GST Demand Order Set Aside for Being Based on a Quashed Show Cause Notice
Summary in Key Points:
- Issue: Whether a GST demand order is valid when it is based on a previously quashed show cause notice (SCN).
- Facts: The revenue department issued an SCN and a subsequent demand order against the assessee. The assessee challenged the order, and the High Court quashed both the SCN and the order due to procedural deficiencies, including the fact that the order was unsigned. However, the department issued a new demand order relying on the same quashed SCN.
- Decision: The High Court held that the new demand order was invalid as it was based on a non-existent SCN.
Analysis:
The High Court ruled in favor of the assessee, setting aside the impugned demand order. The court emphasized the following:
- Quashed SCN: The original SCN and the associated order were quashed by the High Court due to procedural irregularities.
- Non-Existent Basis: Since the SCN was quashed, it ceased to exist, and any subsequent order based on it could not sustain judicial scrutiny.
- Invalid Demand Order: The new demand order, being founded on a non-existent SCN, was invalid and had to be set aside.
Important Note: This case highlights the importance of adhering to proper procedures in issuing SCNs and demand orders under GST. Once an SCN or an order is quashed by a court, it cannot be revived or used as a basis for further proceedings. This decision reinforces the principle that tax authorities must follow due process and ensure that their actions are legally sound. Any attempt to circumvent a court order or rely on invalidated documents can lead to the quashing of subsequent actions, as demonstrated in this case.
HIGH COURT OF TELANGANA
Sree Krishna Automotives
v.
Deputy Commissioner of State Tax
Sujoy Paul and Dr. G. Radha Rani, JJ.
WRIT PETITION No.34391 OF 2024
DECEMBER 12, 2024
Md. Shabaz, Adv. for the Petitioner.
ORDER
Sujoy Paul, J.- Sri Venkata Prasad, learned counsel for the petitioner and Sri T.Chaitanya Kiran, learned Assistant Government Pleader representing on behalf of Sri Swaroop Oorilla, learned Special Government Pleader for State Tax, appears for respondent Nos.1 to 3.
2. With the consent, finally heard.
3. During the course of hearing, the parties agreed that this is second visit of the petitioner to this Court. Earlier, the petitioner filed WP.No.7919 of 2024 against the Original in Order, dated 27.12.2023 (O.I.O.). This Court decided the said matter and the operative portion of the same reads thus:
“Considering the judicial precedents referred to in the preceding paragraphs, we are of the considered opinion that the impugned order in the instant case also since it is an unsigned document which lose its efficacy in the light of requirement of Rule 26(3) of the CGST Rules, 2017 and also under the TGST Act and Rules, 2017. The show cause notice as also the impugned order both would not be sustainable and the same deserved to be and is accordingly set aside/quashed. However, the right of the respondents would stand reserved to take appropriate steps strictly in accordance with law governing the field.
Accordingly, this writ petition stands allowed. No order as to costs.”
4. Learned counsel for the petitioner submits that the impugned order dated 27.12.2023 (Ex.P.1) is founded upon Form GST DRC-01, dated 29.09.2023, which has already been set aside in the previous round. Learned counsel further submits that once the show-cause notice and final order were set aside, it was no more open to the Department to pass the impugned order on the basis of such show-cause notice, which did not exist in the eyes of law.
5. Learned Assistant Government Pleader fairly submits that projection of facts are indeed correct and the Department has committed an error in proceeding on the basis of show-cause notice, which stood quashed by this Court.
6. In this view of the matter, the impugned order founded upon such non-existing show-cause notice cannot sustain judicial scrutiny. Therefore, the impugned order is set aside. Liberty is reserved to the respondents to proceed against the petitioner, in accordance with law. The hurdle of limitation will not come in the way of Department for a period this writ petition was pending before this Court.
7. Accordingly, the Writ Petition is disposed of. No costs.
Interlocutory applications, if any pending, shall also stand closed.