WP(C)/2364/2024 on 9 May, 2024

Judgment Summary: Ashika Business Private Limited vs. Union of India & Ors.

Case No.: WP(C)/2364/2024
Date of Judgment: 9 May, 2024
Court: The Gauhati High Court

1. Outcome

The writ petition was not entertained and consequently dismissed. The Court held that the petitioner failed to establish any exceptional circumstances that would warrant bypassing the statutory remedy of appeal available under Section 107 of the CGST Act, 2017.

However, the Court granted the petitioner the liberty to file a statutory appeal. It directed the appellate authority to consider the time spent by the petitioner in prosecuting this writ petition when deciding the issue of limitation.

2. Core Issue

The central legal question was whether the High Court should exercise its extraordinary writ jurisdiction under Article 226 of the Constitution to quash a Demand-cum-Show Cause Notice (SCN) and an Order-in-Original (OIO) on grounds of procedural irregularities, despite the existence of an efficacious alternative statutory remedy of appeal.

3. Key Facts

1. The petitioner, Ashika Business Private Limited, is a registered taxpayer under the CGST/AGST Acts.
2. The GST authorities conducted an audit under Section 65 of the CGST Act for the period July 2017 to March 2019.
3. Based on the audit findings (communicated via FORM GST ADT-02), a Demand-cum-Show Cause Notice was issued on 22.09.2023 under Section 73(1), demanding GST of ₹24,00,059/- along with interest and penalty.
4. The petitioner filed a reply to the SCN on 04.12.2023.
5. The Adjudicating Authority passed an Order-in-Original on 14.12.2023, confirming the demand, interest, and penalties as proposed in the SCN.
6. The petitioner challenged both the SCN and the OIO directly before the High Court through this writ petition, instead of filing an appeal before the statutory appellate authority.

4. Arguments

Petitioner's Arguments:

• Procedural Violation (Rule 142): The proceedings were vitiated as the summary of the SCN in FORM GST DRC-01 and the summary of the OIO in FORM GST DRC-07 were not uploaded electronically on the common portal, which is a mandatory requirement under Rule 142 of the CGST Rules, 2017 and emphasized in CBIC Instruction No. 04/2023-GST.
• Violation of Natural Justice (Different Officers): The SCN was issued by the Assistant Commissioner of the Audit Circle, whereas the OIO was passed by the Assistant Commissioner of the Silchar Division. This violates the principle that "one who hears must decide."
• Denial of Personal Hearing: The petitioner was not afforded a personal hearing before the passing of the impugned OIO.

Respondents' Arguments (CGST Department):

• Non-Entertainability: The writ petition should be dismissed at the threshold as the petitioner has an effective and efficacious statutory remedy of appeal under Section 107 of the CGST Act.
• Waiver of Procedural Right: The petitioner received the physical SCN and replied to it without raising any objection regarding the non-uploading of FORM DRC-01. This implies a waiver of that procedural requirement. No prejudice was caused.
• Personal Hearing Offered: The petitioner was given four opportunities for a personal hearing but failed to attend. They cannot now claim a denial of natural justice.

5. Court’s Reasoning

The Court systematically rejected the petitioner's arguments for entertaining the writ petition:

• On Entertainability vs. Maintainability: The Court distinguished between the 'maintainability' of a writ petition (which is not barred) and its 'entertainability' (which is a matter of judicial discretion). A writ petition should not be entertained if an alternative remedy exists, except in exceptional cases like a total lack of jurisdiction or a gross violation of natural justice.
• On Non-Compliance with Rule 142:
  • The Court held that the requirement to upload summaries in FORM DRC-01 and DRC-07 is for the benefit of the assessee. Since the petitioner received the physical SCN and replied to it without protest, they had waived their right to insist on the electronic uploading of the summary.
  • Service was completed via a permissible mode under Section 169 of the CGST Act. The non-uploading on the portal did not cause any prejudice to the petitioner, who was fully aware of the proceedings. This procedural lapse was not considered an exceptional circumstance to justify invoking writ jurisdiction.
• On Different Officers:
  • The SCN itself directed the petitioner to show cause before the Assistant Commissioner, Silchar Division (the adjudicating authority). The issuance by the Audit Commissionerate post-audit is standard procedure.
  • Since the petitioner failed to avail the multiple opportunities for a personal hearing, the adjudicating authority rightly decided the matter based on the written reply. Thus, the principle of "one who hears must decide" was not violated.
• On Denial of Personal Hearing: The Court noted that the claim of not being served notice for a personal hearing was a disputed question of fact. Such disputes are best resolved by the appellate authority, which can examine evidence, and are not suitable for adjudication in a writ proceeding.

6. Statutory References

• Constitution of India: Article 226
• Central Goods and Services Tax (CGST) Act, 2017:
  • Section 65 (Audit by tax authorities)
  • Section 73 (Determination of tax not paid for reasons other than fraud)
  • Section 107 (Appeals to Appellate Authority)
  • Section 169 (Service of notice)
• Central Goods and Services Tax (CGST) Rules, 2017:
  • Rule 142(1) & (5) (Requirement to issue summary of notice in FORM GST DRC-01 and summary of order in FORM GST DRC-07)
• Circulars/Instructions:
  • CBIC Instruction No. 04/2023-GST dated 23.11.2023

7. Precedents Cited

• Commissioner of Income Tax and others vs. Chhabil Das Agarwal, [2014] 1 SCC 603: On the rule of self-imposed limitation for High Courts in not entertaining writs when an efficacious alternative remedy is available.
• M/s Godrej Sara Lee Ltd. vs. The Excise and Taxation Officer-cum-Assessing Authority and others, [2023] 3 SCR 871: On the distinction between 'maintainability' and 'entertainability' of a writ petition.
• Commissioner of Customs, Mumbai vs. Virgo Steels, Bombay and another, [2002] 4 SCC 316: On the principle that a mandatory procedural provision intended for the benefit of an individual can be waived by that individual.