GST UPDATE NO 89TH ON VALIDITY OF SCN ISSUED IN IMPROPER FORMAT

The issuance of show cause notice and its contents play a pivotal role in communicating the allegations levelled against the assessee. It is settled principle of law that issuance of a valid show cause notice is extremely important for complying with the principle of natural justice. Recently, the issue regarding validity of show cause notice issued in improper format was raised before the Hon’ble Jharkhand High Court in the case of M/S NKAS SERVICES PRIVATE LTD. VERSUS THE STATE OF JHARKHAND. The outcome of this decision is the subject matter of discussion of our present update. The petitioner challenged the SCN issued by department on the grounds that it was vague as it does not specify which provision of Section 74 was applicable to them. The petitioner contended that it is not possible for them to reply to the said show cause notice as it does not specify the charges levelled against them. It was also pointed out that the show cause notice mechanically reproduced the provisions of section74 without striking of the relevant portions and so the petitioner was denied opportunity to defend itself thereby leading to violation of the principles of natural justice. Reliance was also placed on the decision given by the Apex Court in the case of ORYX FISHERIES P. LTD. VERSUS UNION OF INDIA reported in [2010 (13) SCC 427] wherein it was held that proper notice should specifically state charges which the noticee is suppose to reply. Reliance was also placed on the Supreme Court decision given in the case of CCE VS SHITAL INTERNATIONAL reported in [2011 (1) SCC 109] in support of the contention that no demand can be confirmed on the grounds other than those specified in the show cause notice. The respondent contended that writ jurisdiction is not to be invoked in matters concerning imposition of tax when petitioner has efficacious alternative remedy of appeal. Reliance was placed on the decision given in the case of CIT VS CHHABIL DAS AGARWAL reported in [2014(1) SCC 603] and UNITED BANK OF INDIA VS SATYAWATI TANDON reported in [2010 (8) SCC 110]. The hon’ble High Court held that a bare perusal of the impugned show-cause notice creates a clear impression that it is a notice issued in a format without even striking out any irrelevant portions and without stating the contraventions committed by the petitioner i.e. whether its actuated by reason of fraud or any willful misstatement or suppression of facts in order to evade tax. It was held that the proceedings under Section 74 have a serious connotation as they allege punitive consequences on account of fraud or any willful misstatement or suppression of facts employed by the person chargeable with tax. In absence of clear charges which the person so alleged is required to answer, the noticee is bound to be denied proper opportunity to defend itself. This would entail violation of principles of natural justice which is a well-recognized exception for invocation of writ jurisdiction despite availability of alternative remedy.Hence, the writ petition was allowed by quashing the show cause notice with the liberty to the respondents to initiate fresh proceedings within a period of four weeks from date of order. The above decision clarifies that if the allegations in the show-cause notice are not specific and are on the contrary, vague, lack details and/or unintelligible, its sufficient to hold that the noticee was not given proper opportunity to meet the allegations indicated in the show-cause notice. The violation of the principles of natural justice empowers the taxpayer to file writ petition without following the hierarchy of appellate mechanism prescribed in the statue.

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GST UPDATE NO 89TH ON VALIDITY OF SCN ISSUED IN IMPROPER FORMAT

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