GST show cause notice invalid for wrong factual basis, non-supply of material and vague tax discrepancy allegations.

A GST show cause notice was held unsustainable where it proceeded on an incorrect factual premise, namely that a special audit had been conducted by the Comptroller and Auditor General of India when the admitted audit related to the GST Department in Punjab, and where the audit report was not supplied to the noticee. The notice was also invalid because it alleged input tax credit mismatch, reverse charge short payment and tax liability without disclosing the basis, particulars or heads of computation, contrary to the requirement under Section 73(3) that the alleged defaults be specifically brought to the assessee's notice. The notice was quashed, with liberty to proceed afresh in accordance with law.

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Issues: (i) whether the show cause notice was liable to be set aside for being founded on an incorrect factual premise and for non-supply of the material forming its basis; (ii) whether the notice was invalid for vagueness and failure to disclose the required details of the alleged tax, interest and input tax credit discrepancies.

Issue (i): whether the show cause notice was liable to be set aside for being founded on an incorrect factual premise and for non-supply of the material forming its basis.

Analysis: The notice proceeded on the footing that a special audit of the petitioner had been conducted by the Comptroller and Auditor General of India, whereas the admitted position was that the audit related to the GST Department in Punjab. The notice was thus founded on a factually incorrect premise. It was also undisputed that the audit report forming the sole basis of the notice had not been supplied to the petitioner. A notice that relies on material not furnished to the noticee does not afford an effective opportunity of response.

Conclusion: The notice was unsustainable on this ground and liable to be set aside.

Issue (ii): whether the notice was invalid for vagueness and failure to disclose the required details of the alleged tax, interest and input tax credit discrepancies.

Analysis: The notice alleged excess input tax credit, mismatch in ITC, short payment under reverse charge mechanism and undischarged tax liability, but it did not disclose the basis, the particulars, or the heads under which the amounts were worked out. Section 73(3) required details of the alleged non-payment, short payment, erroneous refund, or wrong availment or utilisation of input tax credit to be brought to the assessee's notice. A vague and non-specific notice defeats the purpose of show cause proceedings and is inconsistent with natural justice.

Conclusion: The notice was invalid for vagueness and for non-compliance with the requirement of particulars.

Final Conclusion: The impugned show cause notice was quashed, with liberty reserved to the authorities to proceed afresh in accordance with law.

Ratio Decidendi: A GST show cause notice must disclose the specific factual basis and the material relied upon, and a notice lacking such particulars or founded on an incorrect premise is liable to be invalidated for breach of statutory requirements and natural justice.

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