M/S Shakar Trading Company vs. Union Of INDIA And 3 Others

Held

The Court held that the impugned order dated 22.12.2025, confirming penalty demands against the petitioner, was set aside. The Court found merit in the petitioner's contention that they were not afforded a proper opportunity of hearing due to their period of confinement. While the revenue cited a precedent regarding composite notices, the Court acknowledged the petitioner's submission that their reply was not duly considered. The Court noted that similar cases arising from the same show cause notice had been remanded. Therefore, the matter was remitted to the adjudicating authority to pass a fresh order. The Court laid down detailed procedural steps for the adjudicating authority to follow, including issuing a fresh show cause notice with RUDs and non-RUDs, allowing the petitioner to request further documents, considering the petitioner's application, providing copies of documents, and allowing cross-examination of witnesses if relied upon by the revenue. The proceedings are to be concluded within six months, affording the petitioner a personal hearing. The Court did not expressly decide on the jurisdictional challenge to the composite notice or the applicability of Section 6(2)(b) as the matter was remanded for fresh consideration.

Facts

The petitioner, M/s Shankar Trading Company, filed a writ petition challenging an order dated 22.12.2025 that confirmed penalty demands. This order arose from a show cause notice dated 31.05.2024, issued under Section 74 of the Central Goods and Services Tax Act, 2017. The petitioner's counsel stated that challenges to certain notifications were not pressed. The petitioner argued that due to their arrest and subsequent release on bail late in 2025, they could not adequately respond to the show cause notice, and their reply was not considered, leading to an ex-parte confirmation of penalty. They also raised objections regarding jurisdictional error in the composite notice and that part of the proceedings were barred by Section 6(2)(b) of the Act. The revenue contended that the issue of composite notice was decided in their favour by a coordinate bench in M/S SA Aromatics Pvt. Ltd. and another Vs. Union of India and 5 others. The revenue conceded that the petitioner's confinement might have prevented a full opportunity of hearing.

Key Issues

1. Whether the impugned order dated 22.12.2025, confirming penalty demands against the petitioner, is vitiated by a denial of adequate opportunity of hearing, contrary to principles of natural justice and Section 74 of the Central Goods and Services Tax Act, 2017? 2. Whether the show cause notice dated 31.05.2024 was issued without jurisdiction or suffers from a jurisdictional error, particularly concerning the concept of a 'composite notice' and the applicability of Section 6(2)(b) of the Act? Petitioner's Arguments: The petitioner contended that their arrest and subsequent bail in late 2025 severely hampered their ability to respond to the show cause notice. They argued that their reply was not considered, and the penalty was confirmed on an ex-parte basis. They also raised objections regarding the composite notice being without jurisdiction and that certain proceedings were barred by Section 6(2)(b) of the Act. Revenue's Arguments: The revenue argued that the issue of a composite notice had been decided in their favour by a coordinate bench in M/S SA Aromatics Pvt. Ltd. and another Vs. Union of India and 5 others. However, they conceded that the petitioner's confinement might have prevented a full opportunity of hearing and that it was arguable that due opportunity had not been granted.