The Hon’ble Madhya Pradesh High Court, in a landmark decision dated November 20, 2023, addressed the matter presented in WP No. 26693 of 2022, where M/s. Raymond Ltd. (referred to as “the Petitioner”) sought relief against the Show Cause Notice (“the Impugned SCN”) dated September 03, 2022, issued by the Revenue Department (“the Respondent”). The subsequent order of demand dated September 12, 2022 (“the Impugned Order”) under Section 73 of the Central Goods and Services Act, 2017 (“the CGST Act”) was also contested by the Petitioner. The central argument focused on the alleged lack of reasonable opportunity for the Petitioner to be heard, as the Impugned Order was issued within a mere nine days of the Impugned SCN. Additionally, the Petitioner contended that the Impugned SCN was vague in nature.
The pivotal issue before the court was whether it is permissible to pass an order within such a brief period after the issuance of an SCN.
The court, after thorough consideration, delivered a comprehensive judgment, setting forth crucial observations and interpretations of relevant provisions:
- Applicability of Section 73 of the CGST Act: The court observed that Section 73 of the CGST Act is applicable in cases other than those involving fraud, wilful misstatement, or suppression of facts. Section 73(1) mandates the issuance of a notice to the taxpayer when tax has not been paid, or there is a shortfall, or there are issues related to erroneous refund or wrongful availing/utilization of Input Tax Credit. Furthermore, the court emphasized the necessity of serving the notice at least three months before the time limit specified in sub-section (10) of Section 73.
- Sequential Process under Section 73: The court highlighted the procedural steps outlined in Section 73, specifically mentioning Section 73(3), which allows the proper officer to serve a statement detailing the tax-related discrepancies beyond the timeframe mentioned in Section 73(1). Sub-sections (5), (6), (7), and (9) of Section 73 prescribe the issuance of a show cause notice, providing an opportunity to the noticee to respond within 30 days regarding the deposit of tax, interest, and other benefits as stated in the notice.
- Reasonable Time Period for Reply to SCN: Notably, the court stressed that Section 73(1) grants the noticee an opportunity to respond, and the reasonable time period for this reply is to be considered as 30 days.
- Validity of SCN and Vagueness: The court underscored that any SCN, whether under Section 73 of the CGST Act or otherwise, should contain sufficient material upon which the proceedings against the noticee have been initiated. Moreover, it emphasized that an SCN is subject to judicial review if found to be vague in nature.
- Inadequate Opportunity Granted: The court opined that the mere 8-day gap between the issuance of the Impugned SCN and the Impugned Order amounted to a denial of reasonable opportunity for the Petitioner to be heard.
Based on these considerations, the court held that the Impugned SCN and Impugned Order were to be set aside. However, it granted liberty to the Respondent to issue a fresh, legal, and valid SCN, thereby ensuring a reasonable and sufficient opportunity for the Petitioner to present their case. As a result, the writ petition was allowed.
Additionally, the court directed the Respondent to pay costs of Rs.10,000/- to the Petitioner within 60 days, deposited in the Petitioner’s bank account.
In conclusion, the judgment of the Hon’ble Madhya Pradesh High Court provides valuable insights into the procedural aspects of tax-related notices and emphasizes the paramount importance of affording a fair and reasonable opportunity to the concerned parties during adjudicative processes.
