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2025 (5) TMI 460 - HC - GSTValidity of SCN - petitioner could not point out any statement specifically relied on by the proper officer in the impugned order for imposing liability on the petitioner - principles of natural justice - HELD THAT - It is found that inasmuch as the proper officer has not relied on any statement recorded by him from the 3rd parties for the purpose of imposing liability on the petitioner it is not a position to accept the argument of the appellant that there is violation of the principles of natural justice. The question as to whether the proper officer was justified in rejecting the retraction statement filed belatedly is a matter which should gain attention of the appellate authority and not by the writ court in a writ petition under Article 226 of the Constitution of India - no case is made out for interference in this intra-court appeal. Appeal dismissed.
1. ISSUES PRESENTED and CONSIDERED
- Whether the issuance of the show cause notice under Section 74 of the CGST/SGST Act, 2017 was valid and sustainable. - Whether the principles of natural justice were violated by denying the appellant the opportunity to cross-examine third-party witnesses whose statements were relied upon in the assessment proceedings. - Whether the confession statement recorded from the appellant, who claimed illiteracy and language barriers, could be relied upon, especially given that the appellant retracted the confession by filing an affidavit before the proper officer. - Whether the writ court should entertain the challenge to the assessment order despite the existence of an alternate remedy of appeal under Section 107 of the CGST/SGST Act, 2017. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of the show cause notice under Section 74 of the CGST/SGST Act, 2017 The legal framework under Section 74 of the CGST/SGST Act, 2017 empowers the proper officer to issue a show cause notice for cases involving suppression of turnover or tax evasion. The appellant challenged the composite show cause notice covering multiple years, which was set aside by the writ court, granting liberty to issue appropriate orders for the relevant year 2017-18. The Court observed that the procedural issuance of the show cause notice was not itself challenged as invalid. The appellant's challenge focused more on subsequent procedural aspects of the inquiry and assessment rather than the initial issuance of the notice. Therefore, no separate detailed analysis was necessary on the validity of the notice itself beyond the procedural compliance already considered. Issue 2: Violation of principles of natural justice by denying cross-examination of third-party witnesses The appellant contended that the proper officer recorded statements from third parties (witnesses) against him but denied him the opportunity to cross-examine these witnesses, which amounted to a violation of natural justice. The appellant argued that such denial prejudiced his defense and rendered the assessment order unsustainable. The Court examined whether the proper officer had relied on any statements specifically recorded from third parties to impose liability. It was found that the impugned order did not rely on any such statements as the basis for the assessment or penalty. Since no direct reliance was placed on third-party statements, the denial of cross-examination did not constitute a violation of natural justice in this context. Further, the Court emphasized that the principles of natural justice require an opportunity to be heard and to confront evidence relied upon. Where no such evidence was relied on, the appellant's contention could not be sustained. The Court thus rejected the argument that the absence of cross-examination violated natural justice. Issue 3: Reliance on the confession statement recorded from the appellant and its subsequent retraction The appellant was illiterate and only conversant in Hindi and Rajasthani, while the confession statement was recorded in Malayalam by an accountant of the proprietary concern. The appellant contended that he had no knowledge of the confession statement's contents and later retracted it by filing an affidavit, asserting that the confession was against his true interests. The Court noted that the proper officer had considered the retraction but found that it was not made immediately after the confession was recorded. The delay in retraction led the proper officer to disbelieve the retraction and not rely on the confession statement for assessment purposes. The Court held that the question of the proper officer's justification in rejecting the retraction was a matter for the appellate authority to decide. It was not appropriate for the writ court to interfere with this factual and evaluative determination in a writ petition under Article 226 of the Constitution. The Court thus declined to entertain the appellant's challenge on this ground. Issue 4: Entertaining writ petition despite alternate remedy of appeal The appellant sought to challenge the assessment order by filing a writ petition, despite the availability of an alternate statutory remedy of appeal under Section 107 of the CGST/SGST Act, 2017. The learned single Judge had previously held that since the appellant failed to point out any specific statement relied upon by the proper officer, and given the availability of an alternate remedy, the writ petition was not maintainable. The Court in the intra-court appeal agreed with this approach, emphasizing that the writ jurisdiction is not a substitute for the statutory appellate remedy, especially where no exceptional circumstances were shown. The Court reiterated that matters involving evaluation of evidence and factual determinations by the proper officer are better suited for appellate scrutiny rather than writ intervention. 3. SIGNIFICANT HOLDINGS "Inasmuch as the proper officer has not relied on any statement recorded by him from the 3rd parties for the purpose of imposing liability on the petitioner, we are not in a position to accept the argument of the appellant that there is violation of the principles of natural justice." "The question as to whether the proper officer was justified in rejecting the retraction statement filed belatedly, is a matter which should gain attention of the appellate authority and not by the writ court in a writ petition under Article 226 of the Constitution of India." Core principles established include:
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