2025 (7) TMI 1200 - HC - GST

Principles of natural justice - issuance of notice u/s 74 of the CGST Act 2017 or not - petitioner is deprived of the benefits u/s 128A of the CGST Act 2017 - suppression of facts or not - HELD THAT - This is not a case where it is required to exercise extraordinary jurisdiction and interfere with the show cause notice either by quashing and setting it aside or by directing the Respondents to convert the same into a show cause notice under Section 73 of the CGST Act 2017. Upon reviewing the show cause notice it cannot be concluded that there are no allegations of suppression. Whether such allegations are correct or not is a matter that will have to be examined by the authority which has issued the show cause notice. At this stage it is premature for this Court to enter the factual thicket and conclude that there was no basis for alleging suppression. The Petitioner states that no reply was filed to the show cause notice since this Petition was filed. He states that if permitted the Petitioner would file a reply to the show cause notice within two weeks from today. Since the Petitioner was bona fide pursuing this Petition and had also relied upon the decision of the Hon ble Madras High Court referred to above the Petitioner is permitted to file a reply within two weeks from today. If such a reply is filed it should be considered by the authority that issued the show cause notice. Petition disposed off.

Summary

ISSUES:

Whether a show cause notice issued under Section 74 of the CGST Act, 2017 is maintainable in the absence of suppression.Whether a show cause notice under Section 74 can be converted into a notice under Section 73 to enable the petitioner to avail benefits under Section 128A of the CGST Act, 2017.Whether the Court should exercise extraordinary jurisdiction to quash or modify a show cause notice issued under Section 74 of the CGST Act, 2017.The extent to which precedents based on concessions by Revenue can be relied upon to challenge a show cause notice.

RULINGS / HOLDINGS:

The Court held that it cannot conclude at this stage that there are no allegations of suppression warranting the issuance of a notice under Section 74, and such factual determinations must be made by the authority issuing the show cause notice.The Court declined to interfere with the show cause notice under Section 74 by converting it into a notice under Section 73, stating that it is premature to bypass the normal procedure of responding to the notice and that the petitioner may raise all contentions in response to the notice.The Court found that the precedent based on a concession by the Revenue in a different case does not have precedential or persuasive value for the present matter, especially given the inability to ascertain factual similarity.The Court refused to exercise its extraordinary jurisdiction to quash or modify the show cause notice, emphasizing the limited scope of judicial interference and availability of alternate remedies.

RATIONALE:

The Court applied the statutory framework of the CGST Act, 2017, particularly Sections 73, 74, and 128A, which govern issuance of show cause notices and grant of benefits in cases of tax evasion or suppression.The Court recognized that Section 74 relates to cases involving suppression or fraud, requiring a higher threshold than Section 73, which deals with general tax demands.The Court relied on the principle that judicial interference with show cause notices is limited and premature factual adjudication is to be avoided at the notice stage.The Court distinguished the cited precedent on the ground that it was based on a concession by the Revenue and did not establish binding or persuasive authority, highlighting the importance of factual context in such matters.The Court emphasized procedural fairness by directing the authority to dispose of the show cause notice expeditiously after giving full opportunity and oral hearing to the petitioner, and permitted the petitioner to file a reply to the notice despite the pendency of the petition.