Laxmi Traders Proprietor Dipanshu Garg Vs Principal Commissioner of Gst Department of Trade And Taxes
Date: April 4, 2024
Subject Matter
Order cannot be passed without issuing an SCN
Summary
The case involves a petitioner challenging an order creating a demand against them, which was set off against blocked Input Tax Credit (ITC). It is observed that no show cause notice or DRC-01 was issued to the petitioner prior to passing the impugned order. The impugned order was purportedly passed under Section 73 of the Central Goods and Services Tax Act, 2017, which mandates the issuance of a show cause notice prior to passing an order creating a demand. It is noted that no such notice was issued in this case. Although a show cause notice proposing to cancel the GST registration was issued earlier, those proceedings were dropped. The court, upon considering the lack of show cause notice prior to the impugned order, set aside the order and clarified that the respondents could pass a proper order after issuing a show cause notice and providing an opportunity for a personal hearing to the petitioner. The court emphasized that the decision was solely based on the breach of natural justice principles and reserved the rights and contentions of both parties.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Petitioner impugns order dated 07.02.2024, whereby a demand has been created against the petitioner and the same has been set off against blocked ITC.
2. Issue notice. Notice is accepted by learned counsel appearing for respondents.
3. With the consent of parties, petition is taken up for final disposal.
4. Learned counsel for respondent No.1, under instructions submits that there does not appear to be any show cause notice or DRC-01 issued to the petitioner prior to passing of the impugned order.
5. The impugned order is purportedly an order passed under Section 73 of the Central Goods and Services Tax Act, 2017 [“the Act”], creating a demand.
6. Section 73 of the Act mandates issuance of show cause notice prior to passing an order creating a demand. In the instant case, admittedly, no show cause notice was issued to the petitioner prior to impugned order being passed.
7. A show cause notice dated 16.06.2023 was issued proposing to cancel the GST registration of the petitioner, however, the said proceedings were dropped by order dated 25.08.2023 upon consideration of the reply of the petitioner.
8. Since no show cause notice was issued prior to passing of impugned order, on the said technical ground alone, this order is liable to be set aside. The same is accordingly quashed.
9. It is clarified that it would be open to the respondents to pass an appropriate order after giving a proper show cause notice and an opportunity of personal hearing to the petitioner.
10. It is clarified that this Court has neither considered nor commented on the merits of contentions of either party and the impugned order has been set aside solely on the ground of infraction of principles of natural justice. All rights and contentions of the parties are reserved
11. Petition is accordingly disposed of in the above terms.