GST Section 73 tax demand proceedings challenged over rushed reply window and vague show-cause notice; demand and SCN set aside

Section 73 CGST proceedings were vitiated for breach of audi alteram partem because, despite the SCN granting 30 days to respond, the authority passed the demand order within eight clear days, which the HC held fell far short of "reasonable opportunity" implicit in s.73(1); the consequential demand order was therefore unsustainable and the matter could not be decided against the noticee on that basis, resulting in interference. The HC further held that an SCN must disclose sufficient foundational material and material particulars to enable an effective reply, and that a vague, sketchy notice is vulnerable to judicial review; on this ground as well, the impugned SCN was invalid, and the SCN was set aside and the petition allowed.

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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.

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