Can a Second Show Cause Notice (#SCN) be Justified after Adjudication under Sections 73 of CGST Act?
Legality of Second SCN After CGST Act Section 73 Adjudication
Assessee subjected to audit under Section 65 for FY 2017-18 and thereafter, an audit report in ADT-02 came to be issued. Subsequently, the PO issued SCN under section 73, which was adjudicated on merits, leading to a detailed speaking order by the PO. The crux of the matter is whether issuing a second SCN invoking the extended period of limitation on the same grounds for the same period, after earlier proceedings under Section 73 were adjudicated on merits, is justified.
Key grounds for challenging the second SCN:
1. Adjudication order if not challenged attains finality and becomes binding on both the parties
2. When no fresh material available with PO justifying issuance of second SCN: When the first SCN was issued all the relevant facts were in the knowledge of the PO. Later on, while issuing the second SCN the same / similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the PO.
3. A quasi-judicial authority cannot review its earlier decision unless power of review is conferred by statute: It appears that the provisions of Section 73 or 74 do not authorise the PO to revise its own order or decision.
Some important judicial precedents from the earlier law supporting the above contentions:
Hon. Supreme Court in the case of Nizam Sugar Factory v. Collector of Central Excise, A.P. [2006 (197) E.L.T. 465 (S.C.)] has held that that the subsequent SCNs cannot be issued on similar facts as were there in the initial SCN. This cannot be considered as suppression of facts on part of the assessee as all the facts were in knowledge as per the first SCN.
Hon. Supreme Court in the case of C.C.E. v. Prince Gutka Ltd. [2015 (322) E.L.T. 165 (S.C.)] has held that issue of second SCN on same cause of action is not permissible and that there was no error on Tribunal’s order setting aside demand under second SCN.
Hon. Delhi High Court in the case of India Tourism Development Corporation Ltd v. Delhi Administration [2014 (306) E.L.T. 231 (Del.)] wherein it has been held that a quasi-judicial authority cannot review its earlier decision unless power of review is conferred by statute. The Collector of Central Excise while adjudicating upon the first show cause notice was clearly performing a quasi-judicial function. Subsequent demand through second show cause notice is not sustainable after gap of five years when first show cause notice adjudicated, became final and accepted by both parties.
In view of the above, in my humble view the PO is not justified in issuing second SCN invoking extended period of limitation on the same ground for the same period when earlier proceedings were adjudicated on merits.
Views welcome.
The principle of finality under Section 73 creates a clear bar once an order has been duly passed, but the “same demand” test is where the actual litigation arises.
The Madras HC in A.N.S. Traders held that a second SCN on the same transaction and period is barred where a valid order under Section 73(9) was already passed, properly served, and the taxpayer had a hearing opportunity. The Allahabad HC has taken a similar position for cases where the limitation period also had expired.
The department typically tries two workarounds:
1. “New facts discovered”: characterizing the second SCN as based on facts that were not available at the time of the first adjudication. Courts scrutinize this closely. If the facts were in documents the department already had access to (GSTR data, audit trail), the “new discovery” argument usually fails.
2. “Different ground, same period”: first SCN was on ITC excess claim, second SCN on RCM non-payment for the same FY. These are legally different demands even for the same period, so the first order does not bar the second.
Practical response: if you receive a second SCN, your first reply should challenge the re-initiation itself under Section 75(3) and on limitation, before engaging on the merits. If you respond only on merits, you may be taken to have waived the procedural objection.