Valid GST Notice Must Disclose Details And Basis of Liability: Punjab & Haryana High Court

The Punjab & Haryana High Court on 2 April held that a GST show cause notice lacking specific allegations, supporting material, and proper reasoning is legally unsustainable and violates principles of natural justice.

A Division Bench comprising Justice Deepak Sibal and Justice Alka Sarin set aside a show cause notice issued to Abbott Healthcare Pvt. Ltd., observing:

“Before raising a demand, the purpose of putting an assessee to notice, is to make the assessee aware of the department's intent to enable the assessee to effectively respond. A vague notice does not fulfil such object. Serving of a non-specific notice is nothing but an empty formality which does not fulfil the afore object and is even otherwise, violative of the principles of natural justice.”

Abbott Healthcare challenged the show cause notice dated 31 January 2024, issued under Section 73 of the CGST Act, alleging that the Department had wrongly allowed Input Tax Credit (ITC) based on audit observations.

It argued that the notice was vague and lacked essential particulars, including invoice-wise details, specific transactions, and the basis for computing the alleged liability. It further contended that the officer merely reproduced audit findings without independently applying mind, depriving the company of a meaningful opportunity to respond.

The High Court observed that a valid show cause notice must clearly set out the allegations, the material relied upon, and the basis for arriving at the proposed demand. Mere reproduction of audit objections or tabulated figures, without disclosing how the liability has been determined, does not satisfy the legal requirements.

The Bench noted:

“....Section 73(3) of the CGST Act makes it clear that 'details' of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised have to be brought to the assessee's notice through the show cause notice issued to the assessee under such provision.”

Emphasising the principles of natural justice, the Bench held that a taxpayer must be put to notice with sufficient clarity to enable an effective reply. In the absence of such particulars, proceedings initiated on the basis of a defective notice cannot be sustained.

The Court further observed that “the impugned show cause notice is not only based on a wrong premise but is also found to be utterly vague and bereft of any details as are required to be furnished under Section 73(3) of the CGST Act.”

Accordingly, the Bench set aside the notice and granted the Department liberty to initiate fresh proceedings in accordance with law.

For Petitioner: Advocates, Bharat Raichandani, Rana Gurtej Singh, Marmik Kamdar 

For Respondent: Sourabh Kapoor, Addl. A.G., Punjab and Advocates, Brijesh Mittal, Simranpreet Singh