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2023 (12) TMI 1193 - HC - GSTValidity of SCN issued under Section 73 of the CGST Act, 2017 - Non-application of mind - respondent authorities have alleged that there appears to be non-payment of tax by the petitioner @ 28% and for which also, the explanation has been sought for by the petitioner - violation of principles of natural justice - HELD THAT - A plain reading of the Show Cause Notice itself would give a clear indication that the Show Cause Notice lacks necessary information, source and the materials on the basis of which the authority concerned found the necessity for issuance of the Show Cause Notice. The Show Cause Notice, from the plain reading, seems to be one which has been issued in a mechanical manner without application of mind and without any cogent sufficient materials available or even the basic scrutiny or the investigation which were required for the authority concerned in reaching to the conclusion that certain transactions which have been carried on by the respondents appear to have been the transactions where there is evasion of tax or where there is suppression of material facts or atleast there was reasonable suspicion on the transactions so made by the petitioner. This Court also finds sufficient force in the submissions made by the learned counsel for the petitioner when they say that since the proceeding has been initiated under Section 73 of the Act, the very provision of Section 73 of the Act starts with the words where it appears to be for the authority concerned which by itself means that at the time where the authority appears to found it necessary for initiating the proceedings, there ought to had been some material, information or even sort of a complaint available with them as regards the suspicious transactions or the alleged evasion of tax made by the petitioner. Ex. P1 Show Cause Notice, dated 30.09.2023 would not be sustainable as they are bereft of facts and materials and the same deserves to be and is accordingly set aside/quashed - petition allowed.
Issues involved:
The challenge to a Show Cause Notice issued under Section 73 of the CGST Act, 2017 for alleged non-payment of tax at 28%. Summary: Issue 1: Challenge to the Show Cause Notice The petitioner challenged the Show Cause Notice, claiming it was vague and lacked substantial material for explanation. They argued that the Notice did not specify which transactions were under scrutiny or why tax at 28% was mentioned when their products had a maximum tax rate of 18%. Additionally, they contended that the Notice was beyond the prescribed limitation period. Issue 2: Lack of Information in Show Cause Notice The Court noted that the Show Cause Notice lacked necessary information, sources, and materials to support the allegations of tax evasion. It appeared to have been issued mechanically without proper scrutiny or investigation, indicating a lack of reasonable suspicion on the transactions. Issue 3: Initiation of Proceedings under Section 73 The Court emphasized that under Section 73 of the Act, proceedings should be initiated based on material or information indicating suspicious transactions or tax evasion. Since the Show Cause Notice lacked such basis, it was deemed unsustainable and set aside. Conclusion: The Court allowed the writ petition, setting aside the Show Cause Notice. The Department retained the right to initiate proceedings in accordance with the law. No costs were awarded, and pending petitions were to be closed.
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