GST Demand Notice Set Aside for Lack of Proper Consideration of Assessee’s Response
Summary in Key Points:
- Issue: Whether a show cause notice (SCN) issued under Section 74 of the GST Act is valid when it fails to consider the assessee’s detailed response to a prior intimation and merely repeats the allegations without addressing the assessee’s contentions.
- Facts: The assessee received an intimation under Section 74(5) regarding tax payable. They submitted a detailed explanation with supporting documents. However, the subsequent SCN under Section 74(1) merely stated that the assessee’s response was unsatisfactory and repeated the allegations without addressing the assessee’s specific contentions.
- Decision: The High Court held that the SCN was invalid as it did not consider the assessee’s response to the prior intimation and failed to address their contentions, violating the principles of natural justice.
Decision:
The High Court ruled in favor of the assessee, setting aside the impugned show cause notice. The court emphasized the following:
- Consideration of Response: The authority should have considered the assessee’s detailed response to the intimation and addressed their specific contentions before issuing the SCN.
- Violation of Natural Justice: By failing to consider the assessee’s response and merely repeating the allegations, the SCN violated the principles of natural justice, as the assessee was not given a fair opportunity to present their case.
- Remand for Fresh Consideration: The matter was remanded back to the authority with directions to consider the assessee’s response to the intimation, address their contentions, and then proceed with issuing a fresh SCN.
Important Note: This case highlights the importance of considering the assessee’s submissions and providing a reasoned response in GST proceedings. The High Court’s decision emphasizes that authorities cannot simply dismiss the assessee’s response without proper consideration and must address their specific contentions before proceeding with any adverse action. This ensures fairness and transparency in GST assessments and protects the rights of taxpayers.
HIGH COURT OF CALCUTTA
Jyoti Tar Products (P.) Ltd.
v.
Deputy Commissioner, State Tax
T.S. SIVAGNANAM, CJ.
and Hiranmay Bhattacharyya, J.
and Hiranmay Bhattacharyya, J.
M.A.T. No.2291 of 2024
IA No. CAN 1 of 2024
IA No. CAN 1 of 2024
JANUARY 21, 2025
Ankit Kanodia, Ms. Megha Agarwal and Piyush Khaitan for the Appellant. A. Ray, Ld. G.P., Md. T.M. Siddique, Sr. Adv., N. Chatterjee, T. Chakraborty and S. Sanyal for the Respondent.
JUDGMENT
T.S. Sivagnanam, CJ.- This intra-Court appeal by the petitioners is directed against an order dated 13th December, 2024 in W.P.A. No. 22106 of 2024. The petitioners had filed the writ petition challenging a show-cause notice issued under Section 74(1) of the CGST Act, 2017 and W.B.G.S.T. Act, 2017 read with Rule 142(1)(a) of the Rules for the financial year 2023-24.
2. The learned Single Bench opined that the writ petition is not maintainable against the show-cause notice and in support of such conclusion, several decisions were referred to.
3. It is settled legal position that if the authority issuing the show-cause notice does not suffer from the vice of lack of jurisdiction, the Court seldom interferes in a show-cause notice. However, the case on hand is peculiar on facts, which has convinced us to grant certain reliefs to the appellants/assessee.
4. Prior to issuance of the show-cause notice, an intimation of tax ascertained as payable under Section 74(5) dated 10th July, 2024 was issued to the appellants. In the said intimation, certain particulars were given and it was stated that the appellants have claimed input tax credit against the alleged inward supply of goods from non-existing entities, whose registrations have been cancelled.
5. The intimation has advised the appellants to pay the tax ascertained, failing which the appellants were informed that show-cause notice will be issued under Section 73(1)/74(1).
6. It is not in dispute that the appellants have submitted a detailed explanation and also enclosed certain documents in support of their contention and relied upon various decisions. Thus, when the authority has thought fit to exercise its powers under Section 74(5), he is enjoined upon a duty to consider the reply before it takes a decision to issue a show-cause notice under Section 74(1) of the Act. However, in the instant case, we find that the show-cause notice dated 8th August, 2024 is a replica of the intimation given earlier and all that the assessing officer has said is that the reply furnished by the appellants in response to the intimation is not found to be satisfactory and hence, not acceptable. The remaining portion of the show-cause notice has been copied from the earlier intimation and the show-cause notice does not deal with any of the contentions, which were raised by the appellants in their reply to the intimation dated 18th July, 2024.
7. Therefore, we are of the view that the authority should consider the reply dated 18th July, 2024 to the intimation issued earlier, deal with those issues and then proceed to issue a show-cause notice. Only for such reason, we are inclined to interfere in the matter.
8. Accordingly, the appeal is allowed and the order passed in the writ petition is set aside and consequently, the show-cause notice issued under Section 74(1) of the Act dated 8th August, 2024 is set aside and the matter is remanded back to the assessing authority to consider the reply dated 18th July, 2024 and if it still finds it to be not satisfactory, it will be well-open to the authority to proceed in accordance with law.
9. In the light of the above order, any observation made by the learned Single Bench touching upon the merits of the matter stands vacated.
10. The certified copy of the impugned order shall be filed during the course of the day.
11. No costs.
12. Urgent photostat certified copy of this order, if applied for, be furnished to the parties expeditiously upon compliance of all legal formalities.