M/S. Indus Towers vs. Assistant Commissioner (St)

Held

The High Court held that the Show Cause Notice dated September 30, 2023, was unsustainable and deserved to be set aside. The Court found sufficient force in the petitioner's submission that the SCN lacked necessary information, source, and materials. A plain reading indicated that the notice was issued mechanically, without application of mind or any cogent sufficient materials, and without basic scrutiny or investigation. The Court also noted that Section 73 of the CGST Act, which begins with 'where it appears to the authority concerned,' implies that there must be some material, information, or complaint available with the authority at the time of initiating proceedings regarding suspicious transactions or alleged tax evasion. Therefore, the SCN, being bereft of facts and materials, was quashed. However, the Court reserved the right of the Department to initiate proceedings in accordance with law if permitted by statute. The Writ Petition was allowed to this extent.

Facts

M/s. Indus Towers (the petitioner) filed a writ petition challenging a Show Cause Notice (SCN) in Form GST DRC-01 dated September 30, 2023, issued by the Assistant Commissioner (ST). The petitioner contended that the SCN was vague, lacked substantial material, and did not specify which transactions were doubtful or suspicious. Furthermore, the petitioner asserted that since November 2017, none of its manufactured products attracted a tax rate higher than 18%, yet the SCN alleged non-payment of tax at 28%. The respondents, represented by the Government Pleader for Commercial Taxes, argued that the writ petition was premature as the petitioner could respond to the SCN with clarifications and documentary evidence, and the authorities would then scrutinize it. They also contended that the SCN was self-explanatory and did not require adjudication at this stage.

Key Issues

1. Whether the Show Cause Notice dated September 30, 2023, issued under Section 73 of the CGST Act, 2017, is sustainable in law, considering its alleged vagueness and lack of supporting material? (Question of law) Petitioner's Arguments: The petitioner argued that the SCN was excessively vague and lacked any substantial material to form the basis of the explanation sought. It failed to identify specific doubtful or suspicious transactions requiring scrutiny. The petitioner also highlighted a discrepancy regarding the alleged tax rate, stating that its products never attracted a tax rate of 28% since November 2017, while the SCN alleged non-payment at this rate. Respondents' Arguments: The respondents contended that the writ petition was not maintainable at the SCN stage. They argued that the petitioner should have responded to the SCN with all necessary clarifications and documentary proofs. The respondents further submitted that the contents of the SCN were self-explanatory and that the petitioner's response would be scrutinized by the authorities, potentially leading to the dropping of proceedings if found in order. They asserted that no adjudication was necessary at this juncture.