Appellate Authority Bound by Show Cause Notice Allegations: Calcutta High Court

Calcutta High Court holds Appellate Authority cannot travel beyond allegations made in Show Cause Notice and quashes order for rejection of refund

Introduction: In an important judgement, the Hon’ble Calcutta High Court has asserted that the Appellate Authority cannot overstep the allegations made in the Show Cause Notice (SCN). The case in question, Earthmark Traders v. Joint Commissioner, State Tax, Chinabazar & Rajakatra Charge & anr. (MAT 791 OF 2023), focuses on a crucial issue in tax law and practice, setting a significant precedent.

Scope of Appellate Authority: The case centers around Earthmark Traders, who, after exporting goods, claimed a refund of Input Tax Credit (ITC). The Revenue Department, after inspecting the premises, rejected the refund claim due to a contention about the additional place of business. Interestingly, the Appellate Authority dismissed the refund claim, arguing the evidence did not prove the goods were exported. However, the Court found it questionable whether the Appellate Authority could have made such a determination, considering the appellant had already received input tax credit for the valid export.

Show Cause Notice Limitations: Crucially, the Hon’ble Court held that the Appellate Authority could not travel beyond the allegations of the SCN. The Court observed that the SCN was defective due to non-consideration of the appellant’s submissions and documents produced in response to the SCN. Therefore, the Appellate Authority’s overreach was found to be inconsistent with due process.

Conclusion: In conclusion, the order passed by both the Original Authority and the Appellate Authority was set aside, and the matter remanded back to the Original Authority. This judgement by the Calcutta High Court reinforces the limitations imposed on the Appellate Authority by the allegations made in the SCN. The ruling carries significant implications for future cases and is a vital guidepost for entities dealing with tax-related disputes.

This matter was represented on behalf of the petitioners by Advocates Vinay Shraff, Priya Sarah Paul, and Sanchita Dey. The respondents were represented by Mr. A. Ray, Ld. G.P., Mr. T.M. Siddiqui, Mr. D. Ghosh, Mr. N. Chatterjee, and Mr. D. Sahu.