Case Law Details
Nice Enterprises Vs Deputy Commissioner ST (Telangana High Court)
Summary: In the case of M/s. Nice Enterprises v. Deputy Commissioner ST (Writ Petition No. 20080 of 2024, Telangana High Court), the Court addressed the issue of a vague Show Cause Notice (SCN) issued by the Department under the Central Goods and Services Tax Act, 2017. The Petitioner, M/s. Nice Enterprises, challenged an SCN dated May 24, 2024, which lacked crucial factual details. The notice only mentioned Section 29(2)(e) of the CGST Act without providing specifics regarding the allegations. This lack of clarity prevented the Petitioner from filing an effective response, violating the principles of natural justice. The Court observed that an SCN must include sufficient factual and elementary details for the Assessee to understand the case against them and prepare a proper defense. The Telangana High Court relied on several previous rulings, including Rayees Metals v. Dy. STO and Canara Bank v. Debasis Das, reinforcing the importance of providing a clear basis for legal actions. The Court emphasized that an SCN should not merely quote legal provisions but must specify the facts supporting the invocation of those provisions. Without such details, the notice cannot be considered valid, as it deprives the Assessee of a fair opportunity to respond. As a result, the Court set aside the impugned SCN and the suspension of the Petitioner’s GST registration. The Court also expressed concern over the mechanical issuance of vague notices, which could severely impact taxpayers’ livelihoods, reminding authorities of the need to adhere to natural justice principles. The petition was allowed with no costs, and the authorities were advised to ensure that such errors do not recur in the future.
The Hon’ble Telangana High Court, in the case of M/s. Nice Enterprises v. Deputy Commissioner ST [Writ Petition No. 20080 of 2024 dated July 30, 2024] held that the Department should not issue the Show Cause Notice (“SCN”) merely to the Assessee by simply mentioning the provisions of Section 29(2)(e) of the Central Goods and Services Act, 2017 (“the CGST Act”). The SCN should contain sufficient factual and elementary details so as to enable the Assessee to file effective reply, such notices violate the principle of natural justice. Hence, the Impugned SCN was set aside.
Facts:
M/s Nice Enterprises (“the Petitioner”) were served an SCN on May 24, 2024 (“the Impugned SCN”). The Petitioner states that the Impugned SCN is inadequate due to its lack of crucial details. Instead of specific allegations, it simply repeats the provisions of Section 29(2)(e) of the CGST Act.
Therefore, the absence of the necessary information prevents the Petitioner from submitting the effective reply, making the Impugned SCN ineffective and invalid. Consequently, the Petitioner’s GST registration was also suspended due to the vague SCN.
Hence, aggrieved by the Impugned SCN, the Petitioner had filed the writ petition before the Hon’ble High Court.
Issue:
Whether the department can issue the SCN on merely reproducing insufficient factual and elementary details?
Held:
The Hon’ble Telangana High Court, in the case of Writ Petition No.20080 of 2024 held as under:
- Observed that, the Impugned SCN violated the principle of natural justice by failing to provide the Petitioner the grounds for the Impugned SCN and prevented the Petitioner from submitting the reply to the Impugned SCN.
- Relied upon, M/s Rayees Metals v. Dy. STO [Writ Petition No. 17400 of 2024 dated July 8, 2024] wherein the Hon’ble Telangana High Court further relied on the case of Canara Bank v. Debasis Das [(2003) 4 SCC 557], Rajesh Kumar v. CIT [287 ITR 91 (SC)], Sri Avanthika Sai Venkata v. Deputy State Tax Officer [83 GSTL 311 (Telangana)] and B. Traders v. The Superintendent [96 GST 13 (Telangana)] held that due to the absence of the factual basis and necessary details, the SCN was declared vague.
- Held that, due to the lack of essential factual details required to invoke Section 29 of the CGST Act, and simply repeating the offending clause or enabling provisions does not give justification for the approval of the SCN. The mere reproduction of the offending clause or enabling provision cannot be a reason to give stamp of approval to a SCN which lacks basic essentials. Hence, the Impugned SCN was set aside. Therefore, the Court permits the Respondents to proceed against the Petitioner under the law. Hence, the writ petition was allowed.
Our Comments:
In the Pari Materia case of Raj Bahadur Narain Singh Sugar Mills Ltd. v. Union of India [(1997) 6 SCC 81] and Collector of Central Excise v. H.M.M. Limited [1995 (76) E.L.T. 497 (SC)] wherein the Hon’ble Supreme Court has reaffirmed that for natural justice to be upheld, the SCN must allege any collusion, willful misstatement, or suppression of facts necessary to justify invoking the extended five-year period and that the notice must clearly state which specific acts of omission or commission warranted the extension of the limitation period; otherwise, the Assessee would not have the opportunity to respond adequately.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Sri Mohd. Mukahairuddin, learned counsel, appears for the petitioner and Sri Swaroop Oorilla, learned Special Government Pleader for State Tax, appears for the respondents.
2. With the consent finally heard.
3. The show cause notice dated 24.05.2024 is subject matter of challenge in this petition which is called in question by learned counsel for the petitioner by advancing singular contention. He submits that the said notice does not contain necessary factual details and is only reproduction of Section 29(2)(e) of Central Goods and Services Tax Act, 2017(for short “the Act”). In absence thereof, the petitioner cannot file effective reply to the said notice and the said notice is no notice in the eyes of law worth the name. The petitioner’s registration also stood suspended pursuant to the said cryptic notice. Thus, the said notice may be set aside.
4. Sri Swaroop Oorilla, learned Special Government Pleader for State Tax, supported the aforesaid impugned show cause notice but fairly subitted. that factual basis on the strength which notice was issued is not d sclosed.
5. We ha’ heard the parties.
6. We have previously interfered with similar notices which were not pregnant w ft necessary factual details and descriptions We find substance in the argument of learned counsel for the petitioner that such a notice runs contrary to principles of natural justice and deprives the assessee to file an effective reply to the show cause notice. In previous occasion, in W.P.No.17400 of 2024, this Court has held as under:
“The singular reason assigned in the impugned notice dated 29.02.2024 reads asunder:
“1. Section 29(2)(e)-registration obtained by means of fraud willful misrepresentation or suppression of facts”
Apart from this bald statement, there exists loth ing in the show cause notice which can throw light as to what is the nature of ‘fraud’ or ‘willful misrepresentation’ ‘suppression of fact the petitioner. Thus, show cause notice cryptic and an example of non application of mind. In absence of factual basis and necessary details, notice becomes vulnerably.
7. This Court, recently, considered this aspect in TSR Exports (supra) and held as under:
“9. We find subsistence in the argument of the Trained counsel for the petitioner that the factual backdrop or the reason on the strength of which, conclusion of fraud or misstatement or suppression of facts was drawn is totally absent in the show cause notice. The show caw e nonce, in our considered opinion, should spell out the ‘actinal backdrop of breach, on the strength of which tie department has rejected and concluded that Section 29(2) (e) of the Act, can be invoked. If minimum factual backdrop precision of breach was not in a position to file reply
10. The Apex Court expressed the need of issuance of such notice in Canara Bank us. Debasis Das 120031 4 SCC 557, at para No. 15, which reads as under:
“15. …Notice is the first limb of this principle. It must be precise and unambiguous. It should apprise the party determinatively of the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him. This is one of the most important principles of natural justice. It is after all an approved rule of fair play. The concept has gained significance and shades with time…”
11. In the Rajesh Kumar vs. CIT 120061 157 Taxman 168/287 ITR 91//200712 SCC 181, the Apex Court at para No.61, held as under:
“61. …The notice issued may only contain briefly the issues which the assessing officer thinks to be necessary. The reasons assigned therefor need not be detailed ones. But, that would not mean that the principles of justice are not required to be complied with. Only because certain consequences would ensue if the principles of natural justice are required to be complied with, the same by itself would not mean that the court would not insist on complying with the fundamental principles of law…”
12. This Court in Sri Avanthika Sai Venkata us. Deputy State Tax Officer /2024J 159 com 235/83 GSTL 311 (7’elangana)/1W.P.No.1596 of 2024, dated 23-1-2024/ and S.B. Traders us. The Superintendent /2022/ 145 taxmann.com 556/120231 96 GST 13/ 69GSTL 175 (7’elangana)/1W.P.Nos.39498 and 39502 of 2022, dated 28-10-2022/, interfered with the impugned proceedings and order therein because the reasons were not mentioned while initiating proceedings against the petitioners therein.
13. Needless to mention that the show cause notice dated 09.71.2023 became the foundation for issuance of orders dated 29.11.2023 and 23.02.2024, since the foundation cannot sustain judicial scrutiny, the entire edifice of orders passed thereupon are liable to be jettisoned”.
(Emphasis Supplied)
8. Since the show-cause notice and suspension of registration is founded upon a cryptic notice dated 29.02.2024, both are set aside. On regular basis, we are painfully noticing this kind of notices, whereby, without assigning adequate reasons, the business of taxpayer is suddenly suspended. In absence of basic reasons available in the show-cause notice, the party aggrieved by it cannot even prefer an effective representation. We wonder how inn such cm_ insensitive and mechanical manner, the registrations are being suspended by issuing defective show-cause notices. Such orders certainty have an adverse impact on the livelihood of taxpayer and hits Article 21 of the Constitution. The authorities must remind therisetves that the words ‘LIFE’ and ‘FILE’ contain same letters Every file has a nexus with somebody’s ‘life’ or liberty. Thus, the authorities should sensitize themselves and shot Id not pass order/notice in the mechanical manner it is passed in the present case. We hope and trust that, hem effort, the authorities will take care of this aspect. Learned counsel for the petitioner insisted for imposition of costs. Faced with this, Sri P. Sri Harsha, learned Assistant Government Pleader, submits that he will appraise the authorities about observation of this Court so that henceforth such mistakes do not recur. In view of this assurance, in the it stant case, we are not imposing any costs on the respondents “
7. In view of aforesaid, the aforesaid impugned show cause notice is liable to be interfered with because it does not disclose minimum/elementary factual details on the basis of which power under Section 29 of the Act is invoked. Mere reproduction of offending clause or enabling provision cannot bit a reason to give stamp of approval to a show cause notice which hicks minimum essential details.
8. Resultantly, the impugned show cat se notice dated 24.05.2024 is set aside. Liberty is reserved to the respondents to proceed against the petitioner in accordance with law. Sri Swaroop Gorilla, learned Special Government Pleader for Stat.( Tax, assured the Court that this order will be brought to the notice of the concerned authorities and he will appraise them to eschew the practice of issuing such cryptic notice.
9. Accordingly, this Writ Petition is allowed. No costs.
Interlocutory applications, if any pending, shall also stand closed.
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