Vidhata Metal Through Ishwar G. Samota vs. Union Of INDIA Through Its Secretary, Department Of Revenue

Held

The High Court held that in the given facts and circumstances, it would be appropriate for all the issues raised by the petitioner to be adjudicated by the Designated Officer. The Court noted that the show cause notice was issued approximately seven months prior and was still pending adjudication, with the petitioner having yet to file a reply. The Court directed the petitioner to file an appropriate reply to the show cause notice, raising all contentions presented in the petition, including those related to the circular dated July 6, 2022, within four weeks from the date of the order. Subsequently, the Adjudicating Officer was directed to adjudicate the show cause notice within eight weeks of the reply being filed, after granting the petitioner an opportunity for a personal hearing. All contentions of both parties were expressly kept open, and the Designated Officer was instructed to consider all pleas raised by the petitioner during the adjudication process. The petition was disposed of accordingly.

Facts

The petitioner, Vidhata Metal, filed a writ petition before the Bombay High Court challenging a show cause notice dated February 2, 2023, issued by Respondent No. 4. The petitioner contended that the notice was issued in violation of constitutional provisions, statutory rules, and a circular issued by the Central Board of Indirect Tax & Customs (CBIC). Specifically, the petitioner argued that a prerequisite notice in Form GST DRC-01A dated January 12, 2023, was back-dated and received after the show cause notice, and that the show cause notice itself was not in line with CBIC Circular No. 171/03/2022-GST dated July 6, 2022. The revenue contended that these issues could be addressed by the adjudicating officer. The show cause notice was pending adjudication, and the petitioner had not yet filed a reply.

Key Issues

1. Whether the Impugned Show Cause Notice dated 02.02.2023, issued by Respondent No. 4, is in violation of Article 14 of the Constitution, Rule 142(1A) of the CGST Act, and Circular No. 171/03/2022-GST dated 06.07.2022, rendering it without authority of law? 2. Whether the Petitioner ought to be subjected to adjudication proceedings for the Impugned Show Cause Notice when the issues raised are glaring and potentially invalidating? Petitioner's arguments: The petitioner argued that the show cause notice was invalid because a prerequisite notice in Form GST DRC-01A was back-dated and received after the show cause notice, violating established procedure. Furthermore, the petitioner contended that the show cause notice was contrary to CBIC Circular No. 171/03/2022-GST, which clarifies demand and penalty provisions for transactions involving fake invoices. The petitioner argued that these procedural and substantive flaws meant the show cause notice should be dropped without adjudication. Revenue's arguments: The revenue argued that the adjudicating officer is competent to examine all the issues raised by the petitioner during the adjudication of the show cause notice.