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Bombay High Court: Issuance of show cause notice is not institution of disciplinary proceedings

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Title: Narendra K. Kumbhare v. Union of India & Ors.

Decided on: 8th AUGUST, 2023.

WRIT PETITION NO. 2539 /2021

CORAM: A.S. CHANDURKAR AND MRS.VRUSHALI V. JOSHI, JJ.

Facts of the Case

The petitioner has superannuated on 30.06.2021 as Deputy Manager (Scale II). On the very day a notice was issued calling upon him to show cause as to why departmental action should not be initiated against him under the United India Insurance Company (Conduct, Discipline and Appeal) Rules 2014 for not submitting the Caste Validity Certificate. The lapse/omission according to the respondents constitutes misconduct. If satisfactory explanation is not submitted before 15 days from the date of receipt of the said letter, appropriate action will be taken by the Company.

Issues

  1. Whether issuance of show cause notice amounts to initiation of enquiry?
  2. Whether withholding of pension benefits of the Petitioner was valid?

Contentions

The petitioner contends that the rules mention that disciplinary proceedings already instituted against the employee on the date of retirement will affect his retirement. The departmental proceedings are a trite law, it is not merely initiated by issuance of show cause notice. It is initiated only when charge sheet is issued. The petitioner is also entitled to other retirement benefits as mentioned in Rule 55. The Respondents without any reason have withheld Gratuity, Leave Encashment, Group Insurance and probably Regular Pension and other retiral emoluments. As per Rule 45, the pension should only be deprived in cases of departmental proceedings; in the instant case, there are no departmental proceedings, so the deprivation of pension is illegal.

The Respondents oppose the petition that, since he was appointed under ST Reservation Policy and was receiving benefits under the Reservation Policy, he should have submitted his Case Validity Certificate. The respondents had issued various Circulars asking him to produce or to apply for Caste Validity Certificates. Each time the petitioner prayed for more time and avoided submitting his documents for verification before Caste Scrutiny Committee citing one or other reasons. The petitioner has incorrectly insisted that once a verification has been performed, the respondents may not seek another verification of the caste status. The pensionary benefits of the petitioner are withheld as the show cause notice dated 30.06.2021 was issued on the date of his retirement and therefore, according to the respondents, the enquiry stands initiated. As per provisions, the respondents can withhold the gratuity during the pendency of the enquiry

Decision

The Court held that Mere issuance of such show cause notice would not amount to initiation of the departmental enquiry. There are no departmental or judicial proceedings pending against the petitioner, therefore, the question of payment of provisional pension and withholding of the benefits does not arise.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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GST | SHOW CAUSE NOTICE MUST CONTAIN FOUNDATION OF CASE ON WHICH ACTION IS NECESSITATED: ALLAHABAD HIGH COURT

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CASE TITLE:  M/S Abhay Traders v. Commissioner Commercial Tax U.P. Lucknow and Another (WRIT TAX No. – 1265 of 2022)

DECIDED ON: 14.7.2023

CORAM: Hon’ble Siddhartha Varma,J. Hon’ble Arun Kumar Singh Deshwal,J.

PETITIONER: – M/S Abhay Traders

RESPONDENT: – Commissioner Commercial Tax U.P. Lucknow and Another

COUNSEL FOR PETITIONER: – Aloke Kumar

COUNSEL FOR RESPONDENT: – C.S.C.,Ankur Agarwal,Gopal Verma

INTRODUCTION:

The Allahabad High Court has ruled that a show cause notice must include the grounds on which the action is being initiated. If the show cause notice is deemed adequate, the assessee has the option to respond and raise objections before the relevant authorities.

In the present case, the petitioner received a show cause notice under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017, stating that Input Tax Credit was incorrectly claimed by the petitioner based on purchases from a fictitious firm. The petitioner was required to provide reasons as to why tax and penalty should not be imposed on them.

FACTS:

The counsel representing the petitioner asserted that the show cause notice lacked clarity and was not in accordance with the law. They argued that it was solely based on the report from the Special Investigation Branch.

On the other hand, the counsel representing the Department contended that the proceedings had not been initiated yet, and the show cause notice served as an opportunity for the petitioner to respond and present objections. Additionally, they argued that further action based on the show cause notice could only be taken if it appeared to the proper officer that tax had not been paid or was underpaid, or if there were issues with Input Tax Credit due to fraudulent activities, willful statements, or concealment of facts. According to them, the writ petition was premature and should be dismissed.

CASE ANALYSIS AND DECISION

Based on the precedent set in the case of Gorkha Security Services Vs. Government (NCT of Delhi) [(2014) 9 SCC 105], the court emphasized that a show cause notice must explicitly state the charges against the individual under scrutiny, ensuring compliance with the principles of natural justice.

The Court observed that the show cause notice was not unlawful merely because the Petitioner was asked to provide reasons as to why tax and penalty should not be imposed, rather than seeking a response on the merits of the allegations. The show cause notice issued under Section 74 (1) of the 2017 Act was deemed sufficient as it contained all the necessary details and grounds for its issuance. Consequently, it cannot be invalidated under Article 226 of the Constitution of India.

As a result, the petition was resolved by directing the petitioner to submit their reply and objections, along with evidence related to the disputed transactions, to the concerned authorities within a month.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

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Written by- Mansi Malpani

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Delhi High Court set aside the show cause notice, order in original and order in appeal against the petitioner under section 107 of the GST act

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Title: Kartik Agarwal vs UOI

Date of Decision: 18.07.2023

+ W.P.(C) 9424/2023 and CM Nos. 36000/2023 & 36001/2023

CORAM: HON’BLE MR. JUSTICE VIBHU BAKHRU

     HON’BLE MR. JUSTICE AMIT MAHAJAN

Introduction

Delhi High Court set aside the show cause notice, order in original and order in appeal against the petitioner and also held that the GST’s cancellation The process of registering a taxpayer has far-reaching effects on the taxpayer and often causes their business to halt. Legislators could never have intended to exclude anyone from operating a lawful company. As a result, the step of cancelling the GST should only be used sparingly and when absolutely required.

Facts of the case

In essence, the petitioner is offended by the revocation of her GST Registration. The petitioner has also asked for a return of Rs. 20,00,000 (Rupees twenty lacs only), which she alleges was placed under duress from the respondent authorities rather than willingly in response to any demand. However, the petitioner does not want to seek any remedy in relation to the deposit, totaling 20,00,000 as requested in the petition at this time, according to the experienced counsel for the petitioner. However, the petitioner wants to retain her rights so that, if required, she might subsequently avail herself of the proper remedies in this respect.

Given the foregoing, the current petition is limited to the petitioner’s challenge of the Order-in-Original dated 28.10.2022, which cancelled the petitioner’s GST registration, and the Order-in-Appeal dated 30.05.2023, which rejected the petitioner’s appeal against the Order-in-Original dated 28.10.2022.

The petitioner claims to be involved in the import and distribution of different minerals, lubricant preparations, and chemicals that come under Chapters 27 and 34 of the Customs Tariff Act, 1975. She asserts that she began operating the aforementioned business under the name and style of a sole proprietorship concern called “Vivaan International” before the GST Regime went into effect on July 1st, 2017, and that she was registered as a dealer under the Delhi Value Added Tax Act.

The petitioner claims that on September 7,2022, her premises were visited and examined by the Anti Evasion Staff of the Central Tax CGST, Delhi North Commissionerate. She says they also removed a few documents from her property without first drafting a panchnama. and they were pressured to deposit 20 lakh rupees, they gave in to their demands and, after speaking with the petitioner, deposited a sum of Rs. 10,00,000/- (Rupees ten lacs only) through DRC-03 dated 7.9.2022.

On October 10,2022, the petitioner replied to the aforementioned Show Cause Notice of 06.10.2022. The petitioner claimed in her response that her accountant had been to the office as needed and had asked for more time to complete the documentation. The petitioner also asked for the cancellation of her GST Registration, which had been suspended.

The competent officer issued the Order-in-Original dated 28.10.2022, which is also challenged in the current case, terminating the petitioner’s GST Registration with effect from 03.07.2017 since the petitioner’s argument was rejected.

Under Section 107 of the Central Goods and Services Tax Act of 2017 (hereafter referred to as “the CGST Act”), the petitioner filed an appeal against the aforementioned ruling. By an Order-in-Appeal of 30 May 2023, the aforementioned appeal was, however, denied. The petitioner was prompted by this to submit the current petition.

Analysis of the court

It is significant to note that the petitioner’s appeal against the first Orderin-first dated October 28, 2022 was denied on the basis of time limitations alone. According to Section 107(1) of the CGST Act, an appeal against an Adjudicating Authority order must be lodged within three months of the date the order was communicated. Therefore, the petitioner in this instance had until January 28, 2023, to submit an appeal. But on February 13, 2023, the petitioner submitted the same. This delay was caused due to involvement in the procedure of filing documents at anti evasion department for verification.

Undoubtedly, the Appellate Authority had the option to excuse the appeal’s filing delay as long as it did not exceed one month in accordance with Section 107(4) of the CGST Act. In the current instance, it is clear that the petitioner was in communication with the Department to resolve the issue with the cancellation of the GST Registration, and in our opinion, the petitioner provided an acceptable justification for the fourteen-day delay.

We believe that the Appellate Authority should have excused the delay given the extensive consequences of cancelling the GST Registration.

As previously mentioned, the ruling of October 28, 2022, terminating the GST registration, was only made in response to directives given by another body. The DC(AE), CGST, North Delhi had, by letter dated 30.09.2022, directed cancellation of the taxpayer’s registration as of the date of her GST Registration. This is the only basis for cancellation of the GST Registration as mentioned in the Order-in-Original.

It is significant to remember that the Order-in-Original dated October 28, 2022 also included a tabular statement indicating that no tax was determined to be owing. Generally speaking, a decision-making authority must independently use its authority and cannot do so only on the instructions of another authority unless it has independently verified the validity of the decision. In this instance, it is clear that the challenged Order-in-Original dated 28.10.2022, which was issued exclusively on the advice of a different authority without taking the petitioner’s response to the Show Cause Notice dated 6.10.2022, into consideration. It is obvious that the challenged Order-in-Original dated October 28, 2022, cannot be upheld.

The Show Cause Notice dated 6.10.2022 sought to revoke the petitioner’s GST Registration for the sole reason that the petitioner had not answered to the summons issued under Section 70 of the CGST Act, which is also relevant information to note. The petitioner had outlined how her accountant had come to the office and requested a postponement so that they could complete the paperwork. There is no indication in the Order-in-Original dated 28.10.2022, that the aforementioned argument was taken into consideration.

the GST’s cancellation The process of registering a taxpayer has far-reaching effects on the taxpayer and often causes their business to halt. Legislators could never have intended to exclude anyone from operating a lawful company. As a result, the step of cancelling the GST should only be used sparingly and when absolutely required.

We annul the contested Show Cause Notice dated 06.10.2022, the Order in Original dated 28.10.2022, and the Order in Appeal dated 30.05.2023, in light of the foregoing. Further clarification is provided, stating that the respondent authority would be free to submit a formal Show Cause Notice outlining the grounds for any planned adverse action against the petitioner. It goes without saying that any orders issued in response to the aforementioned Show Cause Notice would be supported by justifications.

The petition is dismissed on the aforementioned conditions.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written By – Shreyanshu Gupta

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Delhi High Court set aside the Show cause notice and allowed the writ of mandamus as DG’s displeasure is not a penalty stated in Rule11 of the CCS (CCA) Rules, 1965

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Title: RAJDEEP CHOWDHARY Versus UNION OF INDIA AND ORS.

Reserved on: April 25, 2023

Pronounced on: July 14, 2023

+ W.P.(C) 8135/2019

CORAM: HON’BLE MR. JUSTICE SURESH KUMAR KAIT

     HON’BLE MS. JUSTICE NEENA BANSAL KRISHNA

Introduction

Delhi High Court set aside the Show cause notice and allowed the writ of mandamus directing the promotion of petitioner to the post of Deputy Commandant, if found eligible.

Facts of the case

The petitioner asserts that while employed by the 66th Battalion of the BSF as Assistant Company Commandant, he was also administratively searching for two more platoon jobs. An FIR with the number 306/2012, under Sections 8/221/29/25 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) was filed in Jaisalmer, Rajasthan on August 8, 2012, alleging the arrest of four civilians in Jaisalmer City with 8 kg of heroin and $4.35 million in Indian currency that had been smuggled from Pakistan during the previous night of August 4, 2012, to August 5, 2012.

Inspector General (IG) (Head Quarter), BSF, Jodhpur directed a staff court of inquiry to look into how the heroin entered the specified region. Nothing indicated any carelessness or laziness on the part of those in charge.

The Deputy Inspector General (DIG) SHQ, BSF advised the IG (HQ) that the investigation was finished and that no one should be held accountable until the investigation is over or the incidence has been verified by the police in light of the aforementioned inquiry report dated 6.11.2012.

The IG (HQ) on 30.05.2013 advised action against the petitioner for his involvement in failing in appropriate dominance, disregarding the report dated 06.11.2012 and suggestion of the DIG (SHQ) dated 10.12.2012. The petitioner herein was one of six BSF employees who were subject to the disciplinary process, and the DIG, BSF, recorded evidence against them on December 14, 2013.

After reviewing the material, the relevant DIG wrote his observations dated 09.04.2015 and noted that there was no evidence to support the accusation brought against the petitioner.

In the current appeal, the petitioner expresses his unhappiness about receiving a show cause notice from the DIG on May 12, 2016, even though the DG had already made the statements indicated above on April 9, 2015.

Analysis of the court

This Court notes that a staff court of inquiry was launched against the petitioner and other BSF officials in response to the filing of FIR No. 306/2012 under Sections 8/221/29/25 of the NDPS Act, and in an opinion dated November 6, 2012, it was determined that no one in charge acted carelessly or laxly.

Being dissatisfied with the recommendations, the IG recommended action against the petitioner and ROE and Addl. ROE were recorded. Although the petitioner was advised to be dismissed for the relevant offence in the Court of Enquiry dated 10.12.2012 and Recommendations dated 09.04.2015, he was still served with a Show Cause Notice dated 12.5.2016 for a preliminary intended transfer of the DG’s dissatisfaction. The petitioner submitted a response on May 18, 2016, in response to the aforementioned Show Cause Notice from May 12, 2016, and on June 24, 2016, he submitted a request asking for a promotion from April 1, 2014. However, the petitioner’s 18 May 2016 reply to the aforementioned Show Cause Notice of 12 May 2016 was denied by decision dated 22 July 2017 and he was informed of the DG’s “Displeasure”.

Now, the issue that has to be decided by this Court is whether the petitioner may be denied the promotion owing to the DG’s “displeasure”, especially after the case brought against him has been recommended to be dropped. This Court has reviewed the Minutes of DPC Meeting dated 19.02.2014 and 19.02.2015, where the “pendency of ROE” and not “displeasure” is cited as the grounds for continuing the petitioner’s case.

The petitioner bases his argument on the ruling in O.P. Nimesh (Supra), in which the petitioner, a DIG (Medical) in the BSF, requested promotion to the rank of IG (Medical) effective the day his subordinate received promotions. In the aforementioned matter, this Court made notice of two reasons for consideration: first, the DPC had indicated that the petitioner had received two grades below benchmark in the DPC’s APAR for the year 2012–2013; second, the DG’s “displeasure” statement was also cited in detail.

Both the petitioner in O.P. Nimesh (Supra) and the petitioner in front of this court have cited an OM from the Ministry of Home Affairs dated March 27, 2015, which states that “displeasure” is not a penalty stated in Rule 11 of the CCS (CCA) Rules.

In O.P. Nimesh (Supra), this Court held that “displeasure” was not a barrier to the petitioner’s promotion there and ordered the respondents to hold a review DPC and evaluate the petitioner’s case in accordance with the rules because the aforementioned OM dated 27.03.2015 had already been notified when DPC in the said case was held on 15.07.2015.

In our perspective, the petitioner was originally given the all-clear in 2012 itself. However, disciplinary process against the petitioner started on June 8, 2013, and the DIG made statements stating on April 9, 2015 that there was no proof shown against the petitioner based on the evidence presented. Reading through copies of the minutes from the DPC meetings on 19.02.2014 and 19.02.2015 reveals that his case was not taken into consideration for promotion because of the phrase “Due to pending ROE.”

Relevantly, the petitioner received the DG’s “displeasure” via a show cause notice from the DIG on 12.05.2016. In his reply on 05.06.2016 to the aforementioned Show Cause Notice from 12.05.2016, the petitioner conveyed the DG that there was no direct or indirect implication against him in the FIR in question. However, vide order dated 22.07.2016, the DIG rejected petitioners request dated 24.06.2016 conveying him DG’s “displeasure”.

The OM dated 27.03.2015, which specifies that “displeasure” is not a penalty stated in Rule11 of the CCS (CCA) Rules, 1965, has previously been made known. Moreover, “displeasure” has not been recorded against the name of the petitioner in the minutes of meetings that were conducted on February 19 and 20, 2014 and 2015, respectively. Additionally, respondents have not proven that the petitioner’s APARs in 2014 and 2015 fell short of the benchmark, which would have prevented him from being promoted.

The DPC played a significant role in assessing the cases of applicants for promotion, as observed by the Honourable Supreme Court and this Court in a number of rulings. A applicant’s overall effort, performance, and assiduity must also be taken into consideration in addition to the APARs for the pertinent years, particularly when a candidate is being overlooked while his or her juniors are receiving promotions.

In our considered opinion, petitioner case stood deferred for promotion in the years 2014 and 2015 due to pendency of ROE and having been given clean chit, he deserves to get promotion from the date it actually became due to him. 

In view of above-said, the present petition is allowed. In the light of OM dated 27.03.2015, the Show Cause Notice dated 12.05.2016 and order dated 22.07.2016 conveying “displeasure” by the respondents, are set aside. Naturally, if the petitioner meets the requirements, he will be elevated from Assistant Commandant to Deputy Commandant with effect from April 1, 2014, the date his juniors were promoted, and will get all related perks.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

Written By – Shreyanshu Gupta

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