2021 (9) TMI 728 - HC - GST

Consultation with the noticee before issue of SCN - Non-compliance with the requirements set out in Master Circular dated 10.03.2017 on the subject of show cause notice/adjudication and recovery-reg. - HELD THAT - There is no need to quash the impugned show-cause notice. This is because in this case, a notice of pre-consultation was issued, but such notice was not adequate notice. Thereafter, we granted liberty to the respondents to actually go through the process of pre-consultation. In this, even the petitioner, participated. However, we agree with Mr. Vinoj Daniel, the learned Counsel for the petitioner that despite the opportunity, the respondents did not hold any genuine pre-consultation. Therefore, the show cause notice need not be set aside, but directions will have to be issued to the respondents to once again act on the liberty granted by us to attempt a genuine consultation process before the respondents proceed to adjudicate the show cause notice dated 15.12.2020. The respondents will once again hold the consultation process with the petitioner - Petition disposed off.

Summary

Issues:
Challenge to show cause notice based on non-compliance with pre-consultation requirements set out in the Master Circular dated 10.03.2017.

Detailed Analysis:

Issue 1: Challenge to Show Cause Notice
The petitioner challenged the show cause notice dated 15.12.2020, citing non-compliance with pre-consultation requirements as per para 5 of the Master Circular. The notice dated 11.12.2020, purportedly fulfilling pre-consultation, was served by email on 14.12.2020, just a day before the scheduled consultation on 15.12.2020. The petitioner argued that this notice did not genuinely comply with the Circular's requirements, indicating lack of intention by the respondents to adhere to pre-consultation norms.

Issue 2: Pre-Consultation Process
The Court acknowledged the petitioner's contention that the pre-consultation notice was merely a formality, not meeting the Circular's genuine consultation standards. Despite the petitioner's participation in the consultation on 28.04.2021, the Court found the process lacking in meaningful dialogue or effort to address grievances. The Court highlighted the importance of a two-way consultative process, emphasizing the need for discussion and deliberation to resolve disputes effectively.

Issue 3: Compliance with Court Directions
While the Court did not set aside the show cause notice, it directed the respondents to conduct a genuine pre-consultation process in compliance with the Master Circular. The Court granted two months for the consultation to conclude, during which the show cause notice would not be pursued. The Court emphasized that it had not assessed the merits of the dispute, leaving all contentions open for further consideration.

Conclusion:
The Court's order mandated the respondents to conduct a meaningful consultation process with the petitioner, guided by observations from a Delhi High Court case. Until the consultation concludes, the show cause notice remains on hold. The Court stressed the importance of genuine pre-consultation to facilitate dispute resolution and left all arguments on the merits open for future examination.