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Madhya Pradesh High Court: Madhya Pradesh high court holds thirty days as a reasonable period for filing a reply to SCN
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MUMBAI: The Madhya Pradesh high court has 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 a show cause notice.
In this case, the GST authorities had issued Show Cause Notice (SCN) to the taxpayer on 3 September 2022 and within the following nine days raised a demand order.The company challenged the SCN as well as the order before the high court. The company contended that a reasonable opportunity of being heard was denied to it. Further, the SCN itself was vague.
The high court quashed the SCN and the demand order. It noted that the time gap afforded to Raymond Ltd was only 8 days, which was extremely short and would not satisfy the concept of a reasonable opportunity to be heard.
An extract of the order, passed by a two-member bench reads: “Though no time period is stipulated in Section 73 for the notice to respond, it is obvious that the statute contemplates affording reasonable opportunity to reply to show cause notice… In the considered opinion of this Court, the concept of reasonable opportunity demands that a 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 high court also noted that the impugned show cause notice was vague and lacking in material particulars, which would not enable the taxpayer to effectively respond to it.
Accordingly, the high court set aside the SCN and the impugned demand order with liberty to the GST authorities to issue a fresh valid SCN. According to Bipin Sapra, indirect tax partner at EY-India, “ This high court order is likely to benefit taxpayers where adverse demand orders are passed by therevenue authorities without providing a reasonable time to respond to the SCN.”
“The judgement re-emphasizes the principle that notices are not sustainable if they are bereft of facts and material and thus, become vulnerable to judicial review,” he added.
In this case, the GST authorities had issued Show Cause Notice (SCN) to the taxpayer on 3 September 2022 and within the following nine days raised a demand order.The company challenged the SCN as well as the order before the high court. The company contended that a reasonable opportunity of being heard was denied to it. Further, the SCN itself was vague.
The high court quashed the SCN and the demand order. It noted that the time gap afforded to Raymond Ltd was only 8 days, which was extremely short and would not satisfy the concept of a reasonable opportunity to be heard.
An extract of the order, passed by a two-member bench reads: “Though no time period is stipulated in Section 73 for the notice to respond, it is obvious that the statute contemplates affording reasonable opportunity to reply to show cause notice… In the considered opinion of this Court, the concept of reasonable opportunity demands that a 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 high court also noted that the impugned show cause notice was vague and lacking in material particulars, which would not enable the taxpayer to effectively respond to it.
Accordingly, the high court set aside the SCN and the impugned demand order with liberty to the GST authorities to issue a fresh valid SCN. According to Bipin Sapra, indirect tax partner at EY-India, “ This high court order is likely to benefit taxpayers where adverse demand orders are passed by therevenue authorities without providing a reasonable time to respond to the SCN.”
“The judgement re-emphasizes the principle that notices are not sustainable if they are bereft of facts and material and thus, become vulnerable to judicial review,” he added.
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