Dadan Singh vs. Central Board Of Indirect Taxes And Customs Through Its Chairman

Facts

The petitioner, Dadan Singh, a proprietor engaged in arranging trucks/tankers for transporters as a Goods Transport Agency, approached the Jharkhand High Court challenging a show cause notice dated October 18, 2021, issued by Respondent No. 2, the Principal Commissioner, CGST & CX, Ranchi. The notice sought to recover tax along with interest and penalty under Sections 77(1)(a), 77(1)(b), 77(1)(c), 77(2), and 78 of the Finance Act, 1994, for the financial year 2016-17. The petitioner contended that the assessing authority failed to consider his detailed replies to previous summons and submissions, thereby denying him the principles of natural justice. The petitioner sought to quash the show cause notice and prevent any adverse action.

Held

The Court held that interference at the stage of a show cause notice (SCN) is not warranted. The petitioner is required to appear before the assessing authority and respond to the SCN. The assessing authority was directed to fix a date and time for the petitioner to appear and submit his reply with all supporting documents by May 13, 2022. Upon the petitioner's appearance and submission of reply, the concerned authority, Respondent No. 2, shall proceed in accordance with law after affording the petitioner due opportunity. The Court explicitly stated that it had not gone into the merits of the case of the parties. The ratio decidendi is that statutory remedies must be exhausted before approaching the writ jurisdiction, unless the notice is demonstrably without jurisdiction or suffers from gross illegality.

Key Issues

1. Whether the High Court should entertain a writ petition at the stage of a show cause notice when the petitioner has not demonstrated that the notice is without jurisdiction? Petitioner's Argument: The petitioner argued that the assessing authority failed to consider his detailed replies and submissions made pursuant to summons, thus violating the principles of natural justice and the pre-show cause notice consultation clause of the master circular dated December 21, 2015. Therefore, interference by the High Court in its writ jurisdiction was warranted at this stage. Revenue's Argument: The respondent CGST authorities argued that the writ petition should not be entertained at the show cause notice stage as the petitioner had not shown the notice to be without jurisdiction. They contended that the petitioner should be directed to respond to the show cause notice and submit his reply, and that the procedure prescribed under the Finance Act would be followed by the adjudicating authority. They requested the Court to fix a time frame for the petitioner to respond.