In Writ Petition No. 6124 of 2020 – MP HC – Mandatory provisions of Section 74 of GST Act require Revenue to provide sufficient information in show cause notices to enable Assessee to respond: Madhya Pradesh High Court
Justice Sheel Nagu & Justice Hirdesh [10-05-2023]

Read Order: M/s Durge Metals V. Appellate Authority and Joint Commissioner State Tax and Ors

Chahat Varma

New Delhi, June 2, 2023: The High Court of Madhya Pradesh, citing the decision of the Jharkhand High Court in M/s Sidhi Vinayak Enterprises Vs. The State of Jharkhand & Ors. [LQ/JharHC/2023/45], has ruled that the initiation of proceedings in the present case using a vague show cause notice, was invalid.

The main contention of the petitioner was that the show cause notice was vague to the extent of not communicating the relevant information and material, thereby disabling the petitioner to respond to the same, and therefore, all consequential actions of passing of order and dismissal of appeal were vitiated in law.

The division bench comprising of Justice Sheel Nagu and Justice Hirdesh remarked that the mandatory provisions of Section 74 of Goods and Services Act (GST Act) make it incumbent upon the Revenue to ensure that the show cause notice provides sufficient information for the assessee to effectively respond to it.

The bench held that upon a plain reading of the show cause notice, it revealed that it lacked necessary material, information and the statement containing details of ITC transaction under question.

“Section 75 of GST Act is complete Code in itself which prescribes for various stages or determination of wrongful utilization of ITC which is required to subject to affording of reasonable opportunity of being heard to the assessee. Since the Statute itself prescribes for affording reasonable opportunity, it is incumbent upon the Revenue to afford the same and any deficiency in that regard vitiates the end result,” held the division bench.

Consequently, the court quashed the impugned orders, as well as the show cause notice and granted liberty to the competent authority to proceed with the matter in accordance with the law, if so advised.