Section 73 CGST | Reasonable Time To Respond To Show Cause Notice Is Thirty Days: Madhya Pradesh High Court Quashes Notice Against Raymond
The Madhya Pradesh High Court held that Raymond Limited was not afforded a reasonable opportunity under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act) to respond to the notice.
The Court quashed the show cause notice and order of demand issued under Section 73 of the CGST Act. The Court noted that the time gap afforded to Raymond Ltd was only 8 days, which was desperately short to satisfy the concept of a reasonable opportunity to be heard. The Court held that the reasonable period of thirty days.
“Though no time period is stipulated in Section 73 for the noticee to respond but it is obvious that the statute contemplates affording of reasonable opportunity to reply to show cause notice… In the considered opinion of this Court, concept of reasonable opportunity demands that reasonable period of time to reply to the notice should be not less than 15 days, if not more… However, since the time period provided for paying tax, interest and penalty specified in the show cause notice is statutorily prescribed to be thirty days in Section 73 (8), the reasonable period within which show cause notice is to be responded to, ought to be treated as thirty days”, the Bench comprising Justice Sheel Nagu and Justice Amar Nath (Kesharwani) observed.
Advocate Gopal Mundhra appeared for the Petitioner (Raymond Ltd.).
Raymond Ltd approached the High Court by way of a Writ Petition challenging a show cause notice and order of demand issued under Section 73 of the Central Goods and Services Tax Act, 2017 (CGST Act). Raymond Ltd sought an order restraining the Respondents from taking any coercive action against them.
The Court noted that the show cause notice under Section 73 of the CGST Act was issued on September 3, 2022, giving the opportunity to pay the tax with the admissible penalty within 30 days. The Bench observed that Section 73 applies in cases other than cases of fraud or willful misstatement or suppression of facts, for the determination of unpaid/short paid tax or erroneous refund or wrongful availing or utilization of input tax credit.
Furthermore, the Court noted that Section 73 of the CGST Act deals with the determination of unpaid or short-paid tax, erroneous refunds, or wrongful availing or utilization of input tax credit. A show cause notice must be issued to the noticee specifying the amount of unpaid tax.
The Bench observed that the notice must be issued at least 3 months before the time limit specified in Section 73(10). A statement containing details of tax not paid or short paid must be served to the noticee after the issuance of the show cause notice. The noticee has 30 days to respond to the show cause notice and pay the specified amount of tax, interest, and penalty.
Additionally, the Court emphasized that the concept of reasonable opportunity requires that the recipient of a show cause notice be given a minimum of 15 days to respond. However, since the time period for paying taxes, interest, and penalties specified in the show cause notice is statutorily prescribed as 30 days in Section 73(8), the reasonable period for responding to the show cause notice should be considered to be 30 days.
The Bench observed that the statement prescribed under Section 73(2) of the CGST Act, which should contain the foundational material used to form the prima facie opinion against Raymond Ltd, had not been provided. The Court also noted that the impugned show cause notice was vague and lacking in material particulars. The Court stated that a show cause notice must contain enough material to enable the noticee to respond effectively.
Lastly, the Court noted that any show cause notice, whether issued under Section 73 of the CGST Act or otherwise, can only withstand judicial scrutiny if it contains enough and adequate material to support the issuing authority's prima facie view against the noticee. If the contents of the show cause notice are lacking in material particulars or are vague, it becomes vulnerable to judicial review.
“In this regard, this Court merely observes that any show cause notice whether u/S.73 or otherwise can withstand the test judicial scrutiny only when the same contains enough and adequate material which motivated the notice issuing Authority to take a prima facie view against the noticee. If the contents of impugned show cause notice are lacking in material particulars or are vague in regard to any of the entries contained therein then such show caused notice becomes vulnerable to judicial review”, the Bench noted.
Therefore, the Court directed the Respondents to pay a sum of Rs 10,000 to Raymond Ltd.
Accordingly, the Court allowed the Petition and set aside the impugned show cause notice and demand order.
Cause Title: Raymond Limited v Union Of India
