Gujarat High Court in its recent ruling in the case of Dharamshil Agencies v. Union of India has set aside the Show cause Notice on the ground that Petitioner was not granted an adequate opportunity for the consultation prior to the issuance of SCN.
Facts of the Case:
The Petitioner Dharamshil Agencies was issued a pre-show cause consultation notice letter dated 12th April 2019 consultation calling upon Petitioner to remain present on the same day at 14 hrs for pre-show cause notice consultation. Due to such short notice, the Petitioner submitted a letter requesting the Department for another dare for pre-show cause notice consultation. However, the Department issued the SCN on the same day i.e., 12th April 2019.
The petitioner challenged the legal validity of the Show Cause Notice (SCN) dated 12th April 2019.
Order of Gujarat High Court:
The Hon’ble Gujarat High Court noted that as per the settled legal position, the Circulars issued by the Board are binding to and have to be adhered to by the Department. In this regard Master Circular dated 19th March 2017 was issued which stated that pre-show cause notice consultation is mandatory in cases involving the demands of duty above Rs.50 lacs.
Dismissed the Departments’ contention that the period of recovery of 5 years was to expire on 15th April 2021 and stated that it was the Department’s responsibility to issue pre-show cause consultation notice immediately after the final audit report issued on 28th February 2019, and they waited till the last date on 12th April 2019.
The Court further, stated that illusionary pre-show cause consultation notice is not only arbitrary, but is in utter disregard and in contravention of the very object and purpose of the above Master Circular.
Accordingly, the Hon’ble Gujarat High Court allowed the appeal and set aside the SCN on the ground that Petitioner was not granted an adequate opportunity for the consultation prior to the issuance of SCN. Further, the Court stated that the Petitioner would not be permitted to take unfair advantage on the ground that the demand made in the notice had now become time-barred in view of the statutory provisions.
Furthermore, the Court directed the Department to issue a fresh pre-show cause consultation notice.
READ / DOWNLOAD ORDER:
***
Follow us for free tax updates : facebook Twitter
Subscribe to our portal and get FREE Tax e-books, quality articles and updates on your e-mail.
Resolve your GST queries from national level experts on GST free of cost.
Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
