Pre-SCN reply must be considered before issuing SCN in GST cases – Calcutta HC.

In the case of M/s Jyoti Tar Products Private Limited & Anr. vs. The Deputy Commissioner, State Tax, Shibpur Charge, WBGST & Ors., the Calcutta High Court addressed the issue of whether tax authorities must consider a taxpayer’s pre-show cause notice (pre-SCN) reply before issuing a formal show cause notice (SCN) under the Goods and Services Tax (GST) framework.

Background:

The petitioner, M/s Jyoti Tar Products Private Limited, received an intimation alleging wrongful availment of Input Tax Credit (ITC) on inward supplies from suppliers who were purportedly unregistered or non-existent. In response, the petitioner submitted a detailed reply to this pre-SCN intimation, providing evidence to support the legitimacy of their ITC claims. Subsequently, the tax authorities issued a formal SCN under Section 74 of the CGST/WBGST Act, 2017, without addressing the points raised in the petitioner’s pre-SCN reply.

Court’s Findings:

The High Court observed that the SCN was essentially a replica of the earlier intimation and failed to consider the petitioner’s detailed pre-SCN response. The court emphasized that tax authorities are obligated to evaluate and address the taxpayer’s submissions made in the pre-SCN reply before proceeding to issue a formal SCN. By neglecting to consider the petitioner’s initial response, the authorities violated principles of natural justice.

Judgment:

The court quashed the SCN and remanded the matter back to the assessing authority. It directed the authority to duly consider the petitioner’s pre-SCN reply, address the issues raised therein, and then decide whether to issue a formal SCN under Section 74(1) of the CGST/WBGST Act, 2017.

This ruling underscores the necessity for tax authorities to engage with and consider taxpayers’ pre-SCN submissions, ensuring adherence to principles of natural justice before initiating formal adjudication proceedings.