FACTS & SUBJECT MATTER: The appellants were issued a show cause notice intimating certain discrepancies on 30th December, 2022. The allegation was that the appellants had availed/utilised input tax credit during the financial year 2018-19 on supplies whose registration was cancelled retrospectively. The other allegation was that the appellants had claimed input tax credit arising out of debit notes by suppliers, who have not filed GSTR3B Returns during the financial year 2018-19. The appellants were granted 30 days time to file their reply. The appellants, within the time permitted, submitted their reply on 10th February, 2023 placing necessary information. After receipt of the reply, in which the assessee had pointed out that relevant details have not been furnished, the assessing authority issued another notice dated 1st March, 2023 and purported to have enclosed the relevant details. Thereafter the appellants had submitted their reply to the notice of intimation of discrepancies on 13th March, 2023.
Subsequently, the authority had issued a pre-show cause notice dated 31st March, 2023 in Part A of Form GST DRC-01A. In the said pre-show cause notice, the allegations as mentioned in the notices intimating
discrepancies were reiterated. The appellants were advised to pay the tax, as ascertained, failing which, show cause notice will be issued under section 73(1) of the Act. The appellants had submitted their reply to the preshow cause notice on 11th April, 2023 on perusal of which it appears that it is a very detailed reply giving all the factual details and also placing reliance on certain decisions of this Court as well as the Hon’ble Supreme Court. The appellants specifically sought for an opportunity of personal hearing.

CASE LAW: M/s. Diamond Beverages (P.) Ltd. v. Assistant Commissioner of CGST & CX [M.A.T. No. 1948 of 2023 and I.A. No. CAN of 2023 dated December 15, 2023]

ISSUE : Whether Show Cause Notice can be set aside if issued without due application of mind?

HELD: The Calcutta High Court held as under:
(1) Observed that, the submissions made by the appellants in their reply to the Impugned pre-SCN appear to have been considered. However, on closer scrutiny of the Impugned SCN, it is seen that except extracting the reply given by the appellants, the authority has not dealt with the contentions, which were placed by the appellants in the reply to the Impugned pre-SCN. Thus, this would be sufficient to hold that the Impugned SCN has been issued without due application of mind.
(2) Noted that, the Impugned SCN was issued without due application of mind, without considering the reply to the Impugned pre-SCN, and without conducting any inquiry or investigation at the supplier’s end, the Impugned SCN would call for interference. Directed that the Respondent shall, first inquire/investigate the matter from the supplier’s end, collect the necessary information, afford an opportunity to the Petitioner to put forth further submission on such and allow the personal hearing and then proceed to decide as to whether the Impugned SCN under Section 73(1) of the CGST Act has to be issued or otherwise.
(3) Held that, both appeal and writ petition were allowed. The matter was remanded back the matter to the Respondent to the stage of the Impugned pre-SCN. Hence, the impugned SCN was set aside.