Prakash Raghunath Autade Prop Of Ideal Agro Search vs. Union Of INDIA Throu. Its Revenue Sec. Ministry Of Finance And Ors

Held

The Court held that it would generally not interfere at the stage of a show cause notice unless it is ex-facie without jurisdiction, as per the principles laid down in Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and others, Special Director and Another Vs. Mohd. Ghulam Ghouse and another, Union of India and others Vs. Coastal Container Transporters Association and others, Mahanagar Telephone Nigam Ltd. Vs. Chairman Central Board, Direct Taxes and another, and Malladi Drugs and Pharma Limited Vs. Union of India and another. The Court noted that the petitioner's reliance on Prakash Raghunath Autade (Supra) was misplaced, as that decision did not interfere with the show cause notice but rather clarified that any witness summoned during adjudication whose statement is found relevant must be allowed to be cross-examined by the petitioner. Therefore, the Court found no case to interfere with the impugned show cause notice at this threshold stage. The petitioner was granted eight weeks to file a reply, and the time spent on the petition was excluded for limitation purposes. The petition was dismissed without prejudice to the petitioner raising all permissible defenses.

Facts

The petitioner, Prakash Raghunath Autade, challenged a show cause notice dated April 5, 2024, issued by the 4th respondent. The petitioner argued that the notice primarily relied on statements recorded in 2018-19, mainly in the context of the Pre-GST regime, and not during any formal inquiry or proceeding under the GST Act or its predecessor. He cited a previous Bombay High Court decision in his own case, which held that statements recorded before a show cause notice cannot be considered as evidence during an inquiry. The petitioner contended that these statements were non-est and that no other significant material supported the show cause notice. The respondents argued that the notice was based on other materials revealed during the investigation and that the validity of the statements and the burden of proof were issues to be decided during adjudication after the petitioner filed a reply.

Key Issues

1. Whether the statements recorded in 2018-19, primarily in the context of the Pre-GST regime and not during a formal inquiry or proceeding under the GST Act, can form the basis of a show cause notice under the GST regime? (Question of law, concerning the evidentiary value of pre-GST statements under the GST Act). Petitioner's Arguments: The petitioner argued that statements recorded before the issuance of a show cause notice, and not during an inquiry or proceeding, are non-est and constitute no evidence. He relied on the Bombay High Court's decision in his previous case (Prakash Raghunath Autade Vs. Union of India) to support this contention. He further argued that apart from these statements, no other significant material supported the impugned show cause notice. Respondents' Arguments: The respondents contended that the show cause notice was not solely based on the disputed statements but also on other materials discovered during the investigation. They argued that the admissibility of the statements and the issue of the burden of proof are matters that can be decided during the adjudication of the show cause notice after the petitioner files a reply and raises all permissible objections. They also noted that a review petition had been filed against the decision cited by the petitioner.