2022 (12) TMI 1040 - HC - GST

Classification of manufactured goods - preliminary ground on which the show cause notice was challenged is by contending that the authority has pre-decided the issue and the show cause notice is pre-meditated and it is not a show cause notice and consequently no useful purpose would be served in giving reply by the appellants - HELD THAT - On going through the proceedings of the assessing officer dated 26 th September, 2022 it prima facie appears to be an order and the manner of issuing show cause notice has not been rightly understood by the authority. Partly the appellants have to be blamed because the appellants for the query raised by the authority has misconstrued the scope of the query and proceeded to make elaborate factual submissions as well as relied upon several decisions of the Hon ble Supreme Court and the High Courts. If the appellants had restricted their reply only to the extent query raised, this problem could have been averted. Thus, not only the authority committed a mistake in proceeding to reject all the contentions and then issued the show cause notice, equally the appellants also committed a mistake in mentioning facts which were not required to be done pursuant the query raised by the authority. The entire proceedings have to be redone in an opposite manner. We are conscious of the fact that if the matter is remanded back it will be dealt with by the very same officer but, however, we are confident that the very same officer will have an open mind and issue a show cause notice in a proper manner giving adequate opportunity to the appellants to submit their reply and it is thereafter the show cause notice has to be adjudicated. The manner in which the authority has proceeded to issue the notice dated 26 th September, 2022 does not satisfy the legal requirements. Appeal allowed.

Summary

Issues:
Challenge to show cause notice validity in W.P.A., Maintainability of writ petition against show cause notice.

Analysis:
The appeal concerns a challenge to a show cause notice issued by the authority regarding the classification of a product manufactured by the appellants. The appellants contended that the notice was pre-decided and pre-meditated, making it futile to respond. The single bench held that a writ against a show cause notice is not maintainable, leading to the appeal. The Court acknowledged the general principle that writ petitions against show cause notices are not maintainable but emphasized exceptions, such as lack of jurisdiction or premeditation. Referring to legal precedents, the Court highlighted that if a notice lacks jurisdiction or is pre-meditated, the Court can intervene. In this case, the show cause notice was detailed, addressing the appellants' submissions and ultimately indicating the intent to take action under relevant tax laws.

The Court found that the proceedings of the assessing officer appeared more like an order than a show cause notice. It noted that both the authority and the appellants were at fault, with the appellants providing excessive information beyond the query's scope. Consequently, the Court determined that the entire process needed to be redone in a fair manner. While acknowledging that the same officer would handle the matter upon remand, the Court expressed confidence in the officer's ability to approach the case with an open mind. The Court emphasized the need for a proper issuance of the show cause notice, allowing the appellants to respond adequately before adjudication.

As a result, the appeal was allowed, the previous order was set aside, and the impugned show cause notices were quashed. The matter was remanded to the authority with directions to issue a fresh show cause notice without pre-deciding any issues and ensuring a fair opportunity for the appellants to respond. The Court explicitly instructed that the authority should not be influenced by the previous order and mandated the issuance of a fresh notice within three weeks. Additionally, the appellants were barred from raising the issue of limitation when the fresh notice is issued. No costs were awarded, and parties were directed to receive copies of the order promptly.