Show cause notice cannot be in the form of order
Facts:- The Writ petitioners/Appellants filed the intra-court appeal against the Order dated 1st December, 2022 passed in WPA No. 26092 of 2022, wherein the Appellants challenged show cause notice dated 26th September, 2022 with regard to classification of the product manufactured by the Appellant. The main ground on which the show cause notice was challenged is that the authority has pre-decided the issue and the show cause notice is pre-meditated and it is not a show cause notice and consequently no useful purpose would be served in giving reply by the appellants. However, the learned Single Bench was of the view that a writ against a show cause notice is not maintainable. Being Aggrieved of the said order, the writ petitioners/appellants have filed this appeal.
Held: –
- The Hon’ble Court after considering the submissions made and facts of the case, found that the view taken by the learned Single Bench that a writ petition against the show cause notice is not maintainable. Though, it is equally well-settled is the legal principle that there are exceptions to this self-imposed restriction by the Constitutional Courts. If a show cause notice suffers from the vice of lack of jurisdiction, Courts are entitled to interfere with it.
- The Hon’ble Court referring to the judgment of Hon’ble Supreme Court in Siemens India vs. State of Maharashtra reported at 2007 (207) ELT 168 (SC), wherein ‘a challenge was made to a show cause notice and the Hon’ble Supreme Court held that although ordinarily a writ Court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same inter alia appears to have been without jurisdiction’, found that if the show cause notice is an order by itself and not a show cause notice and it is pre-meditated then the Courts are entitled to interfere with the said order.
- Further, When a notice is issued with premeditation a writ petition may not be maintainable, in such an event even if the Court directs the statutory authority to hear the matter afresh, ordinarily such hearing would not yield any fruitful purpose.
- That in the instant matter, it can be seen that the show cause notice is very detailed and the reason for such a detailed notice is that after the inspection of the business premise of the appellants by the authority, a query was raised by the officer by proceedings dated 8th July, 2022 calling upon the appellants to state as to why HSN Code of Concrete Masonry Units-AAAC Blocks will not fall under the broad heading 6810 with applicable tax rate 18%. as the appellants are not making fly ash blocks/bricks as per the standard mentioned in BIS Product Code. The Appellants made such a detailed reply to the query raised and the authority while dealing with the all contentions raised in the reply, discussed the same under the head ‘Rebuttal on the factual points’ and proceeded to reject all the contentions. Thereafter, it was stated by the authority that it has no other option but to proceed under Section 74(1) of the WBGST Act /CGST Act, 2017 read with rule 142(1) of WBGST/CGST Rules 2017 and the summary of the show cause notice will be issued electronically in FORM GST DRC-01, specifying therein the amount of tax, interest and penalty payable by the appellants.
- It was found by the Hon’ble Court that on going through the proceedings of the assessing officer dated 26th September 2022, it prima facie appears to be an order and the manner of issuing show cause notice has not been rightly understood by the authority. However, partly the appellants have to be blamed for making such a detailed submissions replying to the aforesaid query raised, referring several decisions of Supreme Court and High Courts. The problem could have been avoided, if the appellant had restricted their reply only to the extent query raised. Thus, not only the authority committed a mistake in proceeding but also the appellants committed a mistake by submitting such a detailed reply.
- Therefore, the Hon’ble Court was of the view that the entire proceedings have to be redone in an opposite manned and for that purpose the matter was remanded back, to be dealt by the same officer, however, showing confidence that the very same officer will have an open mind and issue a show cause notice in a proper manner giving adequate opportunity to the appellants to submit their reply and thereafter adjudicate the show cause notice.
The Hon’ble Court with the above findings, allowed the appeal by setting aside the order passed in the Writ petitions. Consequently, the show cause notices impugned in the writ petitions are quashed and the matter is remanded back to the authority with a direction to issue a fresh show cause notice with an open mind without pre-deciding any issue and give adequate opportunity to the appellants to submit their reply and thereafter the case shall be adjudicated in accordance with law.
To read the complete judgment 2022 Taxo.online 1345
