Inspection Report Does Not Fulfil The Ingredients Of Proper Show-Cause Notice: Jharkhand High Court

The division bench of Justice Aparesh Kumar Singh and Justice Deepak Roshan has observed that the adjudication order is null and void in the eye of the law if it is passed without the issuance of proper show-cause notice.

On 11.1.2020, by the order of the Joint Commissioner of State Tax, an inspection was conducted by the joint team of officers of the Investigation Bureau in the premises of the petitioner/assessee and an Inspection Report was prepared. At the bottom of the inspection report, the petitioner was directed to appear on 17.1.2020 before the Joint Commissioner of State Tax, failing which proceeding under Sections 73, 50(1) and 125 of the JGST Act would be initiated.

The inspecting team alleged three discrepancies against the petitioner in the inspection report: a lack of goods in physical stock, a lack of goods in summary stock, and a failure to declare an additional place of business.The petitioner was directed to submit his explanation for discrepancies along with purchase invoices and payment evidence before the Joint Commissioner of State Tax.

In pursuance of the inspection report, the proceeding of enquiry was initiated by the respondent. The petitioner was directed to appear before the authorities along with the requisite books of accounts. The petitioner appeared before the respondent along with its books of accounts.

In accordance with the inspection, the petitioner was served with a summary of the order on Form GST DRC 07 separately for the periods 2017–18, 2018–19, 2019–20, and 2020–2021. The alleged amount of tax, interest, and penalties have been levied against the petitioner by the respondent in spite of the fact that the petitioner was regularly appearing before the respondent pursuant to the inspection. The petitioner was also served with three rectification orders as well as a summary of rectification orders on Form GST DRC 08, all of which were also issued by the respondent with respect to three of the Form GST DRC 07 issued previously against the petitioner.

The petitioner submitted that no pre-show cause notice in the form of Form GST DRC-01A was issued intimating the petitioner of the liability for tax, interest, or penalty. The petitioner was barred from filing his objection in part B of Form GST DRC-01 against it. No show-cause notice was issued to the petitioner under Section 73(1) of the JGST Act. The proper officer has not initiated the adjudication process as contemplated under Section 73 of the JGST Act to determine the tax.

The court quashed the summary of the order as contained in Form GST DRC 07 as well as the summary of the rectification/withdrawal order as contained in Form GST DRC 08 with respect to Financial Years 2017–18, 2018–19, and 2019–20.

Case Title: M/s Shyam Hardware Store Versus The State of Jharkhand

Case No: W.P.(T) No. 1117 of 2021

Citation: 2022 LiveLaw (Jha) 71 

Dated: 11.7.2022

Counsel For Petitioner: Advocate Vishnu Deo Bhagat

Counsel For Respondent: Advocate Deepak Kumar Dubey

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