AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
What is Show Cause Notice (SCN)
- Article 311 of the Constitution requires the showing of a cause before person is punished.
- SCN is a notice to the taxpayer to show cause against the allegations and prove sufficient cause
- SCN is used in the sense that a party is given an opportunity to explain his case i.e. to offer defence and prove that the allegations levelled against him are not correct. Noticee should answer or give reply to charges to prove his innocence / charges wrong.
- SCN by necessary implication would allow the other side to answer.
- SCN sets in motion the process of adjudication.
Why SCN is issued
- Requirement of law
- Initiation of quasi-judicial adjudication proceedings
- Putting assessee on notice
- To provide opportunity to assessee to show cause against proposed action / allegations.
- To comply with principle of natural justice.
When SCN is required to be issued under CGST Act, 2017
A show cause notice can be issued under any of the following sections:
- Section 10 - Wrongful availment of Composition scheme
- Section 21 - recovery of credit distributed in excess by ISD
- Section 35 - failure to record supply of goods or services
- Section 50 - Interest on delayed payment
- Section 51 - Tax deduction at source in default
- Section 52 - Tax collection at source in default
- Section 63 - Discrepancy found in scrutiny of returns
- Section 65 - Detection of tax not paid or short paid during Audit
- Section 66 - Detection of tax not paid or short paid during special Audit
- Section 73 - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts
- Section 74 - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts
- Section 74A - Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason pertaining to financial year 2024-25 onwards
Essentials of a Valid Show Cause Notice
- SCN is the foundation for Adjudication
- SCN can be issued only after a proper enquiry
- SCN should be in writing and unambiguous
- Show Cause Notice must be a proper notice and not just any communication
- Proper Service of SCN
- SCN should not be vague - it should spell out allegations, evidences and relied upon provisions clearly
- Jurisdictional Aspects - Territorial Jurisdiction of the Authority
- To follow a correct procedure
- Limitation Period
Indicative Guidelines for Issuance of SCN's
A SCN should comprise of the following, though there may be some variations from case to case:
- It should be issued only after proper inquiry/investigation i.e. when the facts used are ascertained and allegations are prima facie made out;
- It should be strictly in the format & manner prescribed under the GST Act and Rules made thereunder;
- It should be clear on facts and iegal provisions. Alleged violation of the provisions of law and other anomalies should be clearly brought out in the Show Cause Notice;
- Copies of the documents to be submitted or compliance to be made by the noticee should be specifically mentioned in the SCN (RUD's).
- Copies of the details giving reasons for SCN should be attached with the SCN and Proper Officer should not depend only on the drop down menus on the GSTN portal;
- The prima facie amount due, if any needs to be quantified and should be manifestly specified In the notice itself. Possibility of raising additional demand should be kept open and mentioned in notice itself;
- It should be clearly mentioned that whether the noticee(s) wishes to be heard in person, apart from filing a written representation, in the matter;
- The authority to which the SCN Is answerable should be specifically stated along with ward, designation, e-mail id etc.;
- All SCNs should be disposed off within statutory timelines.
*************