GST Dept cannot go beyond the scope of SCN at a later stage of Adjudication: Jharkhand HC [Read Order]

In a significant case, the Jharkhand High Court ( HC ) has held that the GST department cannot go beyond the scope of a Show Cause Notice( SCN ) at a later stage of adjudication.

CJ Darcl Logistics Limited, the petitioner is a public limited company engaged in the business of providing inter goods transportation agency (GTA) services under reverse charge mechanism (RCM) bearing GSTIN 20AAACD2086J2ZZ in the State of Jharkhand. The petitioner is registered for the same services vide another registration in the State bearing GSTIN 20AAACD2086J1Z0, but under the forward charge mechanism (FCM).

On account of a bonafide mistake, the petitioner deposited an amount of IGST of Rs.2,39,705/- CGST of Rs.83,86,310/- and SGST of Rs.83,86,310/- totalling Rs.1,70,12,325/- in its electronic cash ledger [About the RCM registration] instead of depositing it in the cash ledger of the GSTIN 20AAACD20866J1Z0 [about FCM registration]. The petitioner again deposited the same amount in the electronic cash ledger of the FCM registration to file the GSTR-3B return. As there was a double payment and the amount was lying as an excess balance in the electronic cash ledger of the petitioner, an application for refund in FORM GST RFD-01 was filed on 18.04.2021.

The petitioner proceeded against a show cause notice dated 17th May 2021 on an application for a refund under Section 54 of the CGST Act, 2017 in respect of his registration GSTIN registration No. 20AAACD2086J2ZZ. The petitioner claims that the following communication was sent to him on his portal to furnish a reply within 15 days of receipt of the notice.

The adjudicating authority proceeded to decide the SCN taking into account the aforesaid illegality committed by the petitioner by obtaining two GSTIN numbers in respect of which the first one GTA services were under reversed charged mechanism @ 5% RCM without ITC and the second one providing GTA under forward charge mechanism @ 12% FCM with ITC.

The applicant had not paid the aforesaid amount in terms of Section 49(1) of the CGST Act, 2017 and had not maintained an ‘Electronic Cash Ledger’ in terms of Subsection (6) of Section 49, The AO held that he had failed to fulfil the laid down conditions under Section 54(1) of the CGST Act read with Rule 89 (1) of the CGST Rules, 2017 as such his application for refund was rejected

It was evident that regarding none of the grounds on which the OIO has been passed, there is any allegation made in the show cause notice. It is a settled principle of law that if an allegation or ground is not made at the time of issuance of show cause notice, the authority cannot go beyond the scope of show cause notice to create new ground at the later stage of adjudication.

A single-member bench comprising Justice Deepak Roshan observed that the order of adjudication is bad in law since it has been passed beyond the scope of show cause notice and set aside the impugned show cause notice dated 17th May 2021. While allowing the appeal, the Court quashed the consequent order in the original dated 14.06.2021.

To Read the full text of the Order CLICK HERE

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