The Calcutta High Court recently held that although the authorities acknowledged the appellants’ response to the pre-show cause notice, they failed to address the contentions presented by the appellants, thereby quashing the GST Show Cause Notice ( SCN ) against Coca Cola bottling partner Diamond Beverages for alleged improper utilization of Input Tax Credit ( ITC ).
The petitioner M/s. Diamond Beverages (P.) Ltd. had received a Show Cause Notice dated alleging improper utilization of input tax credit ( ITC ) from suppliers who had not filed FORM GSTR-3B returns and whose registration was retrospectively canceled.
The Petitioner responded within the stipulated 30 days, providing necessary information. However, the authority issued a pre-show cause notice in Part A of Form GST DRC-01A dated March 31, 2023. Despite the Petitioner’s reply and request for a personal hearing, the Revenue Department-Respondent issued an order under section 73(1) of the Central Goods and Services Act, 2017 ( CGST Act ) without addressing the Petitioner’s contentions.
Ankit Kanodia Megha Agarwal, Jitesh Sah appeared for the appellants whereas the Union of India was represented by Vipul Kundalia and Soumen Bhattacharjee while Kaushik Dey and Ekta Sinha appeared for the CGST Authorities.
Challenging the Impugned Order and SCN, the Petitioner filed a writ petition, arguing that the Respondent should investigate the matter by considering relevant details at the supplier’s end. The lack of such an investigation would result in incomplete facts, rendering the issuance of any SCN premature. In this case, the Respondent did not conduct such an inquiry, proceeding to issue the Impugned SCN.
The court observed that while the appellants’ submissions in response to the Impugned pre-SCN were seemingly considered, a closer examination revealed that the authority failed to address these contentions in the Impugned SCN. This led to the conclusion that the SCN was issued without proper consideration.
Highlighting that the SCN lacked due consideration, investigation at the supplier’s end and inquiry into the response to the Impugned pre-SCN, the court directed the Respondent to conduct a thorough inquiry, gather necessary information, provide an opportunity for further submissions, allow a personal hearing, and then decide whether to issue the Impugned SCN under Section 73(1) of the CGST Act.
In summary, the Division Bench of Justice T. S. Sivagnanam and Justice Hiranmay Bhattacharyya allowed both the appeal and writ petition, remanding the matter to the Respondent at the stage of the Impugned pre-SCN and setting aside the Impugned Show Cause Notice.
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