In this case, the High Court has highlighted the importance of following the proper statutory process.
Notice was issued to the assessee under Section 61 of Punjab GST/CGST Act, 2017 was issued for scrutiny of the return to explain and prove the genuineness of the ITC claimed on the purchases, alleging that during the period 2017-18, the firm had claimed ITC from four different firms, whose registration had already been cancelled.
The petitioner replied to the notice and his reply was found to be satisfactory and such satisfaction was communicated by the department vide form ASMT-12 dated 28.02.2023. Simultaneously and prior to it, the petitioner was also served with a pre-show cause intimation under Rule 142 (1) (A) in Form GST DRC 01A dated 23.02.2023, stating that demand is payable as reply to the notice under Section 61 in Form ASMT-10 of GST Act, 2017 was not found to be satisfactory.
Following the pre-show intimation, show cause notice was issued under Section 74 of the CGST Act on the very same ground of genuineness of ITC availed from registration cancelled suppliers. Petitioner replied to the SCN and submitted that proceedings had already been dropped vide ASMT-12. However, order confirming the demand, interest and penalty was passed.
The petitioner submitted that once the notice under Section 61 stood dropped, the Proper Officer could not have proceeded further under Section 74. The respondents countered on the ground that no documentary evidence has been submitted by the petitioner in response to proceedings under Section 74(5).
The Court, ruling in favour of the petitioner, observed that initiating proceedings under Section 74 are that the concerned officer should reach to a conclusion that the ITC has been wrongly availed or utilized by reason of fraud or any wilful mis-statement or suppression of facts to evade tax. The Court observed that two different views have been expressed by the same Proper Officer, one while intimating the liability under Section 74(5) on 23.02.2023 and the other by subsequently dropping the proceedings under Section 61(2) on 28.02.2023. Therefore, it can be presumed that after the notice was given under Section 74(5) of the Act, the Authority has reached to the conclusion that no additional demand is payable/chargeable and therefore, the proceedings stand dropped.
W&B Comments: Under the GST regime, the assessees have faced several absurd actions from the department and the reply and clarifications submitted by the assessees as to any patent defect and error has little effect on the department which proceeds to confirm the demand. This judgment clarifies that once the department has formed a view and such view has been communicated vide a statutory process, the department cannot again initiate action based on a divergent view. This also demonstrates lack of robust IT system wherein a second proceeding qua the same FY and for the same issue cannot be initiated where any previous proceeding in respect of the same subject matter is pending for adjudication.