The Jharkhand High Court has held that the summary of show cause notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under section 73(1) of the CGST Act, 2017.
The division bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan has observed that the levy of a penalty of 100% of tax dues reflected in the Summary of the Order contained in Form GST DRC-07 is in the teeth of the provisions of Section 73(9) of the CGST Act. As per Section 73(9), the Proper Officer while passing an adjudication order can levy a penalty up to 10% of the tax dues only.
The court held that it shows non-application of mind on the part of the Deputy Commissioner. The proceedings suffer from a violation of principles of natural justice and the procedure prescribed under section 73 of the CGST Act.
The petitioner/assessee is a civil contractor engaged in the business of civil construction. The petitioner has sought quashing of the show cause notice issued under Section 73 for the period April, 2018 to March 2019. The petitioner has also laid a challenge to the summary of show cause notice of the same date issued on Form GST DRC-01. The petitioner has also challenged the summary of the order issued on Form GST DRC-07.
The petitioner contended that the show-cause notice is in the teeth of the provisions of Section 73(1). The summary of a show-cause notice cannot be a substitute for a proper show-cause notice. The show-cause notice does not strike out the relevant particulars and does not even enumerate the contravention to which the petitioners have been called upon to reply. The proceedings were initiated allegedly on account of a mismatch between GSTR-3B and GSTR-2A for the period in question and that the petitioner had taken undue ITC to which it was not entitled.
The petitioner submitted that the Summary of the Order contained in Form GST DRC-07 imposes a 100% penalty, which is impermissible under the provisions of Section 73(9) of the Act of 2017. The 100% penalty can only be levied in a proceeding under section 74 (9). No adjudication order has been uploaded. The proceedings suffer from a serious violation of principles of natural justice and the procedure prescribed in law. Therefore, the show cause notices and the Summary of the Orders are quashed, and the matters are remanded.
The department contended that GSTN provides for a standard format in which only notices can be issued to the assessee. The Deputy Commissioner of State Tax, Godda Circle, Godda, has therefore followed the procedure by mentioning the violations and charges against the petitioner. The show-cause notices and summary of the show-cause notices in Form GST DRC-01 clearly mention the charge, i.e., the difference between GSTR-3B and 2A. The entries in GSTR-2A, which are auto-populated figures of inward supply for the taxpayer in the online GSTN portal, are dynamic in nature and change upon the filing of GSTR-1 by the suppliers or taxpayer. Thus, after the filing of GSTR-1 by the suppliers, any changes made in the figures in GSTR-2A by the taxpayers were never brought to the notice of the Department, either during the adjudication stage or until the filing of the writ petition. Because of the late filing of GSTR-1 by the suppliers, interest under section 50 is required to be levied to prevent loss of revenue to the State Exchequer.
The court quashed the show-cause notices and the summary of the show-cause notice and summary of orders contained in Form GST DRC-07. However, the Deputy Commissioner of State Tax is at liberty to initiate fresh proceedings for the alleged contravention for the tax period after the issuance of a proper show-cause notice in accordance with the law.
Case Title: Roushan Kumar Chouhan Versus Commissioner of State Tax
Case No: W.P.(T) No. 1849 of 2022
Citation: 2022 LiveLaw (Jha) 73
Counsel For Petitioner: Advocates Deepak Kr. Sinha, Rakhi Sharma
Counsel For Respondent: Advocate Salona Mittal