A fresh SCN should be issued to revise the demand raised in the SCN

[CA Bimal Jain]

The Hon’ble Madras High Court in the case of VELA AGENCIES REP BY ITS PROPRIETOR D. JAGANNATHAN VERSUS ASSISTANT COMMISSIONER ST FAC - 2024 (5) TMI 51 - MADRAS HIGH COURT held that an order should proceed based on the Show Cause Notice issued to the Assessee. Further, the demand mentioned in the Show Cause Notice cannot be modified in the order. A fresh Show Cause Notice must be issued to modify the demand.

Facts:

M/s. Vela Agencies (“the Petitioner”) received an Intimation dated November 24, 2022. The Petitioner replied to the Intimation on December 28, 2022, by stating that the Petitioner was a distributor of M/s. Aircel Limited (Aircel) and was unable to conduct business after February 28, 2018, due to the closure of the business of Aircel.

Further, a Show Cause Notice dated December 29, 2022 (“SCN”), was issued to the Petitioner to show cause as to why tax liability of INR 8,27,252/- should not be imposed concerning sales suppression, which was estimated based on the Input Tax Credit (“ITC”) availed of by the Petitioner and contended that the Petitioner was not entitled to ITC.  

However, an Order dated June 23, 2023 (“the Impugned Order”) was passed by the Assistant Commissioner (“the Respondent”) imposing the tax liability of INR 14,97,072/- and an equal amount of penalty by comparing the FORM GSTR-3B return and the FORM GSTR-2A. Further, a reversal was made of ITC from the electronic credit ledger of the Petitioner to the extent of INR 7,52,047/- on February 15, 2024. 

Hence, aggrieved by the Impugned Order, the present writ petition was filed by the Petitioner. 

Issue:

Whether a fresh SCN should be issued to revise the demand raised in the SCN?

Held:

The Hon’ble Madras High Court in VELA AGENCIES REP BY ITS PROPRIETOR D. JAGANNATHAN VERSUS ASSISTANT COMMISSIONER ST FAC - 2024 (5) TMI 51 - MADRAS HIGH COURT held as under:

• Observed that, the Petitioner was called upon to show cause concerning a sum of INR 8,27,252/-, which was arrived at on an assumption that there was sales suppression. However, the Impugned Order imposed a tax liability of INR 14,97,072/- by comparing the FORM GSTR-3B return and the FORM GSTR-2A and an equal amount of penalty. The Impugned Order did not proceed based on the SCN. It was also noticeable that the Petitioner's electronic credit ledger was debited to the extent of INR 7,52,047/-. In these circumstances, the Impugned Order cannot be sustained.
• Held that, if the Respondent intended to modify the tax proposal in light of the Petitioner's reply, a fresh Show Cause Notice should have been issued. Hence, the Impugned Order was set aside by leaving it open to the Respondent to issue fresh proceedings by issuing a fresh Show Cause Notice to the Petitioner, and the present writ petition was disposed of.

(Author can be reached at [email protected])