issuance of a Show Cause Notice is sine qua non to proceed with the
recovery of interest payable thereon under Section 50 of the Act and penalty
leviable under the provisions of the Act or the Rules.
15] From the above analysis, this Court is of the view that the Summary of the
Show Cause Notice along with the attachment containing the determination of
tax cannot be said to be a valid initiation of proceedings under Section 73
without issuance of a proper Show Cause Notice. The Summary of the Show
Cause Notice is in addition to the issuance of a proper Show Cause Notice.
Under such circumstances, this Court is of the opinion that the impugned order
challenged in the instant writ petition is contrary to the provisions of Section 73
as well as Rule 142 (1) (a) of the Rules as the said impugned Orders were
passed with issuance of a proper Show Cause Notice.
16] Whether the determination of tax as well as the order attached to the
Summary to the Show Cause Notice in GST DRC-01 and the Summary of the
Order in GST DRC-07 can be said to be the Show Cause Notice and order
respectively, this Court duly dealt with what would constitute a Show Cause
Notice, the Statement as per Section 73 (3) as well as the Summary to the
Show Cause Notice in GST DRC-01 and Summary of the Statement in GST
DRC02. This Court had also opined above that the statement to be provided by
the Proper Officer in terms with Section 73 (3) cannot be said to be a Show
Cause Notice which is required to be issued in terms with Section 73 (1).
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Therefore, the submission of the respondents that the statement attached to
the Summary of the Show Cause Notice is the Show Cause Notice is completely
misconceived and contrary to Section 73 (1) and 73 (3).
17] Be that as it may, a very pertinent contention had been made by the
learned counsel appearing on behalf of the petitioner to the effect that the
attachments to both the Summary of the Show Cause Notice and Summary of
the Order have no value as the same contains no authentication of the Proper
Officer. In that regard, the learned counsels referred to Rule 26 (3) of the Rules
and the judgment in the cases of M/s Silver Oak Villas LLP (supra) and A.V.
Bhanoji Row (supra).
18] Rule 26 (3) of the Rules of 2017 categorically stipulates as to how notices,
certificates and orders are to be authenticated. The said Sub-Rule is reproduced
herein under:- “26.(3) All notices, certificates and orders under the provisions of
this chapter shall be issued electronically by the proper officer or any other
officer authorised to issue such notices or certificates or orders, through digital
signature certificate [or through E-signature as specified under the provisions of
the Information Technology Act, 2000 (21 of 2000) or verified by any
other mode of signature or verification as notified by the Board in this behalf.]”
19] A perusal of the above quoted Sub-Rule would show that notices, certificates
and orders under the provisions of Chapter III shall be issued electronically by
the Proper Officer or any other officer authorized to issue such notices or
certificates or orders through digital signature certificate or through e-signature
Page No.# 11/16as specified under the provisions of the Information Technology Act, 2000 or
verified by any other mode of signature or verification as notified by the Board
in that behalf. It is relevant to take note of that Chapter III of the Rules of 2017
pertains to Registration whereas in respect to Demand and Recovery, it is
Chapter XVIII.
20] Now therefore a question arises as to whether Rule 26 (3) can be applicable
to Chapter-XVIII when the said Sub-Rule on refers to Chapter-III. In the case of
M/s Silver Oak Villas LLP (supra), the learned Division Bench of the Telangana
High Court had applied Rule 26 (3) of the Rules of 2017 even to Chapter-XVIII
of the Rules of 2017. In the case of A.V. Bhanoji Row (supra), the learned
Division Bench of the Andhra Pradesh High Court held that the signatures
cannot be dispensed with and Sections 160 and 169 cannot save an order,
notice, communication which did not contain a signature. In another judgment
of the learned Division Bench of Delhi High Court in the case of Railsyls
Engineers Private Limited vs. Additional Commissioner of Central goods and
Services Tax (Appeals-11) and Anr., reported in (2023) 112 GSTR 143, the Delhi
High Court held that there was a requirement of at least putting the digital
signatures on the Show Cause Notice and Order in Original.
21] A perusal of the provisions of Section 73 would show that the Show Cause
Notice is required to be issued by the Proper Officer, the Statement under
Section 73 (3) is to be issued by the Proper Officer as well as the Order under
Section 73 (9) is required to be passed by the Proper Officer. Section 2 (91) of
the Act defines who is the Proper Officer meaning thereby either the
Page No.# 12/16Commissioner or the Officer who had been specifically entrusted by the
Commissioner. As it is the statutory mandate that it is only the Proper Officer
who has the authority to issue Show Cause Notice and the Statement and pass
the order, the authentication in the Show Cause Notice, Statement as well as
the Order by the Proper Officer is a must and failure to do so, makes the Show
Cause Notice, Statement and Order ineffective and redundant.
22] It is also important to note that the Act only stipulates that notice would be
issued and order would be passed by the Proper Officer. The manner in which
the Proper Officer would authenticate the notice(s) or the order(s) in so far as
other Chapters of the Rules of 2017 is silent except Chapter-III. Taking into
account the utmost necessity of the authentication by the Proper Officer, this
Court is of the opinion unless appropriate insertion are made in the Rules or
notification are issued as per the directions of the Board to fill the void in the
Rules of 2017, the authentication in the manner stipulated in Rule 26 (3) of the
Rules of 2017 has to be applied as and when the Proper Officer is required to
issue notice or Statement and pass Order in terms with the Act.
23] This Court has duly perused the Summary of the Show Cause Notices
wherein the petitioner was only asked to file his reply on a date specified. There
was no mention as to the date of hearing and the Column was kept blank.
However, the petitioner had sought for an opportunity of hearing which was
however not given. In this regard, if this Court takes note of Section 75 (4) of
both the Central Act as well as State Act, it would be seen that it is the mandate
of the said provision that an opportunity of hearing should be granted when a
Page No.# 13/16request is received in writing from the person chargeable with tax or penalty or
when any adverse decision is contemplated against such person. The mandate
of Section 75 (4) of both the Central and State Act are safeguards provided to
the assessees so that they can have a say in the hearing process.
24] It is also seen that in the reply to be submitted in Form GST DRC-06, there
is an option given for personal hearing at Sl. No.7. As stated above,
the petitioner had specifically filled up the Column as “Yes” wherein the option
for personal hearing was mentioned. Inspite of that, there was no opportunity
of hearing afforded to those petitioner.
25] The learned Division Bench of the Chhattisgarh High Court in the case of
Mahindra & Mahindra Limited (supra) had categorically observed that when the
statute contains a mandate of hearing, the same has to be granted, else it
would render the provision porous.
26] This Court is of the opinion that when the statute is clear to provide an
opportunity of hearing, there is a requirement of providing such opportunity. In
fact a perusal of the Form GST DRC-01 enclosed to the writ petition shows that
details have been given as regards the date by which the reply has to be
submitted; date of personal hearing; time of personal hearing and venue of
personal hearing. It is seen that in the Summary of the Show Cause Notice only
the date for submission of reply has been mentioned. In respect to other details
as stated above have been mentioned to as ‘NA’. It may be that the Proper
Officer assumed that based on the reply he/she may proceed with the
Page No.# 14/16adjudication depending as to whether the person to whom the notice is issued
had opted for personal hearing or not. But in a case where no reply is filed, a
question arises whether the Proper Officer can pass an adverse order
without providing an opportunity for hearing. The answer has to be in the
negative else it would render the second part of Section 75 (4) redundant.
27] On the basis of the above analysis and determination, this Court is of the
view that 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. 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. This Court further 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
Page No.# 15/16Section 73 (9) is also required to be passed by the Proper officer. The Summary
of the Show Cause Notice, the Summary of the Statement under Section 73 (3)
and the Summary of the Order passed in terms with Section 73 (9) are to be
issued in GST DRC-01, GST DCR-02 and GST DRC-07 respectively. 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 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. Accordingly, this Court is of the opinion that the Impugned Order
challenged in the writ petition are in violation of Section 75 (4) as no
opportunity of hearing was given as already discussed herein above.
28] Accordingly, the impugned order dated 24.12.2024 and 16.08.2024 issued by
the respondent no.3 is hereby set aside and quashed. This Court also cannot be
unmindful of the fact that it is on account of certain technicalities and the
manner in which the impugned order was passed, this Court interfered with
the impugned order and hence set aside and quashed the same. It is also
relevant to take note of that the respondent authorities were under the
impression that issuance of attachment of the determination of tax which was
attached to the Summary of the Show Cause Notice would constitute a valid
Show Cause Notice.
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29] Under such circumstances, in the interest of justice, this Court while setting
aside the impugned Order-in-Original dated 24.12.2024 and 16.08.2024, grants
liberty to the respondent authorities to initiate de novo proceedings under
Section 73, if deemed fit for the relevant financial year in question. This Court
further observes and directs that the period from the date of issuance the
Summary of the Show Cause Notice in Form GST DRC-01 dated
28.09.2024 Cause Notices upon the petitioner till the date a certified copy of the
instant judgment is served upon the Proper Officer, be excluded while
computing the period prescribed for passing of the order under Section 73 (10)
of the Central Act as well as the State Act as the case may be.
30] With the above observations and directions, the writ petition stands disposed
of.
JUDGE
Comparing Assistant