Show Cause Notice Under GST Act 2017 – An Analysis

1. Issue of show cause notice for giving sufficient and meaningful opportunity of hearing , is the essential precondition for every adjudication proceeding . In fact show cause notice is statutory requirement which should be complied with to satisfy principle of natural justice. It is foundation of matter of levy of tax , interest and penalty. Under the GST act 2017 , specific provisions have been made in relevant sections to issue show cause notices before passing any order or decision under relevant sections . In this article an attempt has been made to analyse concept and importance of show cause notice with specific reference of GST ACT 2017.

1. Concept of Show Cause Notice

Under erstwhile Central indirect tax laws , concept of cause notice was in existence . Accordingly , provisions have been made for issue of show cause notice for recovery of demand under the relevant act . ( for example Section 11of central Excise Act , Section 73 of Service tax law , Custom act etc ) . Therefore ,it is not new for those who dealing in those act . However , so far as State vat act it is new for the concerned . Of course SCN being served on dealer before making ex-party assessment orders and for giving opportunity of being heard before taking any decision or order under vat acts.

Show cause notice ( in short SCN ) has great significance in adjudication proceeding for mandatory compliance of principle of natural justice . Show cause notice is mandatory requirement for raising any demand under GST act 2017 except payment of interest u/s 50 and assessment of non filer of returns u/s 62 of the act . SCN is the foundation on which adjudicating authority has to build up case. It is the document served on the taxable person asking him to explain with reason as to why a particular course of action should not be taken against him . It must be speaking and well reasoned . Issuance of show cause notice should be with open mind . Taxable person should be of clear view that it is only proposal and his reply will be considered before taking any decision . Issue of SCN is not only to make aware taxable person against whom the action is intended to be taken but must contain brief facts of case and grounds relied upon for proposed action and language in precision , the reading of which makes person understand the case that he has to defend . It should not be issued on assumptions and presumptions . Allegations and finding in SCN should be supported by documentary evidences. In SCN there should be prima facie opinion and not final opinion or conclusions . Primary purpose of SCN is only to put aggrieved person on the notice of the facts and necessary ingredients of charge so as to enable him effectively meet it .If adjudication order passed without issue of SCN order will be liable to set aside being contravention of statutory provisions and violation of principle of natural justice .

In the case of M/s Ballarpur Industries Ltd (2007 ) 8 SCC 89 Supreme Court held that Show cause notice is the foundation of matter of levy and recovery of duty, penalty and interest . Hence , if there was no invocation of rules (valuation rule in this case), it woud not be open to adjudicating authority to invoke that rule .

2. Proceedings Where Show Cause Notice Is Mandatory

In view of relevant provisions of the GST act 2017 and rule 142 (1) , Proper Officer is required to issue detailed speaking and reasoned SCN along with summary in From – DRC 01 ( and in the form where prescribed . ) for initiation of adjudication proceeding .

a) Proceeding u/s 52 of GST act ( FORM – GST – DRC- 01 ).

b) Determination of tax liability u/s 73 in normal case ( FORM – GST – DRC -01 ).

c) Determination of tax liability u/s 74 in fraud case ( FORM – GST – DRC -01 ).

d) Tax collected but not paid u/s 76 (FORM – GST – DRC -01 ).

e) Levy of penalty u/s 122 for specified offences (FORM – GST – DRC -01 ).

f) Levy of interest u/s 50 (FORM – GST – DRC -01 ).

g) Levy of penalty u/s 123 for failure to furnish information (FORM – GST – DRC -01 ).

h) Imposing fine for failure to furnish information return u/s 151 (FORM – GST – DRC -)01 ).

i) Levy of general penalty u/s 125 for contraventions of provisions of the act (FORM – GST – DRC -01 ) .

j) Levy of penalty in certain cases u/s 127 of the act (FORM – GST – DRC -01 ).

k) Levy of penalty u/s 129 of the act for transport of any goods or store any goods while they are in transit in contravention of provisions of the act and rules (FORM – GST – DRC -01 ) .

l) Confiscation of goods or conveyance and levy of penalty u/s 130 of the act (FORM – GST – DRC -01 ).

m) Cancellation of the registration u/s 29 of the act ( FORM-GST-REG-17 ) .

n) Rejection of an application for revocation of cancellation of registration u/s 30 of the act ( FORM-GST-REG-23 ) .

o) Denial of option to pay tax u/s 10 of the act under composition scheme (on the ground of violation of conditions of restrictions prescribed u/s 10 ) ( FORM-GST-CMP-05 ) .

 p) Rejection of refund u/s 54 read with rule 92 (3) ( FORM-GST-RFD-08) .

q) Assessment of unregistered person u/s 63 of the act ( FORM-GST-ASMT-14 ) and (FORM – GST – DRC -01 ) .

r) Dis qualification of Goods and Service Tax Practitioner u/r 83 (4) of the rules ( FORM-GST-PCT-03) .

s) Revision proceeding u/s 108 of the act ( FORM-GST-RVN-01) .

3. Issuance of Show Cause Notice

As stated in earlier para specific provisions have been made to issue SCN before passing any adjudication order under GST act 2017. The Proper Officer is required to issue SCN in the above referred proceedings under respective section in prescribed forms within prescribed time limit to start adjudication proceedings , on prima facie satisfaction of specified ingredients . So far proceedings under section 73 or 74 it is mandatory to issue detailed SCN to person chargeable with tax along with summary of notice in FORM – GST -DRC-01 . It should contain brief facts of case , ground relied upon and amount of tax and interest . It should be issued within prescribed time limit u/s 73 (2) and 74 (2) . It is clearly provided in section 75 (7) that amount of tax , interest and penalty demanded in the order shall not be in excess of amount specified in notice and no demand shall be confirmed on the grounds other than grounds specified in the notice . However , he has a discretion to reduce the amount of tax , interest on merit after considering representation to SCN .

4. Service of Show Cause Notice

Issue of notice and service of notice are distinct terms . Service of notice has great significance in the adjudication proceedings . Limitation period starts from the date of service of notice . The manner and mode of service has been prescribed in the section 169 of the act and rule 142 . SCN may served on the concerned person by any mode prescribed in the section 169 (1) (a) . Further rule 142 (1) (a ) state that summary of SCN shall be served electronically . Any adjudication order passed without proper service of notice is not sustainable and liable to set aside in appeal .

5. Proceedings – No Need to Issue Show Cause Notice

No specific provisions have been made to issue SCN before passing any order in the following proceedings.

a) Best judgment assessment of non -filers of return u/s 62 of the act .

b) Levy of Interest on delayed payment of taxes u/s 50 of the act.

Where person failed to pay tax within prescribed time he should pay interest u/s 50 on his own and if not paid then order is required to pass to recover such interest . No specific express provision is made to issue SCN before passing such order . However , keeping in view principle of natural justice , opportunity of being is mandatory before passing order .

In the case of M/s LC Infra Project Ltd (2019) 109 taxmann.com 141 the proper officer has passed order u/s 50 and levied interest on delayed payment of tax without issuing show cause notice . The registered person has challenged the order by filing writ petition to Karnataka High court . High court has set aside order on the ground that order is passed in breach of principle of natural justice .

6. Intimation Before Show Cause Notice

Section 73 (5) and 74 (5 ) allows a person chargeable with any tax under subsection 1 , to pay amount of tax and interest payable u/s 50 , before service of SCN on the basis of own ascertainment or tax ascertained by Proper Officer . If such amount has paid before service of SCN no penalty will attract u/s 73 However in case of fraud case penalty equivalent to 15 % of such tax will be applicable u/ 74 . In order to provide manner of ascertainment of tax by the Proper Officer , intimation in FORM – GST- DRC -01 A has been prescribed in rule 142 (1A) . Earlier , issuance of such intimation to the person was mandatory. However , due to amendment in the rule now it is optional . Thus ,if in response to such intimation u/s 74 (5) person pays such ascertained tax and interest , then he will required to pay penalty equivalent to 15 % of the such tax in fraud case . And no penalty is payable under section 73 (5) for normal case.

7. Statement In Lieu of Show Cause Notice

In the adjudication proceeding u/s 73 and 74 of the GST act 2017 , where SCN has been already issued u/s 73 (1) or 74 (1) , proper officer may serve a statement in form GST-DRC-02 specifying therein details of amount payable for such periods other than those covered under subsection (1) on the person chargeable with tax . There is no need to issue separate SCN for other period if the grounds relied are same . Service of statement in DRC-02 shall be deemed to be service of notice on the said person under sub section (1) , subject to condition that ground relied upon such tax period other than those covered under subsection (1 ) are same . However , such statements for other periods should be served within limitation period .

8. Form and Content of Show Cause Notice

No form has been prescribed in the rule for SCN . However , summary of such SCN required to be issue in prescribed form u/r 142 (1) GST- DRC-01 in respect of the specified proceedings . This summary contains

a) Tax period

b) Section under which SCN issued .

c ) Brief facts of the case .

d) Grounds .

e) Quantification of tax liability .

f) Quantification of interest and penalty .

g) Place of supply in case of supply under IGST act.

As regard the proceedings under section 10 , 29, 30, 54,63, 108 and rule 83 (4) no need to issue summary in form GST_DRC-01 only prescribed SCN should be issued .

As stated earlier , apart from summary , separate detailed reasoned and speaking SCN required to be issued , which must generally contain the following ingredient .

A ) Facts of the case .

B) Relevant provisions of law .

C ) Discussion on limitation period .

D ) Reason for applicability of extended limitation period u/s 74 of the act .

E ) Findings of earlier verifications .

F ) Cause of proposed action .

G ) Grounds relied for proposed additional tax liability / actions .

H ) Specific allegations / charges with evidences .

I ) Basis for rejection, denial of claims or exemptions .

J ) Justification for how and why taxable person is liable to pay tax .

K ) Consideration and appreciation of evidences produced .

L ) Details of contraventions of act and rules where necessary .

M ) Discussions on legal issues .

N ) Quantification of proposed tax , interest and penalty .

O) Date of hearing for giving opportunity of hearing .

P) Indicating clear message that it is prima facie opinion / proposal and not final opinion , and reply will be considered in effective manner .

9.  Competent Authorities to Issue Notice

Government by way of notifications /circulars declare proper officers and assign them jurisdictions and powers under different sections for adjudication and other actions . These authorities being proper officers are competent authorities to issue SCN under relevant sections . It is obligatory to proper officer to confirm whether it has jurisdiction to issue SCN . SCN issued without jurisdictions may be challenged in the court . It is well settled that SCN issued without jurisdiction is invalid and liable to set aside. Assumptions of proper jurisdiction is important aspect in adjudication proceeding .

10. Limitation Period – General

 SCN is required to be issued and served within limitation period specified in the relevant sections of the act . Different time limit has been prescribed for different proceedings . For the purpose of demand and recovery of tax liability u/s 73 where proposed demand is not due to fraud or any wilful misstatement or suppression of facts to evade tax , the proper Officer should issue notice within 2 year and 9 months from due date of filing of annual return for the financial year to which demand pertains or from the date of erroneous refund ( sub section 2 of section 73 ). Notice issued after limitation is not sustainable and order passed on the basis of said SCN is bad in law . The Proper officer has no jurisdiction to initiate proceedings after limitation period . It is important to note that no limitation period has been specified in section 76 to issue SCN for the recovery of taxes collected but not paid . However , order should be passed within one year from the date of issue of such notice .

11. Limitation Period – U/S. 74 Of GST Act 2017

 For the purpose of demand and recovery of tax liability u/s 74 , where proposed demand is for the reason of fraud or any wilful misstatement or suppression of facts to evade tax , the proper Officer should issue notice within 4 year and 6 months from due date of filing of annual return for the financial year to which demand pertains or from the date of erroneous refund ( section 74 (2) ) . Considering nature of ingredients higher limit is prescribed . Limitation period has direct nexus with jurisdictions of authorities . There may be difference of opinions on the reasons of the proposed demand and applicability of section 74 and consequential higher limitation periods . Terms “ fraud or any wilful misstatement or suppression of facts to evade tax ,, are very important and subject to different interpretation on different facts . There may be more disputes on this issue . It is pertinent to note that fraud , or wilful misstatement or suppression of facts should be to evade tax , then only case may covered under section 74 . If no such intention is present higher limitation period may not be applicable . Provision of section 74 can be only invoked when there is conscious act of either fraud , or wilful misstatement , or suppression of fact ,on the part of person chargeable with tax with intent to evade payment of tax . There should be justifiable ground for invoking limitation period u/s 74 of the act .

Hence , definition of “suppression “ has been specifically provided in explanation 2 of section 74 in order to reduce disputes and litigation . Such type of provisions were presents erstwhile indirect tax laws ( for example section 11 Central Excise act , section 73 Service Tax law etc ) . Therefore , judicial pronouncement under said act may be applicable if facts are identical.

In the case of M/s Naresh Kumar Vs Union Of India dated 25-04-2014 observed that wilful suppression can not be assumed and or presumed merely on failure to declare certain facts unless it is preceded by deliberate non – discloser to evade payment of tax .

In the case of M/S Anand Nishikawa co Ltd (2005) 7 SCC749 Supreme court has observed that

 “ Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceuticals Co. v. CCE we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in the proviso to Section 11-A of the Act. We are, therefore, of the firm opinion that where facts were known to both the parties, as in the instant case, it was not open to CEGAT to come to a conclusion that the appellant was guilty of “suppression of facts”. In Densons Pultretaknik v. CCE this Court held that mere classification under a different sub-heading by the manufacturer cannot be said to be wilful misstatement or “suppression of facts”. This view was also reiterated by this Court in CCE v. L.M.P. Precision Engg. Co. Ltd.” The aforesaid proposition is further reiterated in a recent judgment rendered by the Supreme Court in case of Commissioner of Central Excise -vs- Bajaj Auto Ltd “

 In the case of Cosmic Dye Chemical v. Collector of Central Excise, Bombay, (1995) 6 SCC 117, the Apex court held that

“Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word “wilful” preceding the words “mis-statement or suppression of facts” which means with intent to evade duty. The next set of words “contravention of any of the provisions of this Act or rules” is again qualified by the immediately following words “with intent to evade payment of duty”. It is, therefore, not correct to say that there can be suppression or mis-statement of fact, which is not wilful and yet constitute a permissible ground for the purpose of the proviso to Section 11-A. Mis- statement or suppression of fact must be willful.”

In Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut, (2005) 7 SCC 749, the Apex Court has observed:

“…we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty, when facts were known to both the parties, the omission by one to do what he might have done not that he must have done would not render it suppression. It is settled law that mere failure to declare does not amount to wilful suppression. There must be some positive act from the side of the assessee to find wilful suppression.”

12.  Incentives for Payment Before Issue of Show Cause Notice

As discussed in earlier para , section 73 (5) and 74 (5) provides for voluntary payment of tax on his own ascertainment or on receipt of intimation from proper officer and eligible for concession in penalty . After making payment person is required to inform /intimate to the Proper officer regarding such payments in FORM-GST- DRC-03 . Thereafter the Proper officer shall issue acknowledgment accepting payment made by such person in f FORM – GST- DRC- 04 .Thereafter ,proper officer should not serve any SCN in respect of tax so paid or penalty payable if any . However, where proper officer is of opinion that person made short payment than amount actually payable , he may issue SCN in respect of of such short payment.

13.  Consequences of Payment After Show Cause Notice

Few incentives given to the person chargeable with tax under section 73 (1 ) and 74 (1) to encourage early payment and voluntary compliance , where taxable person ,after receipt of SCN u/s 73 (1) of the act ,pays amount of tax and applicable interest , within 30 days from issue of notice no penalty shall be payable . However , in case of notice is u/s 74 (1) , payment made within 30 days from the date of issue of SCN ,in view of section 74 (8) , person shall be liable to pay penalty equivalent to 25 % of such tax . No penalty will attract if case is covered u/s/73 . Thereafter , proceeding in respect of said notice shall be deemed to be concluded . Accordingly . Proper office shall issue intimation of concluding of proceeding in form FORM-GST-DRC-05 .

14. Reply to Show Cause Notice

 SCN is an opportunity given to taxable person to prove with evidences that he is not liable for proposed tax liability or proposed action . This proposal may be likely to be converted in to order if no reply or proper reply, on the grounds relied upon is submitted . Therefore , SCN must be taken seriously and should avail this opportunity to submit detailed ground wise reply along with relevant documentary evidences , interpretation of provisions and case laws in order to minimise amount of tax payable or drop the proceeding . Where, taxable person unable to produce any documentary evidence due to sufficient cause then he must request to the Proper Officer to give sufficient time to produce the same , other wise it will be difficult to the appellate authority to allow him to produce such evidence and grant relief in appeal in view of restrictions prescribed in rule 112 of the rules . Sometimes taxable person may accept the tax liability as per notice and make the payments . However , if taxable person is not agree with the tax liability and grounds specified in SCN , he has option to submit representation along with documentary evidences , by way of reply in FORM-GST- DRC- 06 . The Proper officer should consider such representation while determining tax liability and passing order . He may also request for personal hearing . If no reply given to the notice order may passed ex-party .

15. Time Limit to Reply Show Cause Notice

Generally , specific time limit to comply the notice has been provided in the relevant section under which SCN is issued , However , no time limit to submit reply to SCN has been prescribed in section 73 or 74 of the act . Generally , the Proper Officer mention date of hearing in SCN , which suggest that reply required to be submitted on or before that date .Where , taxable person has been directed to submit reply on specific date , reply should be submitted on or before that date . Co joint reading of section 73 (8) and 74 (8) indicate that 30 days time limit is given for either accepting discrepancies and to make consequential payment or to submit reply .Proper Officer is not authorised to take any action till expiry of 30 days from the date of service of SCN . Thus , it clear that 30 days time is available to submit reply to SCN issued u/s 73 or 74 .

16. Adjournments in The Proceeding

Taxable person gets 30 days time to submit reply to SCN u/s 73 or 74 of the act . Where , he is unable to produce documents , evidences or submit reply ,within stipulated date due to sufficient cause , he may request in writing by stating reasons for adjournment . In view of provision of section 75 (5 ) of the act , proper officer has power to adjourn proceeding on satisfaction of sufficient cause and by recording reason thereof . However , such adjournment can not be granted more than three times to a person during the proceeding . Thus , taxable person must avail these adjournments to collect documents , evidences which are required to submit along with written reply . It is pertinent to note that provisions of three adjournments have made in act itself and therefore Proper Officer can not reject the request of adjournment on if there is sufficient cause .

17. Opportunity of Personal Hearing

Section 75 (4 ) of the act states that an opportunity of hearing ( personal hearing ) shall be granted where request is received in writing from person chargeable with tax or where any adverse decision is contemplated against such person . Therefore , taxable person may request in writing to avail opportunity of personal hearing . If ,no such request is received , the Proper Officer will pass ex-party order on merit on the basis of available record and by considering reply . It is pertinent to note that no such personal hearing will be granted unless written request made by taxable person . Thus . right of personal hearing is statutory right and person can not be denied opportunity of personal hearing .

18. Show Cause Notice – Whether Appealable

 As per provision of section 107 of GST act 2017 , any person who is aggrieved by order or decision passed by adjudicating authority may file appeal to the appellate authority within three months from the date of service of such order or decision . Thus , appeal can be filed against only order or decision of adjudicating authority . SCN can not be termed as order or decision of the Proper officer . It is neither final opinion nor decision . It is just proposal containing prima facie opinion of authority on the specified issues .Hence , SCN is not appellable and no appeal can be filed against it .

19. Implications of Issue of Notice After Limitation Period

Section 73 (2 ) and 74 (2) prescribes the limitation period to issue SCN to demand and recover taxes not paid , erroneous refund and wrong availment of ITC etc . The proper Officer has such jurisdiction and powers till the expiry of limitation period . No SCN could be served after such limitation period . SCN issued after limitation period is not sustainable in law and no such short payment of taxes could be recover . Therefore , proper Officer before issue of SCN should confirm whether it is within limitation period . It is pertinent to note that no limitation period has been prescribed in section 76 of the act to issue SCN to recover tax collected but not paid . However ,Proper officer should pass order under said section within one year from the date of issue of notice . In the context of other sections it is necessary to consider limitation period prescribed in respective sections before issue of SCN.

20. Consequences of Non-Passing of Order After Issue Of SCN

Separate limitation period has been prescribed to issue SCN and to pass adjudication order in section 73 or 74 of GST act 2017 . Sometimes , due to various reasons it may happen that after issue of SCN orders are not passed within limitation periods . In such cases Proper officer is not authorise to pass orders for lack of jurisdiction . In this regard specific provision has been made in section 75 (10 ) of the act . Accordingly , such adjudication proceeding shall be deemed to be concluded if orders are not passed within limitation periods as prescribed in section 73 (10 ) and 74 (10) of the act . Thereafter , proper officer can not recover demand involved in such SCN . It is important to note in view of section 75 (1) where service of notice or issuance of order is stayed by an order of the Court or Appellate Tribunal ,the period of such stay shall be excluded in computing the limitation period specified in sub section (2 ) and (10 ) of section 73 or subsection ( 2) and (10 ) of section 74 as the case may be .

21. Deemed Issuance of SCN U/S 73 (1) Of GST Act 2017 In Certain Circumstances

Adjudication proceedings are initiated u/s 73 (1 ) or 74 (1) in normal or fraud case respectively and such SCN are issued to demand and recover short payment of taxes , erroneous grant of refund and ITC wrongly availed . In fraud case higher limitation period is applicable as compared to normal case . For the purpose to assume jurisdiction under particular section SCN is required to be served within limitation period applicable to such sections . In section 75 (2) of the act it is made clear that where any appellate authority or Appellate Tribunal or Court concludes that notice issued under 74 (1) is not sustainable for the reason that charges of fraud or any other will ful misstatement or suppression of facts to evade tax has not been established against the person to whom notice was issued , the Proper Officer shall determine tax payable by such person , deeming as if the notice were issued u/s 73 (1) of the act . Accordingly , there will no need to issue notice u/s 73 (1 ) again and earlier notice issued u/s 74 (1 ) will be deemed as notice u/s 73 (1 ) of the act and limitation period will be applicable accordingly, subject to exclusion of period of stay u/s 75 (1 ).

22. Authorities Are Not Allowed to Travel Beyond Scope of Notice

It is well settled by court judgment that adjudicating authorities are not allowed to travel beyond the scope of SCN . It can not adjudicate the ground which was not mentioned in the SCN . In the case of M/s Saci Allied Product (2005 ) 7 SCC 159 Hon Supreme Court observed that Tribunal was not allowed to go beyond SCN and make out case which was never canvassed and which was assessee had never been required to meet . It is seen from summary of SCN (GST-DRC—01) that all grounds are required to be incorporated in the notice . Under GST act , specific provision has been made in section 75 (7) which . states that, the amount of tax , interest and penalty demanded in the order shall not be in excess of the specified in the notice and no demand shall be confirmed on the grounds other than specified in the notice . In view of the above , it is clear that authority is not allowed to travel beyond scope of SCN .

23. Issuance of Multiple Notices

Plain reading of the section 73 or 74 of the act makes clear that the Proper Officer may issues SCN more than one times on different ground on satisfaction of specified ingredients within limitation period . Thus , there is no bar on issue of SCN on more than one times , if limitation period permit . It is pertinent to note that it is not allowed to issue notice on the same grounds on which already order has passed . It is seen that order under said sections are restricted to limited grounds and it is not comphrensive assessment of taxable person of any tax period . It is issue based SCN to demand and recover amount involved therein . Thus , , it can be said that sections permit to issue SCN on multiple times within limitation period .

24. Issuance of Second Notice for Same Period

In view of provisions of section 73 or 74 of the act it appears that issue of second SCN by the proper officer on the same ground amount to review of its earlier order . The proper officer is not authorise to review it own order or decision . Hence , the proper officer can not issue second notice for same period on same issue . Similarly , no SCN can be issued for subsequent period , when notice and adjudication order for previous period quashed by Court or Tribunal .

In the case of India Tourism Development Corportion Ltd (2017) 52 STR 229 Delhi High Court has held that quasi- judicial authority can not review its earlier decision unless power of review is conferred by statute . Second SCN after gap of five years can not be issued once first SCN is adjudicated ,became final and accepted by both parties .

In the case of M/s Prince Gutka Ltd (2017 ) 52 STR 83 (SC) , Cestat has held that there could not have been second show cause notice on the same cause of action on which adjudicating authority had dropped the earlier demand . Supreme court 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 .

25. Challenge to SCN In Court

GST act is complete code which provides four tier appeal mechanism and efficacious alternate remedy is available . Challenge to SCN in court by filing writ under article 226 is not ordinarily permissible . It is seen that on following grounds writs were admitted

a) Predetermined mind .

b) violation of principle of natural justice .

c) abuse of process of law .

d) Lack of jurisdiction .

e) Question of limitation .

26. Effects of Notice Containing Predetermined Mind or Finally Formed Opinion

Section 73 or 74 of the act indicate that there must be prima-facie opinion regarding non payment of taxes due to specified ingredients to issue SCN . It is neither conclusion nor final opinion . It is mere proposal to demand additional tax . The proper officer has power to reduce quantum of tax liability disclosed in SCN after considering reply and evidences produced by the person in response to SCN . It must have open mind and adjudicate the case after giving hearing and considering representation . It should be not biased , prejudiced or with predetermined opinion .

In the case of M/s Oryx Fisheries Pvt ltd (2011) 266 ELT 422 (SC) the Apex court has observed that

“28. It is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in this instant case, the entire proceeding initiated by the show cause notice get vitiated by unfairness and bias and the subsequent proceeding become an idle ceremony.

31. It is of course true that the show cause notice cannot be read hyper-technically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show- cause notice the person who is subject to is must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence.”

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