HC Nullifies Same-Day SCN Order Lack of Response Opportunity

HC Sets Aside Same-Day SCN Order Due to Lack of Response Time

By: Admin
September 16, 2024
Categories: Important Pronouncements
4 Min Read

In M/s. Pithamber Distributors v. Assistant Commissioner (ST), Chennai [W.P. No. 11337 of 2024, dated April 30, 2024], the Madras High Court canceled an order due to the petitioner’s lack of time to respond to the Show Cause Notice (SCN). The court emphasized that Section 73(2) of the CGST Act requires authorities to wait three months between issuing the SCN and passing the order. However, in this case, both the SCN and the order were issued on the same day, which violated this rule.

Case Overview

M/s. Pithamber Distributors (“the Petitioner”) challenged the order issued on December 31, 2023 (“the Impugned Order”). The Petitioner argued that the Revenue Department (“the Respondent”) did not follow natural justice principles. Issuing the SCN and the Impugned Order on the same day denied the Petitioner sufficient time to respond. Additionally, the Petitioner pointed out that Section 73(2) of the CGST Act mandates a reasonable period for responding to the SCN.

Court’s Decision

The Madras High Court ruled in favor of the Petitioner. The court found that issuing both the SCN and the Impugned Order on the same day failed to provide a reasonable opportunity for a response. Consequently, the court set aside the Impugned Order.

Analysis

Under Section 73(2) of the CGST Act, for tax matters up to FY 2023-24, authorities must issue the SCN under Section 73(1) at least three months before the due date for the final order. This order must be issued within three years from the annual return filing date. For cases involving tax fraud under Section 74, the SCN must be issued six months before the final order, which should be within five years from the erroneous refund or return.