K.P. Indane Service v. State of Jharkhand

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The Tax Publishers 2024 TaxPub(GST) 869 (Jhar-HC) Violation of principles of natural justice - mandatory SCN was not served - provisional attachment of property - HELD THAT:- The Central Board of Indirect Taxes and Customs has issued Master Circular No. 1053/2/2017-CX setting out detailed guidelines for the authorities under the Act as to how a show cause notice under section 11A of Central Excise Act, 1944/ Section 73 of the Chapter V of the Finance Act, 1994 should be issued. In accordance with section 6 thereof and section 27 of the Bihar and Orissa General Clauses Act, 1917, the said circular will apply in the case of issuance of show cause notice under the Act - It further transpires from record that an admission in the hands of the answering deponent has been made to the effect that no opportunity of hearing was extended to the Petitioner. It is a settled proposition of law that any proceeding which has civil and penal consequences, principle of natural justice has to be read into before issuing a final order. From record it appears that the order impugned is dated 14-7-2020, which has never been served upon the petitioner in the manner prescribed under the Act and that too during the Covid-19 period. The power to attach the bank account has to be only by way of an order passed by the Commissioner in order to protect the interest of government revenue and the cash credit account not being as asset of the petitioner, the same could not have been attached in any eventuality. The exercise of power purportedly under section 79 is nothing else, but a misuse of power vested in the authority under the Act. The respondents have failed to say and satisfy as to how the authority of law has been followed and when the petitioner has never been extended any opportunity of hearing before passing of the order complained of, nor have been communicated before attachment of the bank account. Now it is a settled principle of law that any authority has to follow the principle of natural justice and in the instant case the alleged show cause notice in terms of DRC-01 has been issued under rule 142 of JGST Rule 2017, demanding tax, interest and penalty. However, from record it would transpire that the summary show cause notice in terms of rule 142 (1) has not been complied with which is mandatory under section 73/74 of JGST Act 2017. It is clear from the plain language of Section 83(2) of the CGST Act that the operation of an order provisionally attaching the bank account would cease to be operative after the expiry of the statutory period of one year. As stated hereinabove at best only the interest can be recovered from the petitioner for delay filing of return but demand of the entire amount is illegal and liable to be quashed and set aside. The impugned order/notice dated 14-7-2020 and subsequent GST DRC-07 dated 16-7-2020, are hereby, quashed and set aside. Consequently, the letter of attachment/ freezing bank account of the petitioner being account no. 07180500010245 with the UCO Bank, Tata Kandra Rd. Dist. Saraikela-Kharsawa, Jharkhand, is also quashed - matter is remitted back to the Adjudicating Authority to issue statutory notice to the petitioner and pass a fresh order with respect to interest after verifying the records after following due process of law strictly in accordance with the provisions of the Act. Application allowed. G169454 IN THE JHARKHAND HIGH COURT SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 2024 TaxPub(GST) 869 (Jhar-HC)

Violation of principles of natural justice - mandatory SCN was not served - provisional attachment of property - HELD THAT:- The Central Board of Indirect Taxes and Customs has issued Master Circular No. 1053/2/2017-CX setting out detailed guidelines for the authorities under the Act as to how a show cause notice under section 11A of Central Excise Act, 1944/ Section 73 of the Chapter V of the Finance Act, 1994 should be issued. In accordance with section 6 thereof and section 27 of the Bihar and Orissa General Clauses Act, 1917, the said circular will apply in the case of issuance of show cause notice under the Act - It further transpires from record that an admission in the hands of the answering deponent has been made to the effect that no opportunity of hearing was extended to the Petitioner. It is a settled proposition of law that any proceeding which has civil and penal consequences, principle of natural justice has to be read into before issuing a final order. From record it appears that the order impugned is dated 14-7-2020, which has never been served upon the petitioner in the manner prescribed under the Act and that too during the Covid-19 period.

The power to attach the bank account has to be only by way of an order passed by the Commissioner in order to protect the interest of government revenue and the cash credit account not being as asset of the petitioner, the same could not have been attached in any eventuality. The exercise of power purportedly under section 79 is nothing else, but a misuse of power vested in the authority under the Act. The respondents have failed to say and satisfy as to how the authority of law has been followed and when the petitioner has never been extended any opportunity of hearing before passing of the order complained of, nor have been communicated before attachment of the bank account.

Now it is a settled principle of law that any authority has to follow the principle of natural justice and in the instant case the alleged show cause notice in terms of DRC-01 has been issued under rule 142 of JGST Rule 2017, demanding tax, interest and penalty. However, from record it would transpire that the summary show cause notice in terms of rule 142 (1) has not been complied with which is mandatory under section 73/74 of JGST Act 2017.

It is clear from the plain language of Section 83(2) of the CGST Act that the operation of an order provisionally attaching the bank account would cease to be operative after the expiry of the statutory period of one year. As stated hereinabove at best only the interest can be recovered from the petitioner for delay filing of return but demand of the entire amount is illegal and liable to be quashed and set aside.

The impugned order/notice dated 14-7-2020 and subsequent GST DRC-07 dated 16-7-2020, are hereby, quashed and set aside. Consequently, the letter of attachment/ freezing bank account of the petitioner being account no. 07180500010245 with the UCO Bank, Tata Kandra Rd. Dist. Saraikela-Kharsawa, Jharkhand, is also quashed - matter is remitted back to the Adjudicating Authority to issue statutory notice to the petitioner and pass a fresh order with respect to interest after verifying the records after following due process of law strictly in accordance with the provisions of the Act.

Application allowed.

G169454

IN THE JHARKHAND HIGH COURT