IMPORTANT POINT
The main legal point established in the judgment is that the proper officer must consider the explanation offered by the registered person before assuming jurisdiction to issue show cause notice under Section 73 of the RGST Act, 2017.

ORDER :

1. Heard.

2. This petition is directed against order dated 29.09.2023 to the extent of observations made in the enclosures to the said order that even after accepting the explanation/reply furnished by the petitioner, same does not affect the validity of the show cause notice and the legal liability of the person to discharge tax liability under the show cause notice remains ineffective. The petitioner has also prayed for quashing of show cause notice 21.09.2023.

3. The facts necessary for decision of the controversy involved in this petition are that the petitioner, who carries on the business of operating a hotel, is registered under the Goods and Service Tax Act, having GSTIN No.08AACCG4611J1ZQ. He submitted his monthly returns in the prescribed form No.GSTR 3B for the financial year 2017-18. The respondent No.2, however, undertook scrutiny of the returns and thereafter, issued a notice on 01.09.2023 in prescribed form No.GST ASMT-10 intimating certain discrepancies, drawing proceedings under Section 61 of the RGST/CGST Act, 2017 for the financial year 2017-18. The aforesaid notice dated 01.09.2023 stated that the petitioner had availed input tax credit which was not available to him as per Section 17(5) of the RGST Act, 2017. In the notice, it was further detailed out that the ITC on payment made to M/s Kone Elevators India Pvt. Ltd. for purchase of lift and payment made for purchase of Air Conditioners were under block credit as per Section 17(5) of the RGST Act, 2017 and therefore, the same were not available to be availed. On such consideration, it was stated that the petitioner was liable to reverse the tax amounting to Rs.18,44,884/- (SGST amounting to Rs.9,22,442/- and CGST amounting to Rs.9,22,442/-), along with interest under Section 50 of the RGST Act. The petitioner was called upon to furnish explanation on or before 15.09.2023.

4. In response to the said notice, the petitioner submitted a preliminary reply on 15.09.2023. Though in that reply, further time was sought to furnish detailed reply till 01.10.2023, at the same time, the petitioner sought to respond by submitting that the company was engaged in the business of operating hotels and payments made to various persons for purchase of elevators and Air Conditioners were made. According to the petitioner, the said equipments are plant and machinery for the purpose of business and are necessary for making outward supply of services to hotel customers. On such factual premise, the petitioner claimed that the provisions contained in clauses (c) and (d) of Section 17(5) of the CGST Act, 2017, which carves out exception of non-availability of ITC are not applicable to “plant and machinery” and claim be excluded from the exception.

5. In sum and substance, the petitioner stand was that the ITC would be available on the plant and machinery which is used for making outward supply of service.

6. The respondents, however, issued a show cause notice under Section 73 of the Act on 21.09.2023, whereby proceedings for tax recovery were initiated.

7. Curiously enough, a communication in FORM No.GST ASMT-12, referable to Rule 99 (3) of the Central Goods and Service Tax Rules, 2017 came to be issued on 29.09.2023, wherein it was stated that the petitioner’s reply to notice under Section 61 has been found to be satisfactory and no further action is required to be taken in the matter. Along with the said communication an enclosure was made stating that issuance of ASMT-12 does not affect the validity of show cause notice issued.

8. Despite reply of the petitioner having been found satisfactory and communication in form GST ASMT-12 having been issued in its favour, the show cause notice under Section 73 was not withdrawn and proceedings were not dropped. Hence, the present petition was filed.

9. The submission of learned counsel for the petitioner is that once the respondents invoked their jurisdiction under Section 61 of the Act and undertook the scrutiny of return, without consi