Facts of the Case

The petitioner, Alok Steel Industries Private Limited, Ramgarh, Jharkhand, engaged in manufacturing Sponge Iron and M.S. Billet, is registered under the Jharkhand Goods and Services Tax Act, 2017 (JGST Act). For FY 2018-19, it was issued a Form GST ASMT-10 intimation pointing out a mismatch between its GSTR-3B and GSTR-2A returns, followed by a Summary of Show Cause Notice dated 27.09.2019 in Form GST DRC-01 under Section 73(1) of the JGST Act, alleging wrongful availment of Input Tax Credit. No compliance date was intimated, yet the petitioner suo motu filed its reply on 22.10.2019. No hearing was thereafter fixed; amid the COVID-19 lockdown, the petitioner received no further communication until September 2023, when it was informed of a Summary of Order dated 02.09.2020, uploaded on the GSTN portal in Form GST DRC-07, imposing tax, interest and penalty. The matter, heard by the Jharkhand High Court at Ranchi, was decided on 11 December 2023.

Issues Involved

  1. Whether a mere "Summary of Show Cause Notice" issued in Form GST DRC-01, without an accompanying proper show cause notice, satisfies the statutory requirement of Section 73 of the JGST Act.
  2. Whether failure to fix a date of personal hearing before passing the demand order violated the mandatory hearing requirements under Section 75(4) and 75(5) of the JGST Act.
  3. Whether the adjudication order and consequential Form GST DRC-07 summary of demand were sustainable in these circumstances.

Petitioner's Arguments

  • No proper show cause notice was issued under Section 73(1) of the JGST Act read with Rule 142(1) of the JGST Rules — only a Summary of Show Cause Notice in Form GST DRC-01 — an issue already covered by this Court's decision in M/s. NKAS Services Private Limited v. The State of Jharkhand & Ors. (W.P.(T) No.2444 of 2021).
  • No date of hearing was ever fixed, and the demand order followed nearly eleven months after the petitioner's reply without any hearing — an issue covered by M/s. Godavari Commodities Limited v. The State of Jharkhand & Ors. (W.P.(T) Nos.3908 & 3909 of 2020).
  • No adjudication order in the proper sense had even been passed — only a Summary of Demand in Form GST DRC-07 was issued, contrary to the ratio in NKAS Services.

Respondent's Arguments

  • The petitioner had an efficacious alternative remedy of appeal before the Appellate Authority, so the writ application was not maintainable.
  • Prior to the DRC-01 notice, the petitioner had already been issued an ASMT-10 intimation, so the statutory procedure was followed.
  • However, it was fairly admitted, referring to paragraph 14 of the Counter Affidavit, that the petitioner had not been issued any proper Show Cause Notice, and only a Summary of Show Cause Notice had been issued.

Court Order/Findings

  • Following its own precedents in NKAS Services and Godavari Commodities, the Court held that a Summary of Show Cause Notice in Form GST DRC-01 cannot substitute the requirement of a proper show cause notice under Section 73 of the JGST Act, and absence of a fixed hearing date before an adverse order violates the mandatory hearing safeguards under Section 75(4) and 75(5) of the JGST Act.
  • The Summary of Show Cause Notice, the adjudication order dated 02.09.2020, and the Summary of Order in Form GST DRC-07 were quashed and set aside.
  • Respondents were granted liberty to initiate fresh proceedings from the same stage, in accordance with law.
  • The writ application was allowed and disposed of, with parties bearing their own costs.

Important Clarification

  • A Summary of Show Cause Notice in Form GST DRC-01 cannot substitute a proper, self-contained show cause notice under Section 73 of the GST Act; the foundational allegations must be spelt out, not merely summarised.
  • Sections 75(4) and 75(5) of the JGST/CGST Act mandate that an opportunity of hearing be granted where requested, or wherever an adverse decision is contemplated, and permit at most three adjournments; failure to fix any hearing date before an adverse demand order vitiates that order on natural-justice grounds.
  • Such quashing does not bar the department from reinitiating proceedings from the same stage, so the relief is procedural rather than a final adjudication of the underlying tax demand.

Sections Involved

  • Section 73 of the Jharkhand GST Act, 2017 — determination of tax not paid or short paid, and of input tax credit wrongly availed, in non-fraud cases.
  • Section 75(4) and 75(5) of the Jharkhand GST Act, 2017 — mandate an opportunity of personal hearing and regulate the grant of adjournments in adjudication proceedings.
  • Rule 142(1) of the Jharkhand GST Rules, 2017 — prescribes the manner of communicating show cause notices and summaries thereof in Form GST DRC-01.

Decision – In Favour of

The decision was in favour of the Assessee: the impugned show cause notice, adjudication order and demand summary were quashed for non-compliance with the requirements of a proper show cause notice and natural justice, though the department retains liberty to reinitiate proceedings from the same stage.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Jharkhand at Ranchi
  • Case No.: W.P.(T) No.5408 of 2023
  • CNR: Not available on record
  • Coram: Justice Rongon Mukhopadhyay and Justice Deepak Roshan
  • Decision Date: 11 December 2023
  • Disposal Nature: Writ petition allowed; show-cause notice and demand order quashed, liberty to initiate fresh proceedings

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