Case Law Details
Synthroma Laboratories Vs State of West Bengal & Ors. (Calcutta High Court)
A Landmark Ruling for Timely Compliance and Statutory Benefits
In a significant decision, 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), has firmly asserted that departmental delay or inaction on pre-show cause notices (pre-SCNs) cannot be allowed to undermine statutory benefits available to taxpayers, particularly under beneficial schemes like Section 128A of the GST Act. This ruling underscores the critical responsibility of proper officers to ensure timely and reasoned action on pending proceedings, thereby safeguarding the taxpayer’s right to voluntary compliance.
Facts of the Case:
The petitioner, Synthroma Laboratories, challenged a pre-SCN issued in Form GST DRC-01A under Section 74, pertaining to the tax period 2019–2021. The core of the petitioner’s grievance was the department’s prolonged inaction: the pre-SCN had been issued almost a year prior, yet no further proceedings had been initiated. Crucially, the notice was neither formally dropped nor converted into a formal Show Cause Notice (SCN) under Section 73 or 74.
The petitioner argued that this administrative limbo severely prejudiced its ability to avail benefits under the settlement scheme introduced via Section 128A of the Act. This scheme, designed to promote voluntary compliance, requires the issuance of a formal notice under Section 73(1) as a prerequisite for application. Faced with the department’s inertia, the petitioner sought a specific directive to the proper officer to either close the proceedings based on its reply or issue a proper notice under Section 73(1) or 74(1), thereby enabling access to Section 128A benefits.
The Issue at Hand:
The central question before the High Court was: Can the department’s inaction on a pre-show cause notice under Section 74 effectively frustrate a taxpayer’s statutory right to opt for settlement under Section 128A, especially when such settlement is contingent upon the issuance of a formal notice under Section 73(1)?
The Court’s Ruling:
The Calcutta High Court took note of the fact that the pre-SCN dated 19th July 2024 had remained unresolved for nearly a year. Acknowledging the undue delay and its impact on the taxpayer, the Court issued clear directives:
- The proper officer was mandated to take a definitive decision on the pending pre-SCN within two working days from the receipt of the Court’s order.
- This decision had two possible outcomes: either drop the proceedings and issue a formal closure if no merit was found, or immediately issue a formal SCN under Section 73(1) or 74(1) if the department intended to proceed further.
Crucially, the Court emphasized that the departmental delay would not be permitted to defeat the petitioner’s right to avail benefits under Section 128A. It clarified that should a notice under Section 73(1) be issued, the petitioner would be entitled to apply for settlement within 48 hours from the date of receiving such notice.
It is important to note that the Court specified that this order was passed based on the unique facts of this particular case and should not be treated as a universal precedent.
Professional’s Take:
This judgment from the Calcutta High Court is a significant relief for taxpayers grappling with administrative delays in GST proceedings. Here’s what it means for businesses and tax professionals:
1. Accountability for Departmental Action: The ruling reinforces the principle that tax authorities cannot leave taxpayers in perpetual uncertainty. It imposes a clear duty on proper officers to take timely and conclusive decisions on pre-SCNs. This proactive approach ensures that taxpayers are not unduly prejudiced by departmental inertia.
2. Preservation of Taxpayer Rights: The Court has unequivocally upheld the taxpayer’s statutory right to avail beneficial schemes like Section 128A. The decision ensures that administrative lethargy does not become an impediment to voluntary compliance mechanisms designed to reduce litigation and foster ease of doing business.
3. Importance of Formal Notices: The judgment highlights the critical distinction between a pre-SCN (DRC-01A) and a formal SCN (under Section 73 or 74). For taxpayers to access certain benefits or settlement options, the formal SCN is often a mandatory prerequisite. This ruling pushes departments to move beyond preliminary communications and issue formal notices when warranted, thus triggering the taxpayer’s ability to act.
4. Implications for Future Cases (with Caution): While the Court stated this particular order is not a precedent, the underlying principle that departmental delays should not defeat statutory benefits is robust. Taxpayers facing similar situations can draw strength from this judgment to push for timely resolution of their pre-SCNs and related proceedings. It encourages proactive engagement and, if necessary, legal recourse to ensure their rights are protected.
5. Timeliness is Key: The short timeframe of two working days given to the department to act on the pre-SCN signifies the Court’s intolerance for undue delays, especially when taxpayer rights are at stake. This sets a strong expectation for efficiency within the tax administration.
In conclusion, this judgment is a welcome step towards fostering a more predictable and taxpayer-friendly GST regime. It sends a strong message that procedural delays will not be tolerated when they infringe upon the substantive rights of taxpayers to opt for compliance and settlement under the law.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. Affidavit of service filed in Court today is taken on record.
2. This matter has come up under the heading “to be mentioned” since the petitioner wanted to provide further clarification. Having regard thereto, upon noting that both the parties are interested to make further submissions, the unsigned order dated 26th June 2025 is recalled and the matter is heard afresh.
3. Although the writ petition has been filed, inter alia, challenging pre-show cause notice dated 19th July, 2024 issued in Form GSTDRC-01A, threatening to invoke proceedings under Section 74 of the WBGST/CGST Act, 2017 (hereinafter referred to as the “said Act”) in respect of the tax period 2019-21, however, Ms. Mukherjee, learned advocate appearing on behalf of the petitioner would submit that no steps have been taken in furtherance thereto with the object of defeating the valuable right of the petitioner to seek the benefit under Section 128A of the said Act. According to her, for the petitioner to be entitled to the benefit under Section 128A of the said Act, there must be a notice under Section 73(1) of the said Act. Unfortunately, the conduct of the respondents is aimed at frustrating the petitioner’s right to seek benefit thereunder. Having regard thereto, she prays for a specific direction upon the proper officer so that the proper officer can decide on the pre show cause notice and if he is of the view that a notice under Section 73(1) or 74(1) of the said Act is required to be issued, to issue such notice, or in the alternative if he is of the view that the proceedings need to be dropped, to drop the proceeding.
4. Mr. Sanyal, learned advocate appears on behalf of the State respondents.
5.Having heard the learned advocates appearing for the respective parties and noting that the petitioner seeks to bring the pre show cause notice dated 19th July 2024 to a logical conclusion and considering the fact that the consideration on the pre show cause notice is pending for nearly a year, I am of the view that at this stage it would be prudent to direct the proper officer to decide on the pre show cause notice on the basis of the response filed by the petitioner and if the proper officer is of the view that the pre show cause notice need not to be proceeded, the proper officer should drop the proceedings. On the contrary if he is of the view that a notice under Section 73(1) or 74(1) of the said Act should be issued, he shall forthwith issue the same.
6. Considering the peculiar facts and noting that the matter has been pending before this Court and noting that the pre show cause notice remains outstanding for a year, I am of the view that in the event the proper officer is of the view that the pre show cause notice is required to be issued under Section 73(1) of the said act, the petitioner shall be entitled to benefit of the Scheme introduced under Section 128 of the said Act provided the petitioner complies with all formalities and applies before the authority within 48 hours from the date of issue of such notice.
7. It is made clear that the aforesaid order has been passed in the peculiar facts noted hereinabove and shall not be construed as a precedent. The decision of the proper officer must be taken within two working days from the date of receipt of the order.
8. Since, no affidavits have been called for, the allegations made in the writ petition are deemed not to have been admitted by the respondents.
9. With the above observations and directions, the writ petition is disposed of.
All parties shall act on the basis of the server copy of this order duly downloaded from this Court’s official website.
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