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The present GST law requires administration to issue show cause notices (SCN) under various circumstances enshrined in it. Although proper issuance, replies, and adjudication of SCNs are of prime importance and should be discussed at greater length. But, in today’s paper, we shall only address a small but significant question pertaining to SCNs. Various authorities issue SCNs for a variety of reasons, such as cancellation of registration, blocking of the input credit ledger, and more specifically under Sections 73 and 74 for proper adjudication of any tax and interest or penalty thereon.

The first question that arises after issuance of the SCN is by when such a notice is to be replied by the tax payer to whom it was issued. Often, issuing authorities give different time lines for the reply. Some may provide as few as 4 or 7 days to reply, and without waiting for a reply or bothering for a reminder of the SCN, they went on to adjudicate the matter in a hurry without hearing the tax payer at all. In other words, totally disregarding the basic principle of natural justice.

When we look around to find an answer to this moot question. We do not find any specific mention neither in the law nor in the jurisprudence. Administratively, CBIC has prescribed a time limit of “one month” for furnishing a reply to the SCN issued for any reason. In practice, it is always observed that in case of notice for the recovery of an erroneous refund or for the denial of a refund, a shorter time limit of “15 days” is provided in the notice for furnishing the reply, which is not proper and justified.

Similar issue came up for deliberation before the honourable Bombay High Court in the matter of SHEETAL DILIP JAIN VERSUS THE STATE OF MAHARASHTRA & ORS.

Erroneous orders of GST officers – Insufficient Time limit for filing reply to notice issued u/s 73 of the Maharashtra Goods and Services Tax Act, 2017

Brief facts of the Matter

One of the primary grievances raised in the Petition, in which an order dated March 10, 2022 is impugned, is that when a notice under Section 73 of the Maharashtra Goods and Services Tax Act, 2017 is issued, a minimum of 15 days’ time to reply should be given.

In fairness, counsel for respondent, states that the period of 7 days given in the notice dated March 2, 2022, to respond by March 9, 2022, was issued to Petitioner, which is contrary to what the MGST Rules, 2017 prescribe. According to Counsel for the Respondent, a minimum of 15 days should have been given. Counsel for the Petitioner states that no time is prescribed, but since under Section 73(8) of the MGST Act, a period of 30 days from the issue of a show-cause notice is given to a person chargeable with tax under sub-section (1) or sub-section (3) of Section 73 to pay the amount, the show-cause notice should provide a minimum of 30 days to file a reply.

The Court has been in agreement with Counsel for Petitioner because Section 73(8) of the MGST Act, in its terms, permits a person chargeable with tax under subsection (1) or sub-section (3) a period of 30 days from the issuance of the show-cause notice to make payment of such tax along with interest payable under Section 50. If he does not wish to make payment, then within the 30-day period he could file a reply to the show-cause notice.

This statutory period cannot be arbitrarily reduced to 7 days by an assessing officer. In our view, this is also the understanding of the Department because in the impugned order itself, in Paragraph 1, it is stated as under: –

“A show cause notice/statement referred to above was issued to you u/s 73 of the Act for reasons stated therein. Since, no payment has been made within 30 days of the issue of the notice by you; therefore, on the basis of documents available with the department and information furnished by you, if any, demand is created for the reasons and other details attached in annexure.” (Emphasis supplied)

On instructions from the officer concerned, Counsel for Respondent, in fairness, states that the order is erroneous because in the show-cause notice only 7 days were given to reply to the notice, and on the 8th day the impugned order came to be passed. Therefore, the question of not paying within 30 days of the issue of the notice will not arise. Hence, Counsel for respondent has instructions to withdraw the impugned order dated March 10, 2022. Ordered accordingly.

A copy of this order shall be forwarded to the CBIC and to the Chief Commissioner of State Tax, Maharashtra, so that they could at least hold some kind of training and/or orientation session/course, etc., to apprise and educate its officers on the prevailing law and rules framed thereunder and also explain to them what “principles of natural justice” mean.

This would in fact be in the interest of the Authorities, because this would then ensure that otherwise meritorious cases are not defeated on technicalities. It is also necessary that the authorities must be mindful of the grave prejudice that is caused to the assesses on account of such patently illegal orders.

Authorities must be sensitive to this fact and the impact and consequences that their orders have on the public. We would hasten to clarify that the observations above should not be taken as personal attacks against the officer concerned but have been made keeping in mind the larger picture and the problems that the citizens of this country have to face. If only the officers are efficient and accountable, the Government’s vision of ease of doing business in India may fructify.

Cost of Rs. 10,000 imposed on the GST officer

This judgement should be discussed amongst the administrators so as to understand the underlying message from the honourable court. The author gives greater significance to the fact that GST literacy should be increased for all the stakeholders in the subject. This improved literacy would not only allow taxpayers to pay their fair share of taxes, but it would also instil trust in the administrative machinery through diligent collection. Consequently, bringing ease of doing business into reality.

The author can be reached at, His Mobile no. is +91-9891112120.

DISCLAIMER: This publication is merely a general guide meant for knowledge purposes only. All the references or content are for educational purposes only and do not constitute legal advice. We do not accept any liabilities whatsoever for any losses caused directly or indirectly by the use/reliance of any information or conclusion contained in this publication. Prior to acting upon this publication, you’re suggested to seek advice. This work is entirely in the interest of the profession and to contribute to my beloved subject of GST.

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April 2024