In the recent of the cases, the Division Bench Hon’ble Delhi High Court has quashed back-to-back 3 Show Cause Notices issued against 3 petitioners on the ground that no Pre-SCN consultation was done, which is a mandatory criterion, as laid down by CBEC in its Master Circular No. 1053/2/2017-CX dated 10.03.2017.
The Respondents while issuing the Show Cause Notices not only flouted the instructions of the CBEC but also contravened the law laid down by the Hon’ble Apex Court in the case of Amadeus India Pvt. Ltd. vs. Principal Commissioner, Central Excise, Service Tax and Central Tax Commissionerate, 2019 SCC Online Del 8437.
Consequently, the Hon’ble High Court has been pleased to quash the 3 SCNs in the following matters: (i) Back Office IT Solution v. Union of India W.P(C) 5766/2019 (ii) Omaxe Ltd. W.P. (C) No. 7842/ 2020; (iii) Omaxe New Chandigarh Developers Pvt. Ltd. W.P. (C) No. 12653/ 2019
Brief Facts of the Case
The Petitioners in the above-mentioned cases had challenged the impugned show cause notices issued by the Additional Director General of DGGSTI on various ground including the ground that no pre-show cause notice consultation was done as per the mandate of para 5 of the instruction dated 21.12.2015 issued by the CBIC and also para 5 of the Master Circular dated 10.03.2017.
Stand of the Revenue
The Stand of the Revenue in the above-mentioned cases was that (i) Pre-SCN Consultation was not done as the cases involved “prevention” (one of the exceptions, given in the 2017 Master Circular, where pre-show cause notice consultation is not required to be held); (ii) The voluntary statements given by the representatives of the petitioners amounted to Pre-SCN Consultation.
Hon’ble High Court’s Ruling
That Hon’ble High Court quashed the SCN on the ground that (i) Mandatory Pre-SCN Consultation was not carried put as per para 5 of the master circular; (ii) Voluntary Statement of the representatives of the Petitioner cannot considered to be the Pre-SCN Consultation.
The Hon’ble High Court further held that mandatory show cause notice pre-consultation to be carried out in accordance with para 5 of the Master Circular dated 10.03.2017 and the issue whether or not impugned show-cause notice should be revived or fresh show cause notice should be issued is to be decided by the concerned officer in consonance with the decision that would be rendered by the Supreme Court in Amadeus India Pvt. Ltd. bearing SLP (Civil) Diary No. 35886/2019.
The case has been argued by Adv. Puneet Agrawal and Adv. Purvi Sinha.
The back-to-back quashing of the 3 SCNs in three different matters clearly shows that the judiciary will not tolerate the flouting the instructions which have been issued by the Department themselves. From the above ruling we can clearly sense the mood of the Judiciary that Pre-SCN Consultation is not a joke and has to be mandatorily carried out while the issuance of SCNs.
The above-mentioned ruling will clearly have an impact on the issuance of the Show Cause Notices, which are being issued without conducting the Pre-Show Cause Notice consultations.
It is also important to note in the above cases, that the Stand of the Revenue was itself contradictory, as on one hand the Revenue treated the three cases as to “preventive” in nature for not conducting the Pre-SCN Consultation and on the other hand the Revenue consider the voluntary statements given by the representatives of the petitioners amounted to Pre-SCN Consultation.
The rulings will surely have an impact on the ongoing SCNs adjudications wherein the SCNs have been issued without pre-SCN consultation.
Read the order at _W.P.(C)_12653!2019_2021_04_05.pdf
Yuvraj is an advocate and has completed his B.A. LL.B(Hons) from RGNUL-Punjab. He is a practicing advocate and has been involved in matters pertaining to GST and other indirect taxes as well as Direct Tax. He is active in Writ Courts and has involvement in a few landmark judgments like Pitambra Books Pvt. Ltd. V. Union of India (W.P.C. No. 627 of 2020), and represented Sales Tax Bar Association (Delhi) to resolve GST issues and glitches.