By CA Ritesh Arora
No, the Honorable Allahabad High Course in the case of Yash Building Material v. State of Uttar Pradesh [Writ Tax No. 1435 of 2022 dated 31.01.2024], held that a demand order passed without the issuance of a Show Cause Notice is without legal basis and are required to be quashed.
The Honorable Allahabad High Court directed that the Respondents proceed in the matter after issuing SCN under Section 74(1) of the UPGST Act and held that proper SCN was not issued to the Petitioner. Therefore, all the impugned orders were quashed and set aside.
Author’s comment
Important to highlight here is that the intimation in Form DRC-01A issued under section 73(5)/ 74(5) is communication of liability ascertained by the Proper officer and by no measures of standard can be same be regarded as the Show Cause Notice issued to demand and recover dues from the taxpayers.
The taxpayer is denied justice at the threshold itself by not issuing a SHOW CAUSE NOTICE to create any demand and recover taxes. Similar views were given by Honorable Apex Court in the case of Menaka Gandhi v. UIO & Ors AIR 1978 SC 597; State of Orissa v. Dr(Mrs). Binapani Dey and Ors. AIR 1967 SC 1269.
Another common issue surfacing is the issuance of DRC-01 (summary of demand) without SCN. Most of the state authorities are following this practice. This practice is contrary to the law and the judicial pronouncements where justice is denied to the first step itself to demand and a recover taxes along with interest and penalty without issuing a valid SCN.
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