The Hon’ble High Court of Madhya Pradesh vide its order dated 10.05.2023 in M/s Balaji Electricals Vs. Appellate Authority and Joint Commissioner State Tax Sagar Division, Sagar, Assistant Commissioner State Tax in Writ Petition No. 6119 of 2020, set aside and quashed the show cause notice for being vague and issued without relevant material & information and thereby disabling the petitioner to respond to the same. The orders passed on the basis of said show cause notice were also set aside and quashed.
The Petitioner filed the writ petition before the Hon’ble High Court challenging the order dated 03.05.2019 and the order dated 30.08.2019 passed by the Appellate Authority & Joint Commissioner, State Tax, Sagar Division, respectively. The challenge was made on the ground that the show cause notice dated 28.03.2019 under Section 74(1) of GST Act does not satisfy the requirements of provisions r/w Rule 142 of GST Rules.
Petitioner’s Submissions: –
- It was submitted on the behalf of the petitioner that the show cause notice was vague to the extent of not communicating the relevant information and material thereby disabling the petitioner to respond to the same. Therefore, all consequential actions of passing order and dismissal of appeal are vitiated in law.
- Placing reliance on the decision of the Division Bench of Jharkhand High Court in the matter of M/s Sidhi Vinayak Enterprises Vs. The State of Jharkhand & ors. including WP (T) No. 745 of 2021 rendered on 14 – 15th, September 2022, it was submitted that the facts and circumstances of the present case are similar to the facts of these cases. Further, the show cause notice in M/s Sidhi Vinayak Enterprises (supra) was identical to the show cause notice issued in the present case to the extent of being vague and cryptic.
- It was also submitted that Jharkhand High Court has dealt with provisions of Section 74 and 75 of GST Act as well as Rule 142 of GST Rules.
On the other hand, referring to return as well as additional return, it was submitted on the behalf of the State that the reply dated 25.04.2019 to the show cause notice gives an impression that petitioner was not handicapped in giving any response to the show cause notice being vague. It was further pointed out that in the memo of appeal, the said ground of show cause notice being vague, was not raised.
- The Hon’ble Court after considering the submissions made and facts of the case, found that it is true that the petitioner has not specifically raised the said ground before the appellate authority but the fact remains that mandatory provisions of Section 74 of GST Act, make it incumbent upon the Revenue to ensure the show cause notice to be speaking enough to enable the assessee to respond to the same.
- It was found that Bare reading of the show cause notice reveals that it neither contained the material and information nor the statement containing details of ITC transaction under question.
- Further, referring to the Section 75, it was found by the Hon’ble Court that Section 75 of GST Act is a complete Code in itself which prescribes for various stages for determination of wrongful utilization of ITC while following the concept of reasonable opportunity of being heard to the assessee. Since the Statute itself prescribes for affording reasonable opportunity, it is incumbent upon the Revenue to afford the same and any deficiency in that regard vitiates the end result.
- Thereafter taking reference of decision of Jharkhand High Court, it was held that there is no doubt that the very initiation of the proceedings by way of show cause notice is vitiated for the same being vague.
The Hon’ble High Court with the above findings, allowed the writ petition by quashing the show cause notice as well as the impugned orders dated 03.05.2019 & 30.08.2019.