Assessee should respond to the SCN and take all grounds before the authority, and if aggrieved, should avail an alternate statutory remedy of appeal

[CA Bimal Jain]

The Hon’ble High Court of Bombay in the case of VISWAAT CHEMICALS LTD. & ANR. VERSUS UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF FINANCE & ORS. - 2024 (10) TMI 782 - BOMBAY HIGH COURT dismissed the writ petition and held that an Assessee should respond to the Show Cause Notice (“SCN”) and taken all grounds before the authority, and if aggrieved, should have availed the alternate statutory remedy of appeal.

Facts:

M/s Viswaat Chemicals Ltd. & Anr. [“the Petitioner”] was served a show cause notice dated December 07, 2023 (“the Impugned SCN”). The Petitioners were deprived of an effective opportunity to respond to the Impugned SCN because it was vague. It was urged that there was a violation of principles of natural justice.

It was further urged that an order dated July 22, 2024 [“the Impugned Order”] was made on adjudicating the Impugned SCN is, therefore, a nullity.

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

Issue:

Whether Assessee should respond to the SCN and take all grounds before the authority, and if aggrieved, should avail an alternate statutory remedy of appeal?

Held:

The Hon’ble High Court of Bombay in VISWAAT CHEMICALS LTD. & ANR. VERSUS UNION OF INDIA, THROUGH THE SECRETARY, MINISTRY OF FINANCE & ORS. - 2024 (10) TMI 782 - BOMBAY HIGH COURT held as under:

• Noted that, the Impugned SCN is not at all vague but rather contains all material particulars, giving the Petitioners a very clear idea about the case that they were required to meet with. Therefore, the Petitioner made no serious grievance of any alleged vagueness in response to the notice. The allegation of vagueness is an afterthought besides being frivolous. It is raised only to avoid resorting to the alternate remedial appeal available to the Petitioners.
• Observed that, the Petitioners have only tried to “take a chance in the matter”. Upon receipt of the Impugned SCN, the Petitioners filed a detailed reply on April 18, 2024. The reply nowhere seriously alleges any vagueness in the Impugned SCN.
• Noted that, if the Petitioners genuinely regarded the Impugned SCN as vague or if there were any real difficulties in responding to the allegations in the show cause notice, it was expected that the Petitioners challenge such Impugned SCN at the earliest instance. This is nothing but an attempt to circumvent the alternate remedy and to take a chance to see whether any relief can be wriggled out. In some cases, the object is to avoid the provisions requiring pre-deposit of some portion of the demanded amounts as a pre-condition for institution or hearing of the statutory appeals.
• Relied on, the case of WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI & ORS. - 1998 (10) TMI 510 - SUPREME COURT wherein the Hon’ble Supreme Court explained that writ petitions may be entertained against the show cause notices where the Petitioner seeks enforcement of any of the fundamental rights, where there is a violation of the principles of natural justice; or where the order or proceedings are wholly without jurisdiction, or vires of the Act is challenged.
• Relied on, SPECIAL DIRECTOR VERSUS MOHD. GHULAM GHOUSE - 2004 (1) TMI 378 - SUPREME COURT the Hon’ble Supreme Court has held that unless the High Court is satisfied that the show-cause notice was totally non-est in the eye of the law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine. The writ petitioner should invariably be directed to respond to the show cause notice and take all the grounds that may now be highlighted in the writ petition. Whether the show cause notice was founded on any legal premises is a jurisdictional issue which the recipient of the notice can even urge, and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court.
• Further relied on, the UNION OF INDIA & OTHERS VERSUS COASTAL CONTAINER TRANSPORTERS ASSOCIATION & OTHERS - 2019 (2) TMI 1497 - SUPREME COURT the Hon’ble Supreme Court held that where the case was neither of lack of jurisdiction nor any violation of principles of natural justice, the High Court ought not to have entertained the writ petition at the stage of notice, more so, when against the final orders, appeal lies to the Supreme Court. Further, the Court held that when there is a serious dispute concerning the classification of service, the respondents ought to have responded to the show cause notices by placing material in support of their stand. Accordingly, the appeals against the quashing of the show cause notices were allowed.
• Relied on the case of MAHANAGAR TELEPHONE NIGAM LTD. VERSUS CHAIRMAN, CENTRAL BOARD, DIRECT TAXES, AND ANOTHER -2004 (5) TMI 7 - SUPREME COURT, the Hon’ble Supreme Court held that it was settled law that the litigation against show cause notices should not be encouraged.
• Lastly relied on, MALLADI DRUGS & PHARMA. LTD. VERSUS UNION OF INDIA - 2004 (3) TMI 67 - SC ORDER the Hon’ble Supreme Court held that the High Court was absolutely correct in dismissing the writ petition against the mere show cause notice. The High Court, by the impugned judgment, held that the appellant should first raise all the objections before the authority that has issued the show cause notice. If any adverse order was passed against the appellant, liberty was granted to approach the High Court.
• Held that, in order to institute a petition, the parameters the Hon’ble Supreme Court laid down in Whirlpool Corporation (supra) shall be satisfied. The present writ petition deserves to be dismissed with costs of Rs.5,00,000/- (Rupees Five Lakhs) payable by the Petitioners to the Maharashtra Legal Services Authority within four weeks. This will, however, not preclude the Petitioners from availing the alternate statutory remedies of appeal, etc., under the provisions of the CGST Act.

Our Comments:

Through Articles 32 and 226 of the Constitution, the judiciary has been granted specific specialized powers to enforce any of the rights outlined in Part III of the Constitution as well as other legal rights. Prerogative remedies are writ remedies. While availing these writ jurisdictions, the Court may interfere and say that you have an alternate remedy therefore, there is no need for issuance of order under writ, exhaust that remedy first.

The judicial rule of convenience underpins the doctrine of exhaustion of alternatives. It asserts that litigants should first approach the court nearest to them within the judicial hierarchy, avoiding unnecessary use of judicial resources through forum shopping, both in lower specialized courts and higher ones. This doctrine is especially important today, given the vast backlog of cases and increasing litigation. Numerous Supreme Court decisions have shaped the jurisprudence supporting this principle.

The Supreme Court in the case of UNION OF INDIA VERSUS TR. VARMA - 1957 (9) TMI 41 - SUPREME COURT held that when an alternative and equally efficacious remedy is open to a litigant, he should be required to pursue that remedy and not to invoke the special jurisdiction of the High Court to issue a prerogative writ. When such remedy exists, it will be a sound exercise of discretion to refuse to interfere in a petition under Article 226, unless there are good grounds therefore.

Further, in the case of SOHAN LAL VERSUS THE UNION OF INDIA - 1957 (3) TMI 45 - SUPREME COURT the Hon’ble Supreme Court held that whether the alternate remedy is equally efficient and adequate is question of fact to be decided in each case, the onus being on the applicant to show that it is not adequate. Certain observations were made by the court in regard to above matter where the remedy under writ jurisdiction may be refused by the court:

1. Where Petitioner may get an adequate relief by ordinary action of law
2. For the enforcement of contract and compensation
3. Where the Petitioner has already instituted a case
4. Where matter is time barred.

Another point that the courts must consider when applying the above doctrine is that the necessary remedies available to the petitioner should not be unduly burdensome or protracted. This can be due to various reasons, including delays. The Supreme Court also held that there is no need to apply the exhaustion rule when the decision of the authority for which alternative relief is sought is known. This may be because decisions on the relevant issues are known or remedies have already been taken. In this case, it is usually exhausted.

Thus, it is not binding in nature, but certainly has a persuasive value. In the case of G. VEERAPPA PILLAI VERSUS RAMAN & RAMAN LTD. AND OTHERS. - 1952 (3) TMI 31 - SUPREME COURT, the Hon'ble Supreme Court held that if the right and liability is created by a statute and it prescribes a remedy or procedure for enforcing, then the court may refuse to entertain the writ petition and direct the petitioner to seek remedy under the statute only.

Exception to the Doctrine of Exhaustion of Alternate Remedy

The Supreme Court adopted a similar stance in HARBANSLAL SAHNIA AND ANR. VERSUS INDIAN OIL CORPN. LTD. AND ORS.  - 2002 (12) TMI 564 - SUPREME COURT  where it held that the existence of alternative remedies does not serve as an absolute barrier to granting writs under Article 226. In Rajasthan State Electricity Board v. Union of India, the Court reaffirmed that it is a well-established legal principle that the availability of alternative remedies does not preclude relief through Article 226. In a related case, an appeal was made to the Supreme Court after the Bombay High Court dismissed a writ petition on the grounds that the Railway Claims Tribunal provided better remedies. However, the Supreme Court ruled that the High Court could not dismiss the writ petition or direct the appellants to pursue an alternate remedy since the respondent had already admitted liability.

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