Non-Speaking order enhancing the demand beyond the scope of show cause notice not sustainable

Facts: –

• That the petitioner is a company carrying on the business in mechanical erection and fabrication of Cement and Steel plants and duly registered under CGST Act, 2017 and SGST Act, 2017, and filing regular returns after adjusting the tax credit in terms of Section 16 of CGST/SGST Act, 2017.
• That the 1^st respondent on the authorization issued by the 2^nd respondent inspected the business premises of the petitioner on 02.11.2022 and issued a notice dated 03.11.2022 under Section 73/74 of the APGST/CGST Act, 2017, assessing the tax liability of the petitioner as Rs. 69,12,453/- for the period 2018-19 and Rs. 1,53,25,314 for the year 2019-20.
• That another show cause notice dated 10.08.2021 was later on issued by the 1^st respondent proposing to levy interest and penalty in addition to the tax already ascertained by him through Form DRC 01A.
• The petitioner submitted an explanation to the show cause notice mentioning the incorrectness in the show cause notice. Thereafter, the authority passed an Order dated 17.11.2021, being aggrieved of which the present writ petition has been filed.

 Petitioner’s Submissions: –

• It was submitted on the behalf of the petitioner that the explanations given by the petitioner has not been considered while passing the impugned order and except extracting the contents of the explanation, there is no consideration of the same while fixing the liability.
• That the demand proposed in the show cause notice is Rs. 69,12,114/- under SGST and CGST Acts and the impugned order has confirmed the amount of Rs. 5,20,39,891/-as payable by the petitioner, which is beyond the amount demanded in the show cause notice. Moreover, IGST interest to a tune of Rs. 84,16,365/- has been imposed by the authority in addition to the tax amount, and the same is also beyond the scope of show cause notice.

On other hand, it was submitted on the behalf of the respondents that the petitioner did not respond to the show cause notice and the impugned order warrants no interference.  It was also submitted that even if the amount demanded is more than the amount demanded in the show cause notice, it will not cause any prejudice to the petitioner.

Held: –

• The Hon’ble Court after considering the submissions from the both sides and the facts of the case, found that the petitioner was issued a Show cause notice on 10.08.2021 demanding sum of Rs. 69,12,114/- under CGST and on the very same day another show cause notice was issued demanding Rs. 69,12,114/- under SGST.
• Further the Hon’ble Court after considering the findings of the authority, found that the petitioner made a representation dated 09.09.2021 explaining the mistake committed by the authority in arriving the said figures, thereafter, the impugned order dated 17.11.2021 was passed demanding Rs. 5,20,39,891/-, which was calculated after addition of interest and penalty on the amount demanded. Moreover, an amount of Rs. 84,16,365 was added towards IGST which is not permissible under the law.
• It was found that if the authority intended to add interest and penalty on the amount proposed in the show cause notice, separate notice ought to have been issued to the petitioner for the said demand.
• That there is no discussion about the objections raised by the petitioner in the explanation to the show cause notice, and the authority while dealing with the objections, discussed the aspect of claim of ITC made by the petitioner, which was not the content of the show cause notice.

The Hon’ble Court with the above submissions set aside the impugned order in Form DRC-07 dated 17.11.2021 and remanded the matter back to the authority to issue fresh notice and proceed further in accordance with law.

To read the complete judgment 2022 Taxo.online 696