2023 (12) TMI 1097 - HC - GST

GST Show Cause Notice Quashed: Insufficient Evidence and Improper Investigation Invalidate Proceedings Under Section 73(1)

Diamond Beverages Private Limited & Anr. Versus The Assistant Commissioner of CGST & CX, Taltala Division II Kolkata South Commissionerate & Ors.

HC allowed appeal challenging GST show cause notice under section 73(1). Court found notice issued without proper investigation and lacking substantive ... Principles of natural justice - valid SCN or not - non-application of mind - availment of irregular input tax credit - HELD THAT:- At the first blush, on perusal of the show cause dated 16th August, 2023, it appears that the submissions made by the appellants in their reply to the pre-show cause notice appears to have been considered. However, on a closer scrutiny of the show cause notice dated 16th August, 2023, it is seen that except extracting the reply given by the appellants, the authority has not dealt with the contentions, which were placed by the appellants in the reply to the pre-show cause notice. Thus, this would be sufficient to hold that the show cause notice dated 16th August, 2023 has been issued without due application of mind. Be that as it may, this Court is satisfied that since the show cause notice dated 16th August, 2023 has been issued without due application of mind, without considering the reply to the pre-show cause notice and without conducting any inquiry or investigation at the supplier’s end, the show cause notice would call for interference. Thus, the Court is satisfied that the case on hand falls within one of the exceptional circumstances, where the Court will exercise its jurisdiction to interdict a show cause notice. The appeal is allowed and consequently, the writ petition is allowed and the show cause notice dated 16th August, 2023 is set aside and the matter is remanded back to the adjudicating authority to the stage of pre-show cause notice dated 31st March, 2023 - appeal allowed by way of remand. Issues involved: Challenge to show cause notice under section 73(1) of the CGST Act, 2017.Summary:Issue 1: Challenge to show cause noticeThe intra-Court appeal was against an order directing the appellants to reply to a show cause notice dated 16th August, 2023 under section 73(1) of the CGST Act, 2017. The Court interfered with the notice due to vague allegations and lack of effective reply opportunity.Issue 2: Allegations and repliesThe appellants were accused of availing input tax credit on supplies with retrospectively cancelled registration and claiming credit from suppliers who did not file returns. The appellants submitted detailed replies, requested investigations at the supplier's end, and sought a personal hearing.Issue 3: Lack of due application of mindThe Court found that the show cause notice dated 16th August, 2023 was issued without proper consideration of the appellants' replies to the pre-show cause notice. The authority failed to investigate at the supplier's end, leading to the notice being set aside.Issue 4: Legal precedents and interferenceThe appellants cited a similar case where the Court set aside orders due to similar circumstances. The Court allowed the appeal, set aside the show cause notice, and remanded the matter back to the adjudicating authority for further investigation and decision-making.Conclusion:The appeal was allowed, the writ petition was allowed, and the show cause notice dated 16th August, 2023 was set aside. The matter was remanded for proper inquiry from the supplier's end, allowing further submissions and a personal hearing before deciding on issuing a show cause notice under section 73(1) of the Act.