The manner of adjudication proceedings is laid down under the statutory provisions of tax. The starting stage of adjudication proceedings is the scrutiny of returns or records of the taxpayers. If any discrepancy observed or found in the returns then it is required to be intimated to the taxpayers for clarification thereafter a show cause notice may be issued. The show cause notice should based on relied upon documents of the taxpayers with justified grounds.

Statute under GST: Section 67(3) prescribes the documents, books or things referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.

Section 67(5) prescribes the person from whose custody any documents are seized under sub section (2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an authorised officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.

Thus, the relied upon documents is the basic foundation of show cause notice. The adjudicating authority should exercise their power on the basis of supported documentary evidence on record. The adjudicating authority should thoroughly examine the reply of the taxpayers after thorough verification of the relevant documents and subsequent discussion in the personal hearing then only pass the final order. It is to be noted that relied upon documents have gathered by the adjudicating authority is subject to supply to the taxpayers for cross examination, if the taxpayers asked for the same. Sometimes the adjudicating authority fails to supply relied upon documents relating to show cause notice or subsequent pass of final order. In case non-supply of relied upon documents by the proper officer, it becomes violation of principles natural justice. The taxpayers may move to Hon’ble High Court to get remedy against the non-supply of relied upon documents for cross examination / verification.

Therefore, the non- supply of relied upon documents by the adjudicating authority is the violation of natural justice and subject to challenge before the Hon’ble Court. The few such cases of the taxpayers were challenged are discussed as under:

The Hon’ble High Court of Karnataka in the case of Mozart Global Furniture v. State Officer (Intelligence), reported in 2020(33) G.S.T.L.3 (Ker.), wherein held that “On a consideration of the facts and circumstances of the case as also the submissions made across the bar, I find that, although belatedly, the petitioners have approached the 1st respondent with applications for supply of copies of the documents seized from their premises, and relied upon while issuing Ext.P1 notice to them. Inasmuch as the adjudication proceedings pursuant to Ext.P1 notice have not commenced, and a denial of the request of the petitioners for copies of the documents seized from their premises would tantamount to a violation of the rules of natural justice. On the petitioners approaching the 1st respondent within a period of two weeks from today, the 1st respondent shall furnish to them copies of the documents seized from their premises, and reliance on which is placed in Ext.P1 notice,within a week from the date of the petitioners approaching the 1st respondent.”

The Hon’ble High Court of Bombay in the case of High Ground Enterprises Limited v. Union of India, reported in 2020(33) G.S.T.L.169(Bom.), in the light of the provision of Section 67(5) of the Act creating right in the person, the denial of copies must be a reasonable action. The legislative intent is clear that the documents or books seized must not be kept in the custody of the officer for more than the period necessary for its examination and copies thereof need to be given to the person from whose custody the said documents or books are seized. The reasonableness of the action depends on the facts of each case. If the right to get copies of the documents and the power of the authorities to refuse the same has to be balanced, then the balance may shift by the passage of time and continuing withholding of copies can become unreasonable assuming it is justified at the inception. The documents were seized in January, 2019, and the petition is being heard in the middle of August, 2019. The prejudice to the petitioner has been demonstrated. In these facts and circumstances, we are of the opinion that refusal by the respondent-authorities to give copies of the documents to the petitioner which are seized under Panchanama dated 9/10 January, 2019 is not justifiable and the petitioner is entitled to the mandatory direction as prayed for. In the circumstances, we make the Rule absolute by issuing a mandamus to the respondent-authorities to furnish copies of the documents seized under Panchanama dated 9/10 January, 2019 within two weeks. The period of two weeks will commence from the date this order is uploaded on the server of this Court.

The Hon’ble Gujarat High Court in the case of M. G. M. Metalisers Ltd v. Union of India, reported in 2018 (10) G.S.T.L. 537(Guj.), held that “in the result, petition is allowed. Impugned order dated 31-1-2017 is set aside. The proceedings are remanded back to the adjudicating authority for fresh consideration and disposal in accordance with law. He shall supply copies of all documents relied upon in the show cause notice and upon which he proposed to place reliance.”

The Hon’ble High Court of Rajasthan in the case of Patron Defective and Security Services v. C.C.E & S.T., Jaipur, reported in 2018 (8) G.S.T.L.133( Raj), held that It is well-settled principle of law that the person who is to take an action is required to supply basic documents, which sought to be relied upon. The documents though referred in the show cause notice were not given to the assessee by the Tribunal. In that view of the matter, we remit back the matter to the first authority. The petitioner will appear before the first authority on 6-11-2017 and authority will settle the matter within a period of four weeks and reply after the documents are supplied to the appellant. Reply will be filed if required within the period of three weeks from receipt of the documents. Therefore, issue No. 1 is answered in favour of assessee.”

The Hon’ble High Court of Madras in the case of S.Vardharajan v. Commissioner of Customs, reported in 2019(370) E.L.T.194(Mad.), held that “ Right to seek certain documents from the department during the enquiry, can be considered as vested right, if those documents are relied upon by the department in the show cause notice. Certainly, such of those documents, which are relied upon as the basis for issuing show cause notice, if sought for by the other side, need to be given, as a matter of following the principles of natural justice. In other words, the department cannot rely upon certain documents to proceed against the other person without furnishing copies of such documents to him, so as to enable such person to defend the enquiry effectively. At the same time, if the department has not relied on certain documents, which are sought to be furnished by the other side, certainly, there is no vested right on the person to seek such documents in the domestic enquiry/adjudicatory proceedings. The right to seek a document under the Right to Information Act cannot be equated with a right to seek a document in the domestic enquiry/adjudicatory proceedings, since both the rights are not on the same footing and on the other hand, they are on different context. Under the Right to Information Act, a person seeking certain documents need not give any reason for his requirement. However, if the documents sought under RTI application is either prohibited or exempted document as contemplated under Section 8 of the said Act, the same need not be furnished. That is not the case in domestic enquiry/adjudicatory proceedings, where, when a person seeks certain documents for participating in the enquiry and when the department contends that such documents are not relied upon document in the show cause notice, it is not as a matter of right that such person can compel the department to part with such document. Therefore, it cannot be stated that the principles of natural justice is violated by not furnishing those documents, when admittedly they are not relied upon documents by the Revenue.”

The Hon’ble High Court of Bombay in the case of BNS Import Export v. Union of India, reported in 2018 (362) E.L.T.398 (Bom.), held that In the above view, the impugned order dated 17th May, 2012 passed by the Joint Director General of Foreign Trade and the impugned order dated 27th March, 2017 passed in Appeal by the Additional Director General of Foreign Trade are quashed and set aside. The show cause notice dated 27th April, 2012 issued by the Joint Director General of Foreign Trade is restored to file of the Joint Director General of Foreign Trade for fresh disposal after following the principle of natural justice that is giving to the Petitioner’s copy of relied upon document and hearing the Petitioner before disposing of the show cause notice dated 27th April, 2012 in accordance with law.”

Conclusion: Therefore, the supply of relied upon documents is one of the basic requirement to issue show cause notice. The show cause notice without such documents cannot be sustained and can be challenged by the taxpayer. The adjudicating authority also cannot deny the supply of relied upon documents to the taxpayers, who asked for the same. The relied upon documents helps to the taxpayers to cross examine the allegation raised in the show cause notice. If the adjudicating authority fails to provide relied upon documents, it is violation of principle of natural justice, show cause notice or demand unsustainable under tax law.

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Ramesh Jena
B.A. (Hons.), M.A. (Eco.), D.M.M., LL.B. ADVOCATE & TAX CONSULANT
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