Bombay High Court Dismisses Writ Petition Challenging Show Cause Notice in GST Case — No Interference at Threshold Stage as Notice Not Ex-Facie Without Jurisdiction. Statements recorded before issuance of show cause notice are not recorded in course of enquiry or proceedings under CGST Act, but noticee must first respond to notice and raise all defences before adjudicating authority.

Writ petition under Article 226 of the Constitution of India challenging a show cause notice-cum-demand notice issued under the Central Goods and Services Tax Act, 2017.

Quashing of the show cause notice dated 5 April 2024 and prohibition on the respondents from proceeding further based on it.

The petitioner contended that the show cause notice was based on statements recorded in 2018-19 during the pre-GST regime, which were not recorded during any enquiry or proceedings and thus constituted no evidence, making the notice non-est in law.

A co-ordinate bench of the Bombay High Court in the petitioner's own case (Prakash Raghunath Autade v. Union of India, 2022 (380) E.L.T. 264 (Bom.)) had held that statements recorded before issuance of a show cause notice are not recorded in the course of an enquiry or proceedings, and no right to cross-examine arises before reply. However, the show cause notice was not quashed in that decision.

Whether the show cause notice dated 5 April 2024 is ex-facie without jurisdiction and liable to be quashed at the threshold stage. Whether the statements recorded before the issuance of the show cause notice can be relied upon as evidence. Whether the petitioner must exhaust the alternate remedy of responding to the show cause notice before approaching the writ court.

Petitioner: The show cause notice is based mainly on statements recorded in 2018-19 during the pre-GST regime, which are not recorded during any enquiry or proceedings and thus constitute no evidence; the notice is non-est and should be quashed. Respondents: The show cause notice is not based solely on those statements; other material from the investigation exists; the petitioner should raise all defences in reply to the notice; the issue of admissibility can be decided during adjudication.

A show cause notice cannot be interfered with at the threshold stage unless it is ex-facie without jurisdiction, violates principles of natural justice, or infringes fundamental rights. Statements recorded before the issuance of a show cause notice are not recorded in the course of an enquiry or proceedings, but the noticee must first respond to the notice and raise all permissible defences before the adjudicating authority. The alternate remedy of filing a reply and, if aggrieved, an appeal must be exhausted.

Unless a case of the impugned show cause notice being ex-facie without jurisdiction is made out, we are usually not inclined or required to interfere at the stage of issue of the show cause notice. In Whirlpool (Supra), the Hon’ble Supreme Court has explained that writ petitions may be entertained against show cause notices where the Petitioner seeks enforcement of any of the fundamental rights, where there is a violation of the principles of natural justice, or where the order or proceedings are wholly without jurisdiction or vires of the Act, is challenged. Prakash Raghunath Autade (Supra) ... was in the context of the petitioner’s insistence to cross-examine the person who had made the statements before issuing the show cause notice... The Court held that once the show cause notice is issued, it is for the petitioner to deny and dispute the allegations levelled therein and, if he so chooses, to raise such defence as he may be advised.

The petitioner filed Writ Petition No.14128 of 2024 before the Bombay High Court challenging the show cause notice dated 5 April 2024. The petition was heard on 14 October 2024 by a Division Bench comprising M.S. Sonak and Jitendra Jain, JJ. The court dismissed the petition, granting eight weeks to file a reply to the show cause notice.

• Central Goods and Services Tax Act, 2017: Section 14