Madhya Pradesh High Court
M/S Rahul Steels Through Its Authorised ... vs Union Of India on 13 March, 2025
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO. 2025:MPHC-IND:6985
1 RP-15-2025
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
ON THE 13th OF MARCH, 2025
REVIEW PETITION No. 15 of 2025
M/S RAHUL STEELS THROUGH ITS AUTHORISED SIGNATORY
RAHUL GANDHI AND OTHERS
Versus
UNION OF INDIA AND OTHERS
Appearance:
Shri Ajay Bagadia, learned senior counsel with Shri L. C. Patne,
learned counsel for the petitioners.
Shri Prasanna Prasad, learned counsel for the respondent.
ORDER
Per: Justice Vivek Rusia
The present review petition is filed seeking review of the order dated
17.12.2024 whereby this Court has dismissed the writ petition no.8015/2024.
2. In the writ petition the petitioners was issued a show cause notice
under Section 74 and 122 of the CGST Act, 2017. Apart from the petitioner a
joint notice was issued to four other assessee alleging tax evasion by way of
circular trading. This Court has declined to entertain the writ petition only on
the ground that petitioner alone cannot be singled out in the circular trading
adjudication for the purpose of quashing of show cause notice.
3. After dismissal of the writ petition, the remaining four assessees
NEUTRAL CITATION NO. 2025:MPHC-IND:6985
2 RP-15-2025
approached this Court by way of W.P.No.40867/2024 and other connected
matters and by order dated 10.02.2025 the writ petitions have been admitted
and interim relief has been granted by this Court. Meanwhile, the show cause
notice has ended into final adjudication. Even those petitioners have also
challenged the final order by amending the writ petition. The order passed in
writ petition no.40867/2024 is reproduced below:-
"Heard on the question admission and interim relief.
2. Learned Counsel for the petitioner submitted these
petitions were initially filed by petitioners challenging common
show cause notice dated 29.09.2023 issued under Section 74 of
CGST Act, 2017. When the matter came up for hearing on
09.01.2025, learned counsel for respondent was supplied with
copy of the petition alongwith annexures and was granted time to
oppose admission and interim relief sought by the petitioners and
the case was ordered to be listed in the week commencing
20.01.2025. These petitions got listed on 23.01.2025 but in the
meanwhile Respondent No. 2 malafidely passed common final
order dated 21.01.2025 in violation of principles of natural justice
upon which the petitioners filed application for amendment in
each petition for challenging common final order dated
21.01.2025 and the said amendment applications were allowed
vide order dated 23.01.2025 and the cases were ordered to be
listed today i.e. on 10.02.2025 but still no reply has been filed by
the Respondents despite the fact that amendment had already been
carried out by the petitioner. Hence, counsel for the petitioner
expressing urgency in the matter, pressed for interim relief and
submitted detailed synopsis to substantiate his arguments.
3. Per Contra, Counsel for the Respondent has again asked
for time to file reply and oppose admission and the prayer for
grant of interim relief.
4. Heard and perused the record.
NEUTRAL CITATION NO. 2025:MPHC-IND:6985
3 RP-15-2025
5. From the record, it is reflected that the petitioners had
initially filed the present petitions challenging common Show
Cause Notice dated 29.09.2023 issued under Section 74 of CGST
Act, 2017, mainly on the ground that the said show cause notice
has been issued without complying with mandatory provisions of
Rule 142 of CGST Rules, 2017 as the impugned show cause
notice alongwith its summary thereof were not uploaded on the
portal in electronic form and the impugned show cause notice and
subsequent proceedings are liable to be quashed on this ground
itself. To substantiate this ground, reliance has been placed on
various judgments namely, New Hanumat Marbles Vs. State of
Punjab (2023) 5 Centax 75 (P&H), Akash Garg Vs. State of M.P
2020 (11) TMI 786 (M.P), Shri Shyam Baba Edible Oils Vs. Chief
Commissioner 2023 (7) Centax 81 (M.P), Siddhi Vinayak
Enterprises Vs. State of Jharkhand 2023 (4) Centax 398 (Jhar.),
wherein consistent view has been taken that non-compliance of
Rule 142 of CGST Rules would render the show cause notice
invalid and liable to be quashed.
6. Another ground of challenge of common show cause
notice dated 29.09.2023 is that the impugned show cause which
has been issued under Section 74 of CGST Act, 2017 is without
jurisdiction on account of the fact that a show cause notice under
Section 74 can only be issued when evasion of tax is alleged
whereas in the case at hand there is no allegation in the entire
show cause notice regarding evasion of tax but the allegation
pertain to "circular trading " wherein admittedly at each step of
such trading the petitioners have paid GST. To substantiate this
ground, reliance has been placed on judgment of hon'ble Apex
Court in CC, CE & ST Bangalore (Adj.) etc. Vs. Northern
Operating Systems Private Limited (NOS) in Civil Appeal No.
2289-2293 on the basis of which CBIC has issued Instruction No.
05/2023-GST dated 13.12.2023 observing that "Therefore, only in
the cases where the investigation indicates that there is material
NEUTRAL CITATION NO. 2025:MPHC-IND:6985
4 RP-15-2025
evidence of fraud or wilful misstatement or suppression of fact to
evade tax on the part of the taxpayer, provisions of section 74(1)
of CGST Act may be invoked for issuance of show cause notice,
and such evidence should also be made a part of the show cause
notice."
7. It is reflected from record that before this court could hear
the case on the question of admission and interim relief,
Respondent No. 2 has passed common final order dated
21.01.2025 during the pendency of these petitions to which
challenge has been made by the petitioners in their respective
petitions by carrying out amendment in pursuance of order dated
23.01.2025 of this court, mainly on the ground that since the show
cause notice was itself without jurisdiction and was issued without
complying with mandatory provision of Rule 142 of CGST Rules,
the subsequent order is non est in light of the principle that if
initial action is not in consonance with law, all subsequent and
consequential proceedings would fall through for the reason that
illegality strikes at the root of the order. In such a fact-situation,
the legal maxim "sublato fundamento cadit opus " meaning thereby
that foundation being removed, structure/work falls, comes into
play and applies on all scores in the present case. Also, Once the
basis of a proceeding is gone, all consequential acts, actions,
orders would fall to the ground automatically and this principle is
applicable to judicial, quasi-judicial and administrative
proceedings equally. It is also a settled legal proposition that if an
order is bad in its inception, it does not get sanctified at a later
stage. A subsequent action/development cannot validate an action
which was not lawful at its inception, for the reason that the
illegality strikes at the root of the order. It would be beyond the
competence of any authority to validate such an order. To
substantiate this ground, reliance has been placed on State of
Punjab Vs, Debender Pal Singh 2011 (14) S.C.C 770, Badrinath v.
State of Tamil Nadu & Ors., AIR 2000 SC 3243; State of Kerala
NEUTRAL CITATION NO. 2025:MPHC-IND:6985
5 RP-15-2025
v. Puthenkavu N.S.S. Karayogam & Anr., (2001) 10 SCC 191 and
State of Orissa & Others Vs. Mamata Mohanty, (2011) 3 SCC
8. Another ground for challenge of common final order
dated 21.01.2025 which has been raised is that the petitioners
herein specifically sought right to cross examine witnesses whose
testimony are being relied upon by the Respondents but
admittedly such right was not afforded to the petitioner despite
making multiple request and failure to grant opportunity of cross
examination is violative of principles of natural justice and on this
ground common final order dated 21.01.2025 is bad in law and
liable to be set aside. To substantiate this ground, reliance has
been placed on Andaman Timber Industries Vs Commissioner of
Central Excise 2016 (15) SCC 785 and Nishad K.U Vs. Joint
Commissioner, Central Tax and Central Excise
MANU/KE/5243/2024.
9. In view of the aforesaid grounds raised by the petitioners,
this court is of the considered opinion that prima facie case exists
in favour of the petitioners and if the common impugned final
order dated 21.01.2025 is not stayed during the pendency of the
present petitions then the petitioners would suffer irreparably.
10. Accordingly, these petitions are admitted for final
hearing and it is directed that effect and operation of common
impugned final order dated 21.01.2025 shall remain stayed,
pending adjudication of these petitions.
11. Respondents may file their reply. Rejoinder, if any be
filed by the petitioners thereafter.
12. List the matters for final hearing in due course
W.P.No.40861/2024, W.P.No.40864/2024 and
W.P.No.40890/2024."
4. In such changed circumstances, learned senior counsel submits
that this petition may kindly be restored so that petitioner can also challenge
NEUTRAL CITATION NO. 2025:MPHC-IND:6985
6 RP-15-2025
the final order passed by adjudicating authority by way of amendment in writ
petition along with other four assessees.
5. It is correct that issue of circular trading is liable to be decided in
presence of all the five assessees, hence in order to participate along with
four other assessees, the petition is liable to be restored in view of change
circumstance.
6. In view of the above, the order 17.12.2024 is hereby recalled and
the writ petition no.8015/2024 is restored to its original number.
With the aforesaid review petition is disposed off.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
RJ
