Case Laws Durge Metals vs. Appellate Authority and Joint Commissioner State Tax

Facts of the Case:

Revenue:

• The State argued that the petitioner was not handicapped in providing a response to the SCN, as evidenced by their reply dated 25.04.2019 and the additional return. The State contended that the grounds of the SCN being vague were not raised in the memo of appeal.

Court:

• Although the petitioner did not specifically raise this ground before the appellate authority, it was emphasized that Section 74 of the GST Act imposes an obligation on the revenue to issue a speaking SCN that enables the assessee to respond adequately. It was pointed out that the show cause notice lacked relevant material, information, and details of the Input Tax Credit (ITC) transaction in question.

Petitioner:

• The petitioner filed a writ petition challenging orders dated 03.05.2019 and 30.08.2019 issued by the Appellate Authority and Joint Commissioner, State Tax, respectively. The principal ground of challenge was that the SCN issued under Section 74(1) of the GST Act, was vague and failed to communicate relevant information and material.
• The petitioner argued that this vagueness disabled them from responding effectively, and as a result, all subsequent actions and the dismissal of the appeal were vitiated in law.
• The petitioner referred to a similar case, Sidhi Vinayak Enterprises v. State of Jharkhand, where the Jharkhand HC had held that an SCN must fulfill the requirements of proper notice under Section 74(1) of the GST Act.

Judgement:

• Since show cause notice issued to assessee was vague to extent of not communicating relevant information and material, same was to be quashed with a liberty to competent authority to proceed in matter in accordance with law

Summary:

In the case of Durge Metals, the HC of Madhya Pradesh issued a judgment on May 10, 2023. The SCN issued to the petitioner-assessee was found to be vague and did not communicate relevant information and material, which deprived the petitioner of responding effectively. As per Section 75 of the CGST Act,2017, it is mandatory to provide a reasonable opportunity to the assessee, and any deficiency in this regard renders the proceedings invalid. Therefore, the court quashed the impugned orders and show cause notice, granting liberty to the competent authority to proceed in accordance with the law.

The petitioner relied on the case of Sidhi Vinayak Enterprises v. State of Jharkhand, where a similar issue of a vague SCN was addressed by the Jharkhand HC. The court, in that case, held that a summary of a show cause notice cannot be considered a proper notice, as mandated under Section 74(1) of the GST Act. Accordingly, the Madhya Pradesh HC followed the Jharkhand HC’s decision and quashed the impugned SCN and subsequent orders, allowing the competent authority to initiate fresh proceedings from the same stage, ensuring compliance with the law.

Overall, the court ruled in favor of the assessee, Durge Metals, and quashed the SCN and related orders due to their vagueness and failure to provide relevant information, thereby violating the principles of natural justice.

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