1. Heard Mr. Lakshmi Kumaran Sridharan & Mr. Narendra Dave, learned counsel for the petitioner and Mr. Rajsekhar Rao, learned Standing Counsel for Commercial Taxes appearing for the respondents. Perused the entire record.
2. The challenge in the present writ petition is to the Ex.P1, Show Cause Notice in Form DRC-01 dated 29.09.2023 issued under Section 73 of the CGST Act, 2017 (hereinafter referred to as ‘Act’).
3. The petitioner company has come to this Court for the invocation of the extraordinary jurisdiction of this Court contending that the Show Cause Notice is as vague as it could be. It does not have any substantial material on which the explanation has to be provided by the petitioner. Moreover, the Show Cause Notice does not even provide any hint as to which of those transactions are doubtful or suspicious so far as the authority issuing the Show Cause Notice is concerned and which needs scrutiny and proof of the transactions made. It was also the contention of the learned counsel for the petitioner that even so far as the rate of tax is concerned from November, 2017 onwards, there is not a single product manufactured by the petitioner company which has a rate of tax of more than 18%. Yet in the Show Cause Notice, the authorities have said of not paying tax at 28%. In addition, learned counsel submits that even otherwise the Show Cause Notice is beyond the period of limitation prescribed and even crossing of the period of extension which were otherwise granted by the authorities concerned.
4. In the Show Cause Notice which is under challenge in the present writ petition, the respondent authorities have alleged that there appears to be non-payment of tax by the petitioner @ 28% and for which also, the explanation has been sought for by the petitioner.
5. Learned counsel for the Department submits that since the writ petition is at the show cause stage, it is always open for the petitioner to have responded to the Show Cause Notice with all clarifications, explanation and the documentary proofs and the respondent authorities would had scrutinized the same and if everything would had been found to be in order, the show cause proceedings could be dropped at that juncture itself. Therefore, this is not the proper stage where the writ jurisdiction has to be exercised or the present writ petition needs to be entertained. It was also the contention of the learned counsel that the contents of the Show Cause Notice itself is a self explanatory and the petitioner only has to respond to the same including the rate of tax on the products manufactured by the petitioner and the rate of tax at which they have paid tax to the Department and as such, there is no need for any adjudication in the present writ petition. For the said reason, the learned counsel for the Department prayed for the rejection of the writ petition.
6. It would be necessary at this juncture to take note of the contents of Ex.P1 - Show Cause Notice under challenge in the present writ petition itself. A plain reading of the Show Cause Notice itself would give a clear indication that the Show Cause Notice lacks necessary information, source and the materials on the basis of which the authority concerned found the necessity for issuance of the Show Cause Notice. The Show Cause Notice, from the plain reading, seems to be one which has been issued in a mechanical manner without application of mind and without any cogent sufficient materials available or even the basic scrutiny or the investigation which were required for the authority concerned in reaching to the conclusion that certain transactions which have been carried on by the respondents appear to have been the transactions where there is evasion of tax or where there is suppression of material facts or atleast there was reasonable suspicion on the transactions so made by the petitioner.
7. This Court also finds sufficient force in the submissions made by the learned counsel for the petitioner when they say that since the proceeding has been initiated under Section 73 of the Act, the very provision of Section 73 of the Act starts with the words where it appears to be for the authority concerned which by itself means that at the time where the authority appears to found it necessary for initiating the proceedings, there ought to had been some material, information or even sort of a complaint available with them as regards the suspicious transactions or the alleged evasion of tax made by the petitioner.
8. For the foregoing reasons, we are of the considered opinion that Ex.P1 – Show Cause Notice, dated 29.09.2023 would not be sustainable as they are bereft of facts and materials and the same deserves to be and is accordingly set aside/quashed. Nonetheless, if the law permits, the right of the Department stands reserved for initiation of proceedings in accordance with law.
9. The Writ Petition to the aforesaid extent stands allowed. No order as to costs.
10. Consequently, miscellaneous petitions pending, if any, shall stand closed.
