Writ challenge to show cause notice allowed where jurisdiction is absent and settled net-quantity exemption treatment was ignored.

A writ petition may be entertained under Article 226 against a show cause notice where the notice is alleged to be wholly without jurisdiction or an abuse of process, rather than involving only routine factual objections; the preliminary objection to maintainability was rejected. The impugned notice was also held unsustainable because the exemption notifications, earlier ad hoc exemption order and later GST clarification consistently applied a net-quantity basis for the relevant petroleum gases and gaseous hydrocarbons, and the department could not re-characterise that settled treatment after years of accepted practice. The notice was quashed as beyond jurisdiction.

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Issues: (i) whether a writ petition challenging a show cause notice alleging lack of jurisdiction and abuse of process is maintainable under Article 226 of the Constitution of India; (ii) whether the impugned show cause notice could be sustained in the face of the exemption notifications, the earlier ad hoc exemption order and the subsequent GST clarification.

Issue (i): whether a writ petition challenging a show cause notice alleging lack of jurisdiction and abuse of process is maintainable under Article 226 of the Constitution of India.

Analysis: The prohibition against interference at the show cause notice stage is not absolute. Interference may be justified where the notice is alleged to be wholly without jurisdiction or to constitute an abuse of process. The Court distinguished such cases from those involving ordinary factual disputes or routine objections to show cause proceedings.

Conclusion: The writ petition was maintainable and the preliminary objection raised by the revenue was rejected.

Issue (ii): whether the impugned show cause notice could be sustained in the face of the exemption notifications, the earlier ad hoc exemption order and the subsequent GST clarification.

Analysis: The exemption framework consistently treated the relevant petroleum gases and gaseous hydrocarbons on a net quantity basis, namely, the quantity received from the refinery minus the quantity returned after extraction. The earlier ad hoc exemption order also recognised the same commercial and excise treatment. The later GST clarification reinforced the same approach by restricting tax liability to the net quantity retained by the manufacturer. In that background, the Court held that the department could not, after many years of settled treatment, re-characterise the process and proceed on a contrary basis through the impugned notice.

Conclusion: The show cause notice was without jurisdiction and was rightly quashed.

Final Conclusion: The challenge to the show cause notice failed, and the order quashing it was affirmed because the disputed notice was inconsistent with the settled exemption regime and could not be sustained as a lawful exercise of power.

Ratio Decidendi: A writ petition may be entertained against a show cause notice where the notice is alleged to be without jurisdiction or an abuse of process, and a notice contrary to a settled exemption structure and long-accepted net-quantity treatment is liable to be quashed.

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