Tag: Reply to Show Cause Notice

Where recovery proceeding was not initiated, belated reply was allowed

Citation:

Indera Motors vs. Commissioner of Commercial Taxes, CT and GST

High Court of Orissa

[2025] 170 taxmann.com 62 (Orissa)[17-12-2024]

Facts of the Case:

  1. Show Cause Notice dated 25th June 2024 was issued fore recovery of arrears of Interest. It stated that reply was due to be given on 9th July 2024, in a Personal Hearing.
  2. The Petitioner has appeared for the hearing and requested time to submit the reply.
  3. Further, the reply dated 11th November 2024, was received from the petitioner on 13th November 2024. Petitioner requests through the appeal, to consider their reply.
  4. It was held that since recovery proceeding has not yet been initiated, department is hereby directed to consider the reply dated 11.11.2024 and order be made informing the petitioner on his contentions in the reply. Till before such order is communicated to petitioner, recovery proceeding should not be initiated.

Order passed holding SCN reply as “Not Satisfactory” is Set Aside

In the case of:

Decolene Fibers (P.) Ltd. Vs. Commissioner, Directorate General of GST

High Court of Delhi

W.P. (C) No. 5429 of 2024

Facts of the Case:

An Order dated 30.12.2023 has been passed under Section 73 of CGST Act, against a detailed reply dated 17.10.2023 to the Show Cause Notice (SCN) dated 24.09.2023

SCN contains separate headings viz, Excess Claim of ITC, scrutiny of ITC availed on Reverse charge, ITC to be reversed on non-business transactions & exempt supplies and under declaration of Ineligible ITC, to which the petitioner has submitted detailed reply giving disclosures under each head

However, the order simply states that “And whereas, in response to the DRC-01, the Taxpayer submitted his reply in DRC-06 and the reply of the registered person, as well as data available on GST Portal has been checked / examined and the reply / submission of the taxpayer is not found to be satisfactory“.

Findings of the Court:

  1. The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply dated 17.10.2023 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that the reply is unsatisfactory, which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner.
  2. Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details.

Held that:

  1. The Impugned order dated 30.12.2023 cannot be sustained and is set aside and the matter is liable to be remitted back to the proper officer for Re-Adjudication.
  2. This court has neither considered nor commented upon the merits of the contentions of either party.

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.