CGST | Travelling Beyond SCN Erodes Trust In Integrity & Impartiality Of Adjudicatory Process: Allahabad High Court

The Allahabad High Court has held that Department travelling beyond the scope of the show cause notice undermines the right to fair hearing of an assesee and also erodes the trust in integrity and impartiality of the adjudicatory process.

The Court held that Department must clearly outline the allegations against the assesee. Under no circumstances can the Department travel beyond the allegations stated in the show cause notice as would “trample upon the recipient's right to defend itself.”

“Any attempt by the issuing authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the show cause notice would constitute a violation of the principles of natural justice. Such actions would not only undermine the recipient's right to a fair hearing but also erode trust in the integrity and impartiality of the adjudicatory process. Any action taken beyond the confines of the Show Cause Notice, is void ab initio and cannot be sustained,” held Justice Shekhar B. Saraf.

Factual Background

Petitioner-Samsung India filed a refund claim for the period of July–September, 2019 of Rs.7,46,52,231/- and October–December, 2019 of Rs.8,20,59,875/-. Against the aforesaid refund applications, deficiency memos under FORM GST-RFD-03 and later show cause notices were issued by the Department proposing to reject the refund for the aforesaid periods. Eventually a portion of refund was accepted, and some was denied on grounds that specific goods are capital goods, and not inputs. Appeals filed by the petitioner were rejected.

Counsel for petitioner argued that while rejecting the refund, the Department had travelled beyond the scope of show cause notice issued to the petitioner.

High Court Verdict

The Court observed that principles of natural justice include “the right to be heard, the right to present evidence or arguments in their defence and the right to present evidence or arguments in their defence and also the right to a reasoned decision based on the merits of the case.”

The Court held that adding allegations to expand the scope of inquiry after issuance of show cause notice is violation of principles of natural justice.

“Any attempt by the issuing authority to expand the scope of inquiry or introduce new allegations beyond those articulated in the show cause notice would constitute a violation of the principles of natural justice. Such actions would not only undermine the recipient's right to a fair hearing but also erode trust in the integrity and impartiality of the adjudicatory process.”

The Court relied on the decision of the Allahabad High Court in Ramlala v. State of U.P. and others and Associated Switch Gears and Projects v. State of U.P. and others to hold that the Department had deviated from the show cause notice issued to the petitioner and such order passed by the Department cannot be sustained.

The Court held that adhering to show cause notice is “not merely a procedural formality but a mandatory requirement.”

Accordingly, the writ petitions filed by Samsung India were allowed.

Case Title: M/S Samsung India Electronics Private Limited V. State Of U.P. And Others [Writ Tax No. 777 of 2022]

Case citation: 2024 LiveLaw (AB) 170

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