9 days is not reasonable time to reply to Show Cause Notice – Audi Alteram Partem Violated – SCN is invalid

Citation:

Raymond Ltd. Vs. Union of India

Writ Petition No. 26693 of 2022 – Hon’ble High Court of Madhya Pradesh

[2023] 157 taxmann.com 654 (Madhya Pradesh)

Facts of the Case:

  1. A Show Cause Notice (SCN) was issued on 03-09-2022 under Section 73 of CGST Act, 2017, affording 30 days of time for the petitioner (Raymond Ltd) to respond.
  2. Order of Demand was issued on 12-09-2022 (Within 9 days of issue of SCN).

Grounds for Filing the Petition:

The following three grounds were preferred:

  1. Denial of Reasonable Opportunity: Though the SCN has provided 30 days, Order was passed within 9 days, not providing reasonable time to reply to the SCN.
  2. Principle of Audi Alteram Partem Violated: SCN is not self-contained – It fails to inform about the material of adverse nature which constituted the foundation of the SCN, thereby disabling the petitioner to respond. Hence, Principle of Audi Alteram Partem (Hear the Other Side) was violated.
  3. Opportunity of Personal Hearing was not afforded.

Findings:

  1. Though Section 73 does not specify a time period to respond to SCN, the statute contemplates affording reasonable opportunity to reply. Section 73(2) states that SCN needs to be issued at least 3 months prior to the issue of the Order u/s. 73(10)
  2. Concept of reasonable Opportunity demands that reasonable time to reply should be not less than 15 days at least.
  3. As per Section 73(8), time period provided for payment of tax, interest, and penalty is 30 days from the date of SCN(For the proceedings in respect of the SCN to be considered as deemed to be concluded). Hence, the reasonable period for responding to the SCN ought to be 30 days.
  4. Any SCN should contain enough and adequate material which motivated the authority to take a view against the noticee. If the contents of the SCN are lacking in Material particulars or are vague in regard to any entries contained therein, then it would be vulnerable to judicial review.
  5. Hence, the present SCN falls short of minimum period of 30 days to afford reasonable opportunity to noticee to respond and also appears to be lacking in material particular.

Order:

  1. The Impugned SCN dated 03-09-2022 and the Order dated 12-09-2022 are set aside
  2. Revenue is at liberty to issue fresh and legal SCN and proceed after affording reasonable and sufficient opportunity of being heard, to the petitioner.
  3. The petitioner shall be entitled to a cost of Rs. 10,000 to be paid by the respondents and compliance report to be filed by them (respondents) in Registry within 60 days.

Relevant Provisions:

Section 73(1) and (2) of CGST Act:

(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.

(2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in sub-section (10) for issuance of order.

Section 73(8):

Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded.

Section 73(10):

The proper officer shall issue the order under sub-section (9) within three years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.

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