Non-Issuance Of Notice Caused No Prejudice As Case Clearly Spelt Out In Audit Report: Himachal Pradesh High Court

The Himachal Pradesh High Court has held that non-issuance of notice caused no prejudice as the case clearly spelt out in the audit report.

The bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja has relied on the decision of the Supreme Court in the case of State of Uttar Pradesh vs. Sudhir Kumar Singh and others in which it was held that fair procedures appear to serve no purpose since the “right” result can be secured without such treatment to the individual.”

The petitioner/assessee is a Private Limited Company having its business in the State and is duly registered with the Goods and Services Tax Department. The petitioner while availing the credit available with it under IGST and Cess has inter-mingled the heads and availed the credit of head ‘Integrated Goods and Service Tax (IGST) under the head ‘Cess’ and vice-versa.

The wrongful availment of credit created a situation whereby the less credit had been availed under ‘IGST’ head and excess credit had been available under the head ‘Cess’. The petitioner migrated from the erstwhile tax regime to the GST regime and got registered with the respondent authorities by availing GSTIN number. The petitioner was an authorized dealer of Ford India Pvt. Ltd. and was engaged in selling of motor cars, motor vehicles and the part thereof. Apart from this, the petitioner was also engaged in rendition of repair, reconditioning and related services of vehicles.

The petitioner at the time of filing GSTR-3B for the month of February, 2018 had an available balance of ITC amounting to Rs.74,76,049 under Integrated Goods and Service Tax head and Rs.24,44,483 under the head ‘Cess’ has been reflected in his GSTR-2A.

The case of the petitioner was taken up for the Audit under Section 65 of the Act and the petitioner was served with a notice for conducting the audit for the year 2017-18 issued by the Deputy Commissioner State Taxes and Excise, Mandi, District Mandi, H.P.

The audit proceedings were commenced on 31.12.2022 and concluded with Final Audit Report dated 22.07.2023 whereby the petitioner was confronted with certain discrepancies including the fact that the petitioner had claimed excess credit under ‘Cess’ as compared to the credit available for availment and hence, was directed to pay the excess availed ‘Cess’ credit along with interest and penalty.

The assessee contended that the department proceeded with its action in furtherance of the Final Audit Report and issued a summary of show cause notice in Form GST DRC-01 by which a demand of Rs.31,67,808 was proposed to be made from the petitioner under ‘Cess’ on account of excess claim of credit, without considering the fact that it was not actually claimed in excess, rather this was credit of IGST inadvertently claimed under the ‘Cess’ head.

The assessee contended that the action of the department was absolutely illegal on the ground of non-compliance of the provisions of the Act and he has strenuously argued that the show cause notice can be issued under Section 73(1) or 74(1) of the Act and as per Rule 142(1) of the Rules, the proper officer is required to issue, along-with the notice under Section 74, a statement thereof electronically in form GST DRC-01, whereas, in the present case, the proper officer has only issued summary of show cause notice, but the main notice has never been issued. If the captioned notice is treated as one under Section 74(1), then no summary has been issued.

The assessee argued that once the statutory rules provide that an act must be done in a prescribed manner and in no other way, then the conditions of rules and prescribed procedure must be satisfied and there must be application of mind.

The issue raised was whether the petitioner is fully aware of the case that it is required to meet and is being taken by surprise by not making it aware of the adverse material or the case it has to meet or is it only that the petitioner has tried to take advantage of a technical defect.

The court held that the petitioner is required to show and establish that non-furnishing of the notice has caused it prejudice and that this has prevented it from effectively defending itself. After all, in a matter like the instant one, this Court cannot be oblivious that where the procedural and/or substantive provisions of law embody the principles of natural justice, the infraction per se does not lead to invalidity of the order passed. The prejudice must be caused to the litigant except in the case of a mandatory provision of law, which is conceived not only in individual interest, but also in public interest.

The court stated that the petitioner was very well knows the case it requires to meet, as the same has been elaborately spelt out in the audit report and, therefore, we have no hesitation to conclude that no prejudice has been caused to the petitioner by non-issuance of the notice as the petitioner does not dispute the case against it.

Case Details

Case Title: Saluja Motors Pvt. Ltd. Versus State of H.P and others

Case No.: CWP No.2293 of 2024

Date: 21st April, 2025

Counsel For Petitioner: Naveen Bindal

Counsel For Respondent: Anup Rattan

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