Authorities could not travel beyond the show cause notice to levy the penalty on the taxpayer, Allahabad High Court ruled.
The bench comprising Justice Shekhar B. Saraf stated that,
“At its core, a show cause notice represents the initial step in an administrative or legal process, wherein an individual or entity is formally apprised of allegations or discrepancies attributed to them. This notice serves as a mechanism to allow the recipient to present their side of the story, provide clarifications, or rectify any perceived errors before any punitive action is taken.”
The court sees that the issue of the show cause notice is considering the principle of audi alteram partem ensuring due process and fairness in proceedings.
On the interception of the applicant was issued an SCN on the basis that the destination where the vehicle was travelling was not specified in the invoice. However, the appellate authority kept the order of penalty on the foundation that the GST E-way bill having the goods had lapsed. The applicant contested both the penalty order and the order of the first appellate authority.
The Court established reliance on the decisions of the Supreme Court in Commissioner of Customs, Mumbai v. Toyo Engineering Ltd., Commissioner of Central Excise, Bhubaneshwar v. Champdany Industries Ltd and Commissioner of Central Excise, Chandigarh v. Shital International wherein it has been ruled that the authorities could not go beyond the scope of SCN issued by them.
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The Court followed that a show cause notice kept the rule of law and contained arbitrary practice of power on the position of the authorities.
“Any action taken by an authority beyond the scope defined in the notice risks transgressing the boundaries of legality and procedural fairness. Such overreach not only undermines the legitimacy of the authority but also compromises the rights of the individuals or entities involved, potentially leading to legal challenges and erosion of public trust.”
The court sees that the need to specify all the allegations in the SCN emphasizes transparency and accountability since the same enables the taxpayer to provide an informed answer. Beyond the realm of the SCN, the authority breaches the principle of particularity and deprives the taxpayer of a chance to deny the charges dropped against him.
Court laid on the Allahabad High Court decisions in Ramlala v. State of U.P. and Ors. and Jitendra Kumar v. State of U.P. and Anr. to maintain that at the time of the penalty, the council goes beyond the scope of SCN. As the applicant did not have the chance to answer the charges directing the levy of the penalty, the same was a breach of the principles of natural justice.
Therefore, the penalty order and further order of the first appellate authority were suppressed.
| Case Title | M/s Associated Switch Gears and Projects Ltd. Vs State of U.P. |
| Case No.: | Writ Tax No. – 276 of 2020 |
| Date | 25.01.2024 |
| Counsel For Appellant | Rishi Raj Kapoor |
| Counsel For Respondent | C.S.C. |
| Allahabad High Court | Read Order |
