The main legal point established in the judgment is the mandatory and imperative nature of the show cause notice requirement under Section 74(1) of the JGST Act and the need for specific charges in the notice to afford the opportunity to defend.

JUDGMENT :

Deepak Roshan, J.

Since common issue is involved in both these writ applications and belongs to same assesse for different period as such both are heard together and disposed of by this common order.

2. W.P. (T) No.1991 of 2021 relates to the period from July, 2017 to March, 2018 (AY-2017-18) and W.P. (T) No.1984 of 2021 relates to the period from April 2018 to 31.8.2018 (AY-2018-19).

3. The facts of the case are that on 13-08-2018 a search was conducted in the premises of the petitioner under Section 67 of the JGST Act for irregular claim of input tax credit mainly on the ground (in W.P.(T) No.1991/2021) that the petitioner has claimed input tax credit without making payment of value and tax of the inputs to the supplier within six months which is in contravention of 2nd/3rd proviso to Section 16(2) of the JGST Act. It is also held that credit of Rs.27 lakh (out of total Rs.19.43 Cr. constituting 1%) is not transported in heavy vehicle as per the vehicle numbers. Whereas, the ground for search in W.P. (T) No.1984/2021 is concerned; the petitioner made purchases only from one supplier, and there exist no proof of payment and secondly, on physical verification, difference in stock was found from the stock maintained in books of accounts.

4. Mr. Kartik Kurmi, assisted by Mr. N. K. Pasari and Ms. Sidhi Jalan learned counsel for the petitioner submits that the proceeding in both the cases started with issuance of summary show-cause notices, both dated 14.9.2018 in Form DRC-01 under Section 74(1) of JGST Act, 2017. The petitioner under bona-fide and mistaken belief of law, submitted its concise reply vid letter dated 11-10-2018 in Form DRC-06 explaining that the ITC have been legally claimed by them and the goods have been physically received by them. The Respondent No.4 thereupon passed two separate orders, both dated 25-02-2019 under Section 74(9) of the JGST Act and confirmed tax demand, interest and penalty and issued Summary of Order dated 28-02-2019.

The petitioner filed two separate applications for two separate orders, both dated 2.6.2019, before respondent No.2 under Section 161 of the JGST Act for rectification of certain mistakes. Pursuant thereto; the respondent No.2 passed rectification order for both the periods relating to the above two applications by two separate orders, both dated 3.3.2021 and rectified some errors and subsequent thereto; issued two separate demand notices for the above referred period in Form DRC-08, both dated 3.3.2020.

Learned counsel further submits that no show cause notice under Section 74(1) is issued and served upon the petitioner which fact is not disputed by the respondent in its counter affidavit. Issuance of show cause notice U/s 74(1) of the JGST Act, 2017 is mandatory and imperative in character. Form DRC 01 is not a substitute of show cause notice u/s 74(1). Thus, the entire proceeding in both the cases is without jurisdiction. Since, the foundation of the two proceedings suffer from material irregularity as such they not sustainable being contrary to Section 74(1) of the JGST Act. Thus, the subsequent proceedings/impugned Orders cannot sanctify the same and the entire super structure will have to fall.

Learned counsel further contended that there is no estoppel against statute and reiterated that issuance of show-cause notice u/s 74(1) of the JGST Act, 2017 is mandatory and imperative in character. Form DRC-01 is not a substitute of show cause notice u/s 74(1). Thus, the entire proceeding is without jurisdiction. He reiterated that the petitioner-company were never issued and/or served with mandatory show-cause notice u/s 74(1) of the JGST Act, hence, the entire proceeding is without jurisdiction and without authority of law. Since service of show cause notice u/s 74(1) is mandatory in character and is requirement of natural justice hence, cannot be give a go-bye or jettisoned. The use of the auxiliary verb “shall” under Section 74(1) indicates that the provision is mandatory an