Demand Order cannot be passed without issuance of SCN

The Hon’ble Himachal Pradesh High Court in the case of M/s. Microtek Himachal Power Products (P.) Ltd. v. State of Himachal Pradesh[CWP No. 5562 of 2023 dated June 26, 2024] disposed the writ petition and directed that the erroneous order passed with wrong description be treated as Show Cause Notice (“the SCN”) and be further adjudicated upon after the filing of reply to the deemed SCN.

Facts:

M/s. Microtek Himachal Power Products (P.) Ltd. (“the Petitioner”) filed a writ petition against the order dated June 20, 2023 (“the Impugned Order”) issued in Form GST DRC-01 passed under Section 74(9) of the Central Goods and Services Act (“the CGST Act”) contending that no prior SCN has been issued before the passing of Impugned order mandated under Section 74(1) of the CGST Act and thereby the Impugned Order passed is in violation of principles of natural justice.

However, the Revenue Department (“the Respondent”) contended that there has been error on the part of the Respondent officer, as the portion of the SCN has been mentioned as if there is determination of tax, interest and penalty.

Issue:

Whether demand order can be passed without the issuance of SCN?

Held:

The Hon’ble High Court in the case of CWP No. 5562 OF 2023 accepted the submissions made by the Respondent and directed that the Impugned Order shall be treated as SCN issued to the Petitioner. Further, the Hon’ble High Court is directed to file the reply to deemed SCN within the period of four weeks. 

Our Comments:

The Hon’ble Jharkhand High Court in the case of Prity Dokania Sole Proprietor of M/S Samridhi Enterprises v. The State of Jharkhand [W.P.(T) No. 745 of 2021 dated September 14, 2022] and Hon’ble Allahabad High Court in the case of M/s. Yash Building Material v. State of UP and Ors. [Writ Tax No. – 1435 of 2022 dated January 31, 2024] inter-alia held that orders demand tax, interest and penalty thereof, cannot be passed without the issuance of SCN. 

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