HC sets aside order passed on the same day of issuance of SCN citing lack of reasonable opportunity for filing reply

The Madras High Court has quashed a Goods and Services Tax (GST) order that was issued on the very same day the Show Cause Notice (SCN) was served. The court found this violated the principles of natural justice, as the petitioner was not given a reasonable opportunity to respond. This decision aligns with Section 73(2) of the CGST Act, which mandates a minimum three-month period between SCN issuance and order passing to allow for a proper reply.

The Hon'ble Madras High Court in the case ofM/s.Pithamber Distributors v. Assistant Commissioner (ST), Chennai [W.P. No. 11337 of 2024 dated April 30, 2024],allowed the writ petition, therebysetting 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 theCGST 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.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED