2026 (2) TMI 224 - HC - GST

Challenge to show cause notice under GST: court declines interference but preserves crossexamination and rebuttal rights.

Challenge to a show cause notice under the GST framework raises disputed factual issues requiring full adjudication; the HC declined to interfere at the ... Challenge to show cause notice - adjudication under the Central Goods and Services Tax framework for alleged tax evasion - disputed factual issues requiring adjudication - interference with initiated adjudication proceedings - natural justice - right to cross-examine witnesses - reliability and rebuttal of documentary RUDs - HELD THAT:- The present petition has been filed at the very initiation of the adjudication proceedings. Suffice to note, no final conclusion has been drawn by the adjudicating authority. Since the petitioner proposes to dispute the show cause notice, it may never be compelled to deposit proposed amounts before adjudication. At present, the statements of the recipients have been recorded during investigation. Thus, it appears that the revenue seeks to rely on those witnesses. It goes without saying that if such course is adopted, the petitioner would be given adequate opportunity to cross-examine such witnesses before any adverse inference is drawn on the strength of their statements and due compliance would be offered to the rules of the natural justice enshrined under the Act. As to the other material (RUDs) relied by the revenue, the petitioner would have a right to rebut the reliability of such documents as also to doubt the inferences that may be drawn on the strength of those documents. The issue would have to be thrashed out both on facts and on law. Such exercise may be carried out more efficiently and effectively in the course of adjudication. For that reason interference claimed is declined. Issues: Whether interim judicial interference should be granted to quash or suspend the show cause notice issued under Section 74(1) of the Central Goods and Services Tax Act, 2017 (and corresponding provisions of the U.P. GST Act, 2017 and Section 20 of the IGST Act, 2017) pending adjudication.Analysis: The petition was filed at the initiation of adjudication proceedings and no final conclusion has been reached by the adjudicating authority. Investigation including search and recording of recipient statements has taken place and the revenue seeks to rely on those materials and witnesses. Disputed questions of fact and law arise which require full adjudication; the petitioner has avenues within the adjudication to challenge documentary material and to cross-examine witnesses. Given the factual disputes and the need for an adjudicatory process to examine evidence and afford opportunity to test witness statements and documents, the matter is better resolved in the course of statutory adjudication rather than by pre-emptive judicial intervention.Conclusion: Interim interference is declined and the writ petition is dismissed; the order upholds the continuance of the adjudication proceedings and is therefore against the petitioner and in favour of the revenue.