The Gujarat High court while imposing the cost of Rs.20,000 on GST Department held that the Issuance of an illusory Pre-Show-Cause Notice for consultation only two hours before the hearing is arbitrary.
The petitioners, Dharamshil Agencies by way of the present petition, have challenged the legality and validity of the show-cause notice dated 12.4.2019 issued by the respondent, the Additional Commissioner of Central Goods, and Service Tax, Ahmedabad.
Mr.Paritosh Gupta for the petitioners, placing heavy reliance on the Circulars issued by the Central Board of Excise and Customs from time to time and more particularly the Customs’ Circular dated 10.3.2017 on the show-cause notices, vehemently submitted that the said circulars mandate a pre- show-cause notice consultation before the issuance of show-cause notice, in order to promote voluntary compliance and to reduce the necessity of issuing show-cause notice, however, an illusory pre-show-cause notice was issued on 12.4.2019, delivering the same to the petitioner at 13.55 hours, calling upon the petitioner to remain present before the respondent at 16.00 hours for the pre-show-cause notice consultation.
Mr.Gupta submitted that the petitioners requested the respondents to provide reasonable opportunity for effective pre-show-cause notice consultation as the time granted to the petitioner was too short, the respondent issued the show-cause notice on the same day on 12.4.2019.
According to Mr.Gupta, such conduct on the part of the respondent authority was not only arbitrary, high-handed, and unjust, but in blatant violation of mandatory procedure and pre-condition prescribed by the Board for pre-show-cause notice consultation.
Advocate Mr. Dhaval Vyas for the respondents submitted that during the course of the audit, certain deliberations and discussions had taken place with the petitioner firm to promote voluntary compliance, however, the clarification tendered by the petitioner firm having been found to be unsatisfactory by the audit officers, the final audit report was issued on 28.2.2019 towards the non-payment of the service tax.
According to Mr.Vyas, the respondent authorities had given ample opportunity to the petitioners and had even tried to reduce the need to issue the show-cause notice by adhering to the procedure envisaged in the Circular dated 10.3.2017. In view of the said Circular the petitioner firm was issued the pre-show-cause notice on 12.4.2019, however, the petitioners sought time with a view to see that the demand made by the respondent authorities gets time-barred, in light of the fact that the returns for the relevant period were filed on 15.4.2014 and the five years for invoking the Section 73(1) of the Finance Act, 1994 would be over on 15.4.2019.
The division bench of Justice Bela M. Trivedi and Justice A.C.Joshi sets aside the impugned notice on the ground that the petitioners were not granted an adequate opportunity for the consultation prior to the issuance of the said notice. The parties are relegated to the stage prior to the issuance of the impugned show-cause notice.
“Before parting the Court is constrained to observe that such an action on the part of the respondent in issuing the illusory pre- show-cause notice for consultation only two hours before the hearing is not only arbitrary but is in utter disregard and in contravention of the very object and purpose of the circular dated 10.3.2017, which mandated such consultation with the assessee as an important step towards trade facilitation, for promoting voluntary compliance and for reducing the necessity of issuing show-cause notice. The action of the respondent authority in not taking timely action after the audit report and in issuing the impugned notice in contravention of the mandatory instructions given by the Board, therefore, is required to be seriously viewed. The present petition, therefore, is allowed, subject to the payment of the cost of Rs.20,000/- to be deposited by the respondent in the Court within eight weeks from today. On such deposit being made, the office shall pay Rs.10,000/- to the petitioners and shall deposit the remaining Rs.10,000/- with the Gujarat State Legal Services Authority,” the court said.
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