The Commissioner Of CGST Kolkata Audit I vs. M/S. Saumya Agrotech Private Limited

Held

The High Court held that there was indeed a violation of the principles of natural justice because the respondent-writ petitioner did not have sufficient time to react and produce necessary documents before the concerned authority for a pre-show cause notice consultation. The Court agreed with the Single Judge's view to this extent. However, the Court found that quashing the show cause notice-cum-demand was not necessary. The Court modified the Single Bench's order by setting aside the direction to quash the show cause notice-cum-demand dated October 11, 2021. The contents of the show cause notice were to be treated as additional information, along with the audit observation dated October 1, 2021. The assessing officer was directed to fix a date for personal hearing, discuss the case with the assessee, and proceed according to law. No coercive action was to be initiated until then. The respondent-writ petitioner was directed to submit written objections to the audit observation and the show cause notice within 15 days of receiving the order. The assessing officer was to fix a personal hearing and proceed on merits within 10 days of its conclusion. The Court also held that the issue of limitation could not be raised by the assessee. The ratio decidendi is that procedural lapses, such as insufficient time for pre-show cause notice consultation, can be rectified by providing an opportunity for personal hearing and submission of objections, rather than outright quashing of the notice, especially when it serves the interest of both the assessee and the revenue.

Facts

The Commissioner of CGST, Kolkata Audit-I, filed an intra-Court appeal against an order dated February 14, 2022, passed by a Single Bench in a writ petition. The respondent-petitioner, M/s. Saumya Agrotech Private Limited, had challenged a show cause notice-cum-demand dated October 11, 2021, issued by the CGST authority. The petitioner argued that the show cause notice violated principles of natural justice because a pre-show cause notice consultation was issued on October 5, 2021, and the petitioner received it late the same day. The petitioner requested time to produce documents for the period 2006-2017, but without a response to this request, the show cause notice was issued. The petitioner contended that pre-show cause notice consultation is mandatory for demands exceeding Rs. 50,00,000/-, citing departmental circulars. The Single Bench had quashed the show cause notice but allowed the department to issue a fresh one.

Key Issues

1. Whether the show cause notice-cum-demand dated October 11, 2021, issued by the CGST authority, violated the principles of natural justice due to insufficient time provided for pre-show cause notice consultation, particularly concerning the period 2006-2017. Petitioner's Arguments: The petitioner argued that the pre-show cause notice consultation was issued on October 5, 2021, and received late in the evening. The petitioner immediately requested time to gather necessary documents for the period 2006-2017. However, the show cause notice was issued on October 11, 2021, without addressing the petitioner's request for time. The petitioner relied on departmental circulars which mandate pre-show cause notice consultation, especially for demands exceeding Rs. 50,00,000/-, to ensure fairness and allow the assessee an opportunity to clarify issues, potentially leading to the dropping of proceedings. Revenue's Arguments: The revenue's primary contention, as implied by their appeal, was that the Single Bench erred in quashing the show cause notice entirely. While not explicitly detailed in the provided text, the revenue likely argued that the violation, if any, was procedural and could be rectified without quashing the entire notice. They would have argued for a modification of the order to allow the proceedings to continue after rectifying the procedural lapse.