2025 (7) TMI 617 - HC - GST

Petitioner must file reply to show cause notice within four weeks instead of challenging it directly

The Madras HC disposed of a petition challenging a show cause notice (SCN) issued by the first respondent. The petitioner had not challenged the ... Challenge to SCN passed by the first respondent - jurisdiction of proper Officer to issue the show cause notice - HELD THAT:- Admittedly, the petitioner has not challenged the Circular dated 09.02.2018 and the challenge herein is only to the show cause notice issued by the first respondent. Thus, in the absence of any challenge made by the petitioner to the said Circular, this Court is not inclined to interfere with the impugned show cause notice issued by the first respondent and if the petitioner is aggrieved by the impugned show cause notice, the petitioner can very well raise all objections in the form of reply before the second respondent. The petitioner is directed to file reply/objection before the second respondent within a period of four weeks from the date of receipt of a copy of this order - Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether a show cause notice issued by one proper officer directing the registered person to file reply/objection before another officer is invalid for want of jurisdiction under the Act. 2. Whether instructions contained in an administrative circular issued by the Board (Central Board of Excise and Customs, GST Policy Wing) permitting audit officers/DGGSTI to issue show cause notices and directing adjudication by the jurisdictional Executive Commissionerate bind the Court's decision on the validity of such a show cause notice where the circular itself is not challenged. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of a show cause notice that requires filing reply before a different officer Legal framework: The Act confers powers on specified officers to issue show cause notices and on specified adjudicating officers to decide the matters. The judgment refers to the statutory scheme distinguishing audit powers and adjudicatory powers (audit officers/DGGSTI v. jurisdictional Executive Commissionerate). Precedent Treatment: No judicial precedents were cited or relied upon in the judgment; the Court's analysis is based on the statutory scheme and administrative instructions. Interpretation and reasoning: The Court recognized that the impugned show cause notice was issued by an audit officer but required the petitioner to file the reply before the jurisdictional adjudicating officer. The Court examined whether that procedure offended the Act and observed that the administrative Board's instruction contemplates such a division of functions - issuance of notice by audit authorities and adjudication by the jurisdictional Executive Commissionerate. Because the petitioner did not impugn that administrative instruction, the Court declined to strike down the notice solely on the ground that the reply was directed to another officer. Ratio vs. Obiter: Ratio - Where a show cause notice is issued by an officer empowered to do so under an administratively sanctioned scheme that separates issuance (audit) from adjudication (jurisdictional executive), the notice is not void for directing filing of reply before a different officer, in the absence of a challenge to the administrative instruction authorizing that procedure. Obiter - Observations describing the functional division between audit officers (power to issue SCNs) and adjudicating officers (power to decide) as per the Board's instructions. Conclusions: The Court refused to quash the impugned show cause notice on jurisdictional grounds. The petitioner was directed to file its reply before the designated adjudicating officer and raise all objections in that reply. Issue 2: Effect of an unchallenged administrative circular authorizing issuance by audit officers and adjudication by jurisdictional officers Legal framework: Administrative circulars issued by the Board interpret and direct internal allocation of functions among Central Tax officers, including provisions for Audit Commissionerates and DGGSTI to issue show cause notices while adjudication is performed by Executive Commissionerates in whose jurisdiction the taxpayer is registered. Precedent Treatment: The Court did not distinguish, follow, or overrule any case law; it treated the circular as an operative administrative instruction relevant to the permissibility of the contested procedure. Interpretation and reasoning: The Court held that, in the absence of a specific legal challenge to the circular itself, a writ petition challenging only the show cause notice cannot succeed on the ground that the notice prescribes filing before another officer. The Court emphasized that unless the circular's validity is impugned, the prescribed administrative procedure is binding for purposes of interlocutory scrutiny of jurisdictional validity of the notice. Ratio vs. Obiter: Ratio - An administrative circular allocating issuance and adjudication functions, if not challenged, operates to validate the procedural step of issuing show cause notices by audit/DGGSTI officers and directing replies to the jurisdictional adjudicating authority; courts will not set aside such a notice for that reason alone. Obiter - The Court's description of the Board's instruction as having been 'scrupulously followed' in the present instance. Conclusions: Because the circular was not challenged, the Court declined to interfere with the show cause notice and required the petitioner to pursue objections through the prescribed reply and adjudication mechanism under the circular. Consequential Directions and Enforcement of Rights Legal framework: Principles of natural justice and the statutory adjudication process require opportunity to be heard and adjudication in accordance with law by competent officers. Interpretation and reasoning: The Court balanced non-interference with administrative arrangements against the petitioner's right to be heard. Rather than quashing the notice, the Court ordered the petitioner to file its reply within a limited time and directed the adjudicating officer to consider the reply, afford an opportunity of hearing, and adjudicate in accordance with law. Ratio vs. Obiter: Ratio - Where jurisdictional validity of a show cause notice is not established as contrary to law or administrative instructions, the appropriate remedy is to permit the statutory adjudication process to proceed subject to full opportunity to raise objections; courts may remit the controversy to the adjudicating authority with time-bound directions. Obiter - Comments on the separate functional roles of audit and adjudication officers as contemplated by the Board's circular. Conclusions: The Court ordered interlocutory relief rather than setting aside the notice: the petitioner must file a reply within four weeks, and the adjudicating officer must consider and decide the matter after hearing, in accordance with law.