ADJUDICATION UNDER GST (PART-6)

[Dr. Sanjiv Agarwal]

Adjudication of Show Cause Notices

When show cause notices are issued under provisions of law charging any person for contravention of any provisions of the said Act and rules and/or notifications issued thereunder and penal action is proposed the competent officers of the Department adjudge the case and issue orders. This process is called adjudication.

Basic contents of show cause notice

Though the GST law and rules do not specify the contents or conditions for issuing show cause notice, following points should generally be considered while issuing show cause notice.

1. A show cause notice should ideally be comprised of the following contents :

1. Introduction of the case
2. Legal framework
3. Factual statement and appreciation of evidences
4. Discussion, facts and legal framework
5. Discussion on limitation
6. Calculation of duty and other amounts due
7. Statement of charges
8. Authority to adjudicate

2. SCN is a mandatory requirement for raising any demand of duty/service tax.
3. The basic aim of SCN is to provide a reasonable opportunity to assessee to present his case or show cause to the proposed demand before any demand is conformed.
4. SCN beyond jurisdiction is not sustainable.
5. SCN is tentative, not decisive. Final decision is taken after hearing the notice. It can not normally be said that adjudicating authority had a pre-determined mind.
6. Reasonable time may be given for adjudication to take place. Issue of order one day after the SCN has been held to bad GANESH POLYTEX LTD. VERSUS UNION OF INDIA [2010 (9) TMI 299 - ALLAHABAD HIGH COURT].
7. A proper SCN has to specify the demand, i.e., quantify the demand and liability in clear term.
8. A letter from the department is not a proper SCN  COMMISSIONER OF CUSTOMS, BANGALORE VERSUS MERCHANT IMPEX [2011 (9) TMI 783 - KARNATAKA HIGH COURT]
9. Adjudicating authority can not pass two orders on same SCN, though corrigendum may be issued on minor issues without substantially altering the order.
10. For genuine reasons, three adjournments should be given to assessee or giving opportunity of hearing for three occasions before passing any order.
11. Adjudication is an important function of revenue officers.
12. Adjudication is a quasi judicial function.
13. Powers of adjudication are subject to jurisdiction and monetary limit for different officers.
14. Adjudicating order should comply with the principle of natural justice.MEENAKSHI ASSOCIATES (P) LTD. VERSUS COMMISSIONER OF C. EX., NOIDA [2009 (1) TMI 552 - CESTAT, NEW DELHI] ; AFLOAT TEXTILES (P) LTD. VERSUS COMMISSIONER OF C. EX., VAPI [2007 (7) TMI 444 - CESTAT, AHMEDABAD]
15. Order can not travel beyond the scope of SCN.MCNALLY BHARAT ENGINEERING CO. LTD. VERSUS COMMR. OF C. EX., RANCHI [2011 (2) TMI 1240 - JHARKHAND HIGH COURT]
16. Adjudicating order should be in accordance with judicial discipline which must be strictly adhered to.
17. Order of adjudication must show application of mind and be self-speaking/reasoned order. Reasons for order would ensure justice
18. Adjudication order must be a speaking order giving clear findings on all the points raised by the defence dropping the proposed allegations or rebuttal of defence points.
19. Adjudication order has to be dated and signed by the adjudicating authority.
20. SCN should not be vague and without particulars
21. Challenge to SCN is generally not permissible. It is justified only in exceptional cases where (i) Constitutional vires of enactment is challenged, (ii) violation of principle of natural justice, (iii) orders impugned are without jurisdiction, (iv) private and public wrongs areinextricably mixed up, and (v) prevention of public injury and vindication of public

Personal hearings

It has been provided in section 75(4) of the CGST Act, 2017 that the opportunity of personal hearing will be granted to the person chargeable with tax in following circumstances:

(a)   When a written request is made by person chargeable with tax.

(b)   Where any adverse decision is contemplated against such person.

Adjournments

The person chargeable with tax can seek adjournment of hearing and he can be granted time, in case sufficient cause is shown by person chargeable with tax. The hearing will be adjourned for reasons to be recorded in writing. As provided in section 75(5) of the CGST Act, 2017, no such adjournments shall be provided for more than 3 times.

Discipline to be observed by proper officer

For making the order of demand, following discipline needs to be observed by the proper officer. The provisions for the same are contained in section 75(7) of the CGST Act, 2017. Accordingly, the proper officer, in his order shall set out:

1. All relevant facts and basis of his decision.
2. The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice.
3. No demand shall be confirmed on the ground other than grounds specified in the notice.

Who should adjudicate?

The law is silent on whether the officer issuing the order has to be the same person who had issued the show cause notice.

There is no bar provided in the GST Act in this respect. The officer issuing the order could be the same officer who had issued the SCN. Even in the present taxation laws also there is no such bar.

Modification of demand

The appellate authority or Tribunal or Court can modify the amount of tax, interest or penalty. In case the amount of tax has been modified, the amount of interest and penalty will automatically get changed even if the order of appellate authority/court/Tribunal is silent on this aspect.

As per provision of section 75(8) of the CGST Act, 2017, the amount of interest and penalty is charged as a percentage of amount of tax as specified in the order. In case the amount of tax payable as per order is modified by the Appellate Authority or the Court, the amount payable as interest and penalty will also stand modified accordingly.

Separate demand for interest

As provided in section 75(9) of the CGST Act, 2017, it is not necessary to separately order for payment of interest.

In case of amount of tax not paid or short paid has been determined in the order of the proper officer. The amount of such tax not paid or short paid would be payable with interest at the applicable rates, whether or not such interest has been specified in the order or not.

Limitation in case of pending appeals

As provided in section 75(11) of the CGST Act, 2017, in case the ground on which show cause notice has been issued is the same on which an appellate authority, appellate tribunal or High Court has given a decision, which is prejudicial to the interest of revenue and an appeal on the said issue is pending before the Appellate Tribunal, High Court or Supreme Court of India. The following time will be excluded for calculation of limitation period of 3 years/5 years for issuance of an order.

(a)   between the date of decision of the first Appellate Authority and date of decision of Appellate Tribunal or

(b)   between the date of decision of Appellate Tribunal and date of decision of High Court, or

(c)   between the date of decision of High Court and the date of decision of Supreme Court.

(To be continued…….)