Diamond Beverages Private Limited Vs Assistant Commissioner of CGST & CX (Calcutta High Court)
Calcutta High Court sets aside show cause notice in Diamond Beverages case, emphasizing the necessity of thorough examination and due application of mind.
The recent judgment by the Calcutta High Court in the case of M/s. Diamond Beverages (P.) Ltd. v. Assistant Commissioner of CGST & CX [M.A.T. No. 1948 of 2023 and I.A. No. CAN of 2023 dated December 15, 2023] has brought attention to the necessity of a thorough application of mind in issuing Show Cause Notices (SCNs). The court’s observation that the SCN lacked due application of mind, despite considering appellant submissions, sets a significant precedent. This article delves into the details of the case, highlighting the facts, issues, and the court’s directive to remand the matter back to the Adjudicating Authority.
Hon’ble Calcutta High Court held that submissions made by appellants in their reply to pre-show cause notice appeared to have been considered. However, except extracting the reply given by the appellants, the authority has not dealt with the contentions, which were placed by the appellants in the reply to the pre-show cause notice. Thus, this would be sufficient to hold that the show cause notice has been issued without due application of mind. Hence, Show Cause Notice was set aside and subsequently, the matter was remanded back the matter to the Adjudicating Authority at the level of pre-show cause notice and the writ petition was allowed.
Facts:
M/s. Diamond Beverages (P.) Ltd. (“the Petitioner”) was issued the Show Cause Notice dated August 16, 2023 (“the Impugned SCN”), alleging that the Petitioner had availed/utilized input tax credit (“ITC”) arising out of debit notes by the suppliers, who had not filed FORM GSTR-3B returns and whose registration was canceled retrospectively. The Petitioner replied within 30 days as permitted by law and submitted their reply placing the necessary information. Thereafter, the authority issued a pre-show cause notice in Part A of Form GST DRC-01A dated March 31, 2023 (“the Impugned pre-SCN”). The Petitioner also submitted their reply to the Impugned pre-SCN dated April 11, 2023, and sought an opportunity for the personal hearing. However, the Revenue Department (“the Respondent”) issued the order dated September 25, 2023 (“the Impugned Oder”) under section 73(1) of the Central Goods and Services Act, 2017 (“the CGST Act”) without considering the contentions of the Petition.
Thus, aggrieved by the Impugned Order and Impugned SCN, the Petitioner filed the writ petition in the Calcutta High Court and contended that the Respondent has to investigate or inquire into the matter by taking note of the relevant details at the supplier’s end. If that is not done, the true facts will not emerge and consequently, the issuance of any SCN will be a fait accompli. In the instant case, the Respondent has not conducted any such investigation and proceeded to issue the Impugned SCN.
Issue:
Whether Show Cause Notice can be set aside if issued without due application of mind?
Held:
The Calcutta High Court in M.A.T. No. 1948 of 2023 and I.A. No. CAN of 2023 held as under:
