2022 (3) TMI 351 - HC - GST

Validity of SCN - monetary amount involved - Challenge on the ground that the SCN was issued without issuing pre-show-cause notice consultation as per Circular No.1076/02/2020 CX dated 19th November, 2020 issued by the Central Board of Indirect Taxes and Customs - high pitch assessment involving due above ₹ 50 lakhs - HELD THAT - Admittedly in this case the demand involved is about 50 lakhs - On perusal of Circular of the Board dated 11 th November, 2021, it is found that though the said pre-show-cause notice consultation to the noticee is not mandatory but it does not wholly exclude issuance of notice of pre-show-cause notice consultation, which means at least it is directory and discretionary and discretion has to be exercised by the authority in a judicious and reasonable manner and the respondent authority concerned cannot exercise his power of discretion in a discriminatory or arbitrary manner or without giving any reason for not exercising his power of discretion in favour of the noticee. The petitioner has been able to make out a prima facie case for an interim order and matter requires hearing since questions of law are involved in the matter. Respondents are directed to file affidavit-in-opposition within three weeks. Petitioner to file reply thereto, if any, within two weeks thereafter - List this matter for final hearing after six weeks.

Summary

Issues:
Challenge to show-cause-cum-demand notice issued by CGST Authority without pre-show-cause notice consultation as per Circular No.1076/02/2020 CX dated 19th November, 2020.

Analysis:
The petitioner challenged the show-cause-cum-demand notice issued by the CGST Authority without pre-show-cause notice consultation as required by Circular No.1076/02/2020 CX dated 19th November, 2020. The petitioner argued that the demand involved was above ?50 lakhs, making pre-show-cause notice consultation mandatory under Clause 5 of the said Circular. The respondent, representing the CGST Authority, opposed the petition, citing a subsequent Circular dated 11th November, 2021, which stated that pre-show-cause notice consultation was not mandatory. However, the Court noted that while the subsequent Circular did not make pre-show-cause notice consultation mandatory, it did not wholly exclude its issuance. The Court emphasized that the authority must exercise discretion judiciously and reasonably, without discrimination or arbitrariness. Importantly, the Court highlighted that the subsequent Circular did not specify its retrospective nature, emphasizing the principle that benefits under a statute or circular cannot be taken away retrospectively unless expressly stated.

The Court, after considering the arguments and relevant legal provisions, found that the petitioner had established a prima facie case for an interim order. Recognizing the involvement of legal questions, the Court directed the respondents to file an affidavit-in-opposition within three weeks, with the petitioner given two weeks to respond. The matter was scheduled for final hearing after six weeks, during which the respondents were prohibited from proceeding with the impugned show-cause notice dated 23rd April, 2021. Additionally, the Court instructed both parties to prepare short written notes of arguments for the hearing.