Show cause treatment of differential tax notices requires hearing on quantum before any final recovery demand.

Differential tax recovery notices may be treated as show cause notices where the underlying liability is undisputed and only the quantum is contested. In that setting, the affected parties must be given an opportunity to file objections to the calculation before any final demand is made. The competent authority must hear those objections and determine the recoverable amount afresh on the basis of the material placed before it. The operative effect is that the notices cannot be enforced mechanically without considering the petitioners' challenge to the computation.

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Issues: Whether the impugned notices demanding recovery of differential tax were to be treated as show cause notices, with the petitioners being afforded an opportunity to reply and to contest the quantum of demand before the final demand was issued.

Analysis: The liability to reimburse the differential tax was not in dispute; the only dispute concerned the correctness of the amount calculated and demanded. In that situation, the notices could be treated as show cause notices, and the petitioners were entitled to place their objections regarding calculation before the competent authority. The competent authority was then to hear the petitioners and determine the recoverable amount afresh.

Conclusion: The petitioners were entitled to a hearing on the quantum of the demand, and the impugned notices were directed to be responded to and decided afresh after consideration of their objections.

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