The Calcutta High Court in the case of SYNTHROMA LABORATORIES vs. THE STATE OF WEST BENGAL & ORS. Vide WPA 4149 of 2025 dated 30.06.2025, held that departmental delay or inaction on pre-SCNs cannot defeat statutory benefits available to taxpayers under beneficial schemes like Section 128A. The decision clarifies the legal responsibility of the proper officer to take a timely and reasoned call on pending pre-SCNs and preserves the taxpayer’s right to opt for voluntary compliance.

Facts of the Case: In this case, the petitioner challenged a pre-show cause notice (pre-SCN) issued in Form GST DRC-01A under Section 74 pertaining to the tax period 2019–2021. Though the pre-SCN was issued nearly a year ago, no further proceedings had been initiated by the department. Also, neither was the notice dropped nor converted into a formal SCN under Section 73 or 74.

The Petitioner argued that this inaction prejudiced its right to avail benefits under the settlement scheme introduced under Section 128A of the Act, which requires issuance of a formal notice under Section 73(1).

The petitioner requested a specific direction to the proper officer to either drop the proceedings based on its reply or issue a proper notice under Section 73(1) or 74(1) of the Act, enabling the petitioner to act under Section 128A.

Issue: Whether the inaction by the department on a pre-show cause notice under Section 74 can frustrate a taxpayer’s statutory right to opt for settlement under Section 128A, which is contingent upon the issuance of a formal notice under Section 73(1)

Held that: The High Court acknowledged that the pre-show cause notice dated 19th July 2024 remained pending without resolution for nearly a year.

The Court directed the proper officer to take a decision on the said pre-SCN within two working days from the receipt of the order. The officer must either drop the proceedings, if he finds no merit then officer must issue a formal closure., or forthwith issue a formal SCN under Section 73(1) or 74(1) if he intends to proceed.

The Court ensured that the delay caused by the department would not defeat the petitioner’s right to avail benefits under Section 128A of the Act. It thus clarified that if a notice under Section 73(1) is issued, the petitioner would be entitled to apply for settlement within 48 hours from the date of such notice.

The Court emphasized that the order was passed in the peculiar facts of the case and shall not be treated as a precedent.

To read the complete judgment 2025 Taxo.online 1360