The Madhya Pradesh High Court, led by Hon'ble Justices Sheel Nagu and Amar Nath (Kesharwani), set aside CGST proceedings against Raymond Limited, emphasizing the denial of a reasonable opportunity and lack of informativeness in the show cause notice.
Brief Facts of the Case:
Raymond Limited, a company incorporated under the Companies Act, 1956, filed Writ Petition No. 26693 of 2022 before the High Court of Madhya Pradesh at Jabalpur. The petitioner challenged the show cause notice dated 03.09.2022 (Annexure P/2) and the subsequent order of demand dated 12.09.2022 (Annexure P/3), both issued under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act). The petitioner contended that the impugned proceedings violated the principles of natural justice and, specifically, the right to a reasonable opportunity and audi alteram partem. On 01.12.2022, the Court, upon taking cognizance of the matter, restrained the respondents from taking coercive steps against the petitioner based on the impugned show cause notice and order of demand.
Contentions of the Petitioner:
The petitioner contended that although various grounds were pleaded, the focus of the arguments was narrowed down to the denial of a reasonable opportunity. This denial, as per the advocate's submission, stemmed from the fact that the impugned order under Section 73 was issued on 12.09.2022, merely nine days after the show cause notice dated 03.09.2022 (Annexure P/2), which had initially allowed a 30-day window for the petitioner to respond. It was argued that the show cause notice itself lacked self-containment. According to the argument, the notice failed to adequately inform the petitioner about material of an adverse nature that formed the basis of the show cause notice. This alleged deficiency, they argued, handicapped the petitioner's ability to provide a meaningful response, thus violating the fundamental principle of audi alteram partem – the right to be heard. It was asserted that not only was the petitioner deprived of a clear understanding of the adverse material, but an opportunity for a personal hearing was also not extended. This further compounded the perceived violation of procedural fairness in the proceedings.
Contentions of the Respondent:
Counsel for the Respondent argued that the show cause notice was admissible. Further, the counsel disputed the question of the admissibility and final disposal.
Observation of the Court:
In reviewing the show cause notice issued under Section 73 of the CGST Act on 03.09.2022, the High Court noted its provision, granting the petitioner 30 days to settle the tax liability and penalty. Section 73, applicable in cases excluding fraud, focuses on determining unpaid or short-paid tax, erroneous refund, or wrongful utilization of input tax credit. The court highlighted Section 73(1) of the CGST Act, mandating notice to those accountable for tax issues. Although the statute does not specify a response time, the Court inferred the need for a reasonable opportunity to reply. The Court deemed a response time not less than 15 days reasonable, aligning with the statutory provision of payment within thirty days.
The Decision of the Court:
The HIgh Court, upon careful consideration, found that the time gap between the show cause notice dated 03.09.2022 and the contested order dated 12.09.2022 was merely 8 clear days. In the court's considered opinion, this duration glaringly falls short of satisfying the fundamental concept of providing a reasonable opportunity to be heard. The notice was thus, set aside with liberty to the Revenue to issue fresh legal and valid show cause notice and thereafter proceed in the matter if so advised after affording a reasonable and sufficient opportunity of being heard to the petitioner
Case title: Raymond Limited vs. Union of India and Ors.
Coram: Hon'ble Shri Justice Sheel Nagu and Hon'ble Shri Justice Amar Nath (Kesharwani)
Case No. : Writ Petition No. 26693 of 2022
Advocate for the Petitioner: Shri Gopal Mundhra, Ms. Ginita Badhani, Shri Rohan Harne
Advocate for the Respondent: Shri Darshan Soni (Government Advocate)
Read Order @LatestLaws.com
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