The Court ruled that the SCN, lacking essential factual information, was invalid as it violated principles of natural justice.
03 Sep, 2024
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A recent judgment by the Telangana High Court, highlighting the importance of detailed show cause notices in tax proceedings.
Case Facts:
- The petitioner challenged a show cause notice issued by the tax department under Section 29(2)(e) of the Central Goods and Services Tax Act, 2017 (CGST Act).
- The notice, according to the petitioner, lacked specifics and merely reproduced the relevant section of the Act.
- This absence of factual details hindered the petitioner's ability to effectively respond to the notice. Additionally, the petitioner's registration was suspended based on this very notice.
Court's Decision:
- The Court sided with the petitioner, emphasizing that a show cause notice lacking crucial details violates the principles of natural justice.
- The Court highlighted the need for a proper notice that outlines the reasons for initiating proceedings against the taxpayer.
- Referring to previous judgments Sri Avanthika Sai Venkata [2024 TAXONATION 201 (TELANGANA)] & S.B. Traders [2022 TAXONATION 1635 (TELANGANA)] the Court reiterated that a show cause notice must contain the factual basis for invoking a particular section of the Act.
- The Court expressed concern about the "insensitive and mechanical manner" in which tax authorities issue such notices, causing hardship to taxpayers.
- Drawing a parallel between "LIFE" and "FILE," the Court stressed the potential impact of such notices on a taxpayer's livelihood.
- While quashing the notice, the Court refrained from imposing costs on the respondents considering the assurance from their representative to address this issue with the concerned authorities.
Key Takeaways:
- Tax authorities must ensure that show cause notices are detailed and specific, outlining the factual basis for initiating proceedings.
- A vague notice lacking essential details violates natural justice principles and hinders the taxpayer's ability to respond effectively.
- Tax authorities should exercise due diligence and sensitivity when issuing show cause notices to avoid impacting a taxpayer's livelihood.
GST Case Law Nice Enterprises Versus The Deputy Commissioner
CItation-2024 TAXONATION 2049 (TELANGANA)
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