HC sets aside order passed on the same day of issuance of SCN citing lack of reasonable opportunity for filing reply
Summary: In the case of M/s. Pithamber Distributors v. Assistant Commissioner (ST), Chennai (W.P. No. 11337 of 2024), the Madras High Court set aside an order passed on the same day as the issuance of a Show Cause Notice (SCN). The petitioner challenged the order dated December 31, 2023, on the grounds that it violated the principles of natural justice by denying them a reasonable opportunity to respond. Section 73(2) of the Central Goods and Services Tax Act, 2017 (CGST Act) mandates a gap of at least three months between the issuance of an SCN and the corresponding order, allowing time for a reply. However, in this case, both the SCN and the order were issued on the same day, leaving no room for the petitioner to file a response. The High Court ruled that this action contravened Section 73(2) and quashed the order. The judgment underscores the importance of granting adequate time to taxpayers to respond to SCNs, adhering to procedural fairness under the CGST Act.
The Hon’ble Madras High Court in the case of M/s. Pithamber Distributors v. Assistant Commissioner (ST), Chennai [W.P. No. 11337 of 2024 dated April 30, 2024], allowed the writ petition, thereby setting aside the order passed citing lack of reasonable opportunity to file reply to SCN as the Department is required to pass the order after three months of issuance of SCN under Section 73(2) of Central Goods and Services Tax Act, 2017 (“the CGST Act”) with an intent to grant reasonable opportunity to file the reply. However, the order was passed on the same day of issuance of SCN.
Facts:
M/s. Pithamber Distributors (“the Petitioner”), filed writ petition against order dated December 31, 2023 (“the Impugned Order”), passed by the Revenue Department (“the Respondent”). The Petitioner argued that both the SCN and the Impugned Order were issued on the same date, which violated the principles of natural justice by not providing a reasonable opportunity to respond before the Impugned Order was passed. Also, it was contended that the said act violated the provision of Section 73(2) of the CGST Act, which requires the Department to grant sufficient time for filing of reply to the SCN.
Held:
The Hon’ble Madras High Court in W.P. No. 11337 of 2024 held that no reasonable opportunity was not provided when SCN was issued and Impugned Order was passed on the same day. Hence, Impugned Order passed is liable to be set aside.
Our Comments:
It is pertinent to note that Section 73(2) of the CGST Act, provides that for determination of tax relating to the period upto FY 2023-24, the SCN under Section 73(1) of the CGST Act has to be issued atleast three months before the due date for issuance of order as specified in Section 73(10) of the CGST Act, i.e. three years from the due date for furnishing of annual return for the financial year to which the tax has not been paid or short paid or input tax credit wrongly availed or utilised relates to or within three years from the date of erroneous refund.
However, in case of SCN issued and subsequent order passed under Section 74 of the CGST Act for period upto FY 2023-2024, as per Section 74(2) of the CGST Act, the SCN under Section 74(1) of the CGST Act has to be issued at least six months before the due date for issuance of order as specified in Section 74(10) of the CGST Act, i.e. five years from the due date for furnishing of annual return for the financial year to which the tax has not been paid or short paid or input tax credit wrongly availed or utilised relates to or within five years from the date of erroneous refund.
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