2023 (11) TMI 1205 - HC - GST

Validity of SCN and subsequent order of demand issued u/s 73 of the Central Goods and Services Tax Act, 2017 - denial of reasonable opportunity arising from the fact that despite show cause notice dated 03.09.2022 (Annexure P/2) affording 30 days time for the petitioner to respond, the impugned order u/s. 73 was passed on 12.09.2022 i.e. within nine (9) days - not self-contained SCN - HELD THAT - A bare perusal of show cause notice u/S. 73 of CGST Act reveals that the same was issued on 03.09.2022 affording opportunity to petitioner to make payment of tax with admissible penalty within 30 days. From the language employed in Section 73, it is obvious that Section 73(1) affords opportunity to noticee to show cause which means to respond as to why he should not pay the amount specified in the notice with interest and penalty, if any - Though no time period is stipulated in Section 73 for the noticee to respond but it is obvious that the statute contemplates affording of reasonable opportunity to reply to show cause notice. Thus, it is evident that the time gap provided between show cause notice dated 03.09.2022 (Annexure P/2) and impugned order dated 12.09.2022 (Annexure P/3) was only 8 clear days which in the considered opinion of this Court falls desperately short of satisfying the concept of reasonable opportunity of being heard. Another ground raised by counsel for petitioner is that the statement prescribed u/S. 73(2) has not been afforded to petitioner thereby keeping the petitioner in dark as regards the foundational material which persuaded the show cause notice issuing Authority to form a prima facie opinion against petitioner - From bare perusal of the impugned show cause notice (Annexure P/2) and order (Annexure P/3), it is not evident as to whether show cause notice was issued in cases covered by Section 73(1) or not - Thus, it would be appropriate to leave this aspect for the competent authority to decide it at its level. The third ground raised by the petitioner is that the impugned show cause notice (Annexure P/2) is not pregnant enough as regards foundational material to enable a reasonable opportunity to petitioner to respond effectively to the same. Meaning thereby that the impugned show cause notice is vague, sketchy and lacking in material particulars - In this regard, this Court merely observes that any show cause notice whether u/s. 73 or otherwise can withstand the test judicial scrutiny only when the same contains enough and adequate material which motivated the notice issuing Authority to take a prima facie view against the noticee. If the contents of impugned show cause notice are lacking in material particulars or are vague in regard to any of the entries contained therein then such show caused notice becomes vulnerable to judicial review. Thus, what comes out loud and clear is that the show cause notice not only falls short of the minimum period of 30 days to afford reasonable opportunity to noticee to respond but also appears to be lacking in material particular - impugned SCN set aside - petition allowed.

Summary

Issues involved:
The judgment involves the challenge to a show cause notice and order of demand issued under Section 73 of the Central Goods and Services Tax Act, 2017.

Admission of Petitioner's Plea:
The petitioner argued that the order was passed within nine days of the show cause notice, denying a reasonable opportunity to respond. It was contended that the notice did not inform about the material of adverse nature, violating the principle of audi alteram partem, and no opportunity for a personal hearing was provided.

Legal Scrutiny and Grounds:
The court limited its scrutiny to the denial of reasonable opportunity and lack of self-contained information in the notice. The court emphasized the importance of affording a reasonable opportunity to respond to show cause notices.

Provisions of Section 73:
Section 73 of the CGST Act deals with determination of unpaid/short paid tax or erroneous refund or wrongful availing or utilization of input tax credit. It mandates serving a notice to the person chargeable with tax, specifying the amount due along with interest and penalty.

Reasonable Opportunity to Respond:
The court highlighted that Section 73(1) provides an opportunity to the noticee to respond, implying a reasonable period for reply. While no specific time period is mentioned, the court inferred that 30 days should be considered a reasonable period for responding to the notice.

Judicial Findings:
The court found that the gap of 8 days between the show cause notice and the order did not meet the standard of providing a reasonable opportunity to be heard. It also noted that the notice lacked essential material particulars, making it vague and susceptible to judicial review.

Decision and Order:
The court set aside the show cause notice and order of demand, granting liberty to the Revenue to issue a fresh notice after ensuring a reasonable opportunity for the petitioner to be heard. The petitioner was awarded costs, to be paid by the respondents within 60 days.

Conclusion:
The writ petition was allowed with the liberty granted for the issuance of a fresh notice, emphasizing the importance of providing a reasonable opportunity for the noticee to respond effectively.