Judgments on Cryptic Notices which are invalid
Table of Contents
1- Why an SCN is issued ?
The Show cause notice gets its power from the principles of natural justice. Although most of the statutes provide for its issuance. But even if it is not written in any statute, SCN is mandatory.
As per the principles of natural justice , no one should be punished without hearing their side. The SCN is issued to ensure that the party was given an opportunity of being heard.
2- Essentials of an SCN.
An SCN should always be speaking.
It means that it should mention the reasoning. A notice without detailed reasoning is cryptic and can be quashed. It doesn’t allow the party to place their side.
It should be issued by authorised person-
In GST both centre and state officers can send a notice. But DGGI is also competent to send notice?
The answer is yes, it was clarified in case of Cannon Indian (p) Ltd.
Don’t send a mechanical notice by copy pasting the provisions-
In the case of AGGARWAL DYEING AND PRINTING WORKS Versus STATE OF GUJARAT & 2 other(s) .
In this case the registration of taxpayer was sought to be cancelled by the authorities. They failed to file the returns for 6 months. A notice was issued and he was asked to submit the reply by 27.09.2018.
The TP failed to submit the reply and his registration was cancelled retrospectively from the date of its registration.
The WRIT applicant said that he was new to the GST regime. He filed returns later on. The court said in very beautiful words-
“Reasons are heart and soul of the order and non communication of same itself amounts to denial of reasonable opportunity of hearing, resulting in miscarriage of justice.”
The cancellation was set aside by the Gujarat high court. They observed that-
“In all the writ applications we could note from the tabular details that the show cause notice though issued in the prescribed form does not elaborate the reasons and the one line reason mentioned is nothing but the reproduction of either of the reasons provide under rules regarding cancellation of registration.”
“The respondent authority i.e. the Assistant/Deputy Commissioner, State tax Officer ought to have atleast incorporated specific details to the contents of the show cause. Any prudent person would fail to respond to such show cause notice bereft of details thereby making the mechanism of issuing show cause notice a mere formality and an eye wash.”
Lateron various judgments in GST were passed based on the decision of Gujarat high court. UMIYA INDUSTRIES Versus SUPERINTENDENT OF GOODS AND SERVICES TAX was passed relying on the decision of Gujarat high court in Supra Aggarwal dying case.
The requirement to record reason is a part of human rights-
In this context judgment of Kranti Associates private limited Vs Masood Ahmed Khan is also very important. It laid down the detailed principles for reasoning in an SCN considering the various judgments.
One of which was point no. “n”
“n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553 at 562 para 29 and Anya v. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires, “adequate and intelligent reasons must be given for judicial decision.”
The SCN shall reflect the jurisdictional facts based on which the final order will be passed-
In case of MRF Mazdoor Sangh vs. The Commissioner of Labour & Others, reported in 2014 the court said that the reasons are important. The other party will be able to make a reply only if they know the reason.
“The show cause notice should reflect the jurisdictional facts based on which the final order is proposed to be passed. The person proceeded against would then have an opportunity to show cause that the authority had erroneously assumed existence of a jurisdictional fact and, since the essential jurisdictional facts do not exist, the authority does not have jurisdiction to decide the other issues.”
Even if statute doesn’t provide for the OOBH, It should be read into it.
In case of Union of India vs. Jesus Sales Corporation, reported in 1996 (4)SCC 69
a practice has developed holding that even in the absence of a provision providing for an opportunity of hearing, such a provision is required to be read into the Rules governing the case,
“On basis of practice which has grown during the years the courts and quasijudicial authorities have been hearing the appellants and applicants before dismissing such appeals or applications as barred by limitations. It can be said that courts have read the requirements of hearing the appellants or the applicants before dismissing their appeals or applications filed beyond time on principle of natural justice, although the concerned statute does not prescribe such requirement specifically.”
CCE Vs Brindavan Beverages-
Oudh Sugar Mills Ltd. v. UOI
A.K. Kraipak v. Union of India, (1970) 1 SCR 45.
Oryx Fisheries (P.) Ltd. UOI
The old judgments of honourable Supreme court
Ravi Yashwant Bhoir v. District Collector Raigad, (2012) 4 SCC 407,
Sant Lal Gupta v. Modern Cooperative Grouop Housing Society Limited
CA Shafaly Girdharwal
CA
New Delhi, India
CA Shaifaly Girdharwal is a GST consultant, Author, Trainer and a famous You tuber. She has taken many seminars on various topics of GST. She is Partner at Ashu Dalmia & Associates and heading the Indirect Tax department. She has authored a book on GST published by Taxmann.
