2025 (2) TMI 734 - HC - GST

Show-cause notice under s.73 CGST quashed for vagueness; fresh notice must state specific reasons why reply rejected

The HC held the show-cause notice under s.73 CGST was vague and failed to disclose the adjudicating authority's prima facie view on the appellant's reply ... Challenge to SCN issued u/s 73 of the CGST Act - mismatch between GSTR-9 and GSTR-1 - requirement on the part of appellant to submit to the jurisdiction, furnish their reply and participate in the adjudication process - HELD THAT:- On a reading of the relevant portion of the show-cause notice, which is confined only to one issue i.e. mismatch between GSTR-9 and GSTR-1, one gets an impression as if the authority has considered the reply given by the assessee to the final audit report and thereafter has drawn the show-cause notice. However, on a closer reading, it is seen that the adjudicating authority has extracted the reply given and in a single line stated that “The decision by the undersigned on the above discrepancy stands and hence the liability remains as:” What is required to be seen is whether this would tantamount to a proper show-cause notice. It is settled legal proposition that a show-cause notice should be specific as to the role of the assessee and as to what passes in the mind of the adjudicating authority, which, in its prima facie view is against the assessee. If the show-cause notice does not satisfy these conditions, the notice will be termed as ‘unspecific’ and ‘vague’ thereby denying opportunity to the assessee to put forth an effective reply. It will be incumbent upon the adjudicating authority, while issuing show-cause notice to record reasons for its finding. Undoubtedly, this will be a prima facie finding. However, in the instant case, the adjudicating authority, though referred to the reply submitted by the assessee dated October 21, 2024 to the final audit report drawn under section 65 (6) in GST ADT-02, the same has not been dealt with. Conclusion - The assessee is put in a disadvantageous position in not being able to give an appropriate reply since the adjudicating authority has not disclosed its prima facie view qua the reply submitted by the assessee to the final audit report. Therefore, it is inclined to interfere with the show-cause notice, which is impugned in the writ petition only to that extent and remand the matter to the adjudicating authority to issue a fresh show-cause notice recording reasons as to why in his/her prima facie view, the reply dated October 21, 2024 or the other documents, which are enclosed in the reply or which were submitted earlier, are not to the satisfaction of the adjudicating authority. Appeal disposed off by way of remand. The judgment by the Calcutta High Court addressed an intra-Court appeal against an order related to a show-cause notice issued under Section 73 of the CGST Act. The key issues considered in the judgment include the adequacy of the show-cause notice, the rights of the assessee, and the necessity for the adjudicating authority to provide reasons for its findings. The Court analyzed the legal framework, precedents, evidence, and reasoning to reach its conclusions.The Court noted that the appellants had challenged a show-cause notice issued to them and that the learned Single Bench had directed the appellants to participate in the adjudication process. The Court observed that the show-cause notice was based on a discrepancy memo and a final audit report under the CGST Act. The Court highlighted that the show-cause notice lacked specificity regarding the role of the assessee and the reasoning behind the authority's findings, which is essential for a valid notice.The Court emphasized that a show-cause notice must clearly outline the allegations against the assessee to enable them to respond effectively. It referenced the legal requirement for the proper officer to inform the registered person about audit findings and their rights and obligations. The Court found that the adjudicating authority had not adequately considered the assessee's responses to the discrepancy memo and the final audit report, leading to a lack of clarity in the notice.In light of these deficiencies, the Court concluded that the assessee was disadvantaged by the vague show-cause notice. It held that the adjudicating authority must provide a clear prima facie view on the assessee's submissions before issuing a show-cause notice. Consequently, the Court decided to set aside the impugned notice and instructed the adjudicating authority to issue a fresh notice with detailed reasons for its findings. The Court directed the authority to allow the assessee to respond and adjudicate the matter in accordance with the law.In summary, the judgment focused on the importance of a specific and reasoned show-cause notice in tax matters to ensure the rights of the assessee are protected. The Court's decision emphasized the need for transparency and fairness in the adjudication process under the CGST Act.