Writ Petition Dismissed: Assessee’s Claim of Natural Justice Violation Not Tenable Without Reply to SCN

Writ Petition Dismissed: Assessee’s Claim of Natural Justice Violation Not Tenable Without Reply to SCN

Issue:

Whether an assessee can successfully challenge a show cause notice (SCN) and a subsequent order passed under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act), on grounds of violation of natural justice, specifically when the assessee has failed to even submit a reply to the SCN.

Facts:

For the period 2018-19, a show cause notice (SCN) was issued to the assessee, alleging excess/ineligible Input Tax Credit (ITC) availed. Subsequently, an impugned order was passed under Section 74 of the CGST Act (which deals with demands involving fraud, willful misstatement, or suppression of facts). The assessee submitted a petition claiming that both the SCN and the impugned order were passed in violation of the principles of natural justice. However, it was evidently clear that the assessee, despite being aware of the SCN, had not filed any reply to it.

Decision:

The court ruled in favor of the revenue. It held that since the assessee was evidently aware of the show cause notice and still complained about the violation of natural justice without even replying to the show cause notice, the pleas of the assessee were not tenable. The instant petition was deemed a “misadventure” and was accordingly dismissed.

Key Takeaways:

• Fundamental Duty to Reply to SCN: The primary and most fundamental step for an assessee upon receiving a show cause notice is to file a comprehensive reply, presenting their defense and explaining their position. This is the first and most crucial opportunity to be heard.
• No Violation of Natural Justice if Opportunity Not Availed: The principle of natural justice, particularly the right to audi alteram partem (hear the other side), implies that an opportunity must be provided. If an opportunity (like filing a reply to an SCN) is provided but not availed by the assessee without reasonable cause, they cannot subsequently claim a violation of natural justice.
• Writ Jurisdiction Limits: High Courts exercise extraordinary writ jurisdiction cautiously. It is generally not invoked to remedy a situation that arose due to the assessee’s own inaction or failure to utilize available statutory remedies (like responding to the SCN).
• “Misadventure” of Petition: The court’s characterization of the petition as a “misadventure” signifies that it found the assessee’s challenge to be without merit, primarily due to the failure to respond to the initial SCN.
• Consequences of Non-Reply: Failure to reply to an SCN can lead to the authorities passing an ex parte order based on the available information, and the assessee may then have to resort to statutory appeals, which might be more complex or time-consuming than simply replying to the SCN.