We would like to highlight an insight from the recent judgment of Madhya Pradesh HC wherein the premise of SCN, opportunity for cross-examination and the grounds for invoking Section 74 of CGST Act were discussed.
M/S PANJON LIMITED VERSUS COMMISSIONER CGST AND CENTRAL EXCISE [2025 (3) TMI 836 – MADHYA PRADESH HIGH COURT]
- In the captioned case, the Hon’ble HC has discussed the criticality of a valid SCN. HC has stated that the show cause notice forms the foundation of any proceeding. If the said foundation i.e. SCN is not in accordance with the provisions of law, the subsequent or consequential proceedings shall not sustain. In order to support this view, HC also referred to the legal maxim i.e. ‘sublato fundamento caditopus’ which means if the foundation is removed, the structure developed on the same shall fall apart. Hence, if the basis of a proceeding i.e. SCN is invalid, all consequential acts/actions/orders would automatically will become invalid. The said principle shall apply to judicial, quasi-judicial and administrative proceedings.
Further, HC highlighted that if an Order is invalid since its inception, the same cannot become valid at a subsequent stage. The subsequent action/development cannot validate an action which was not valid/lawful at its inception.
- Another aspect which HC dealt in this case is with respect to opportunity for cross-examination. In the said regard, HC held that if the taxpayer intends to cross examine a witness whose statement has been relied upon in the proceedings, the denial of said request turns out to be a violation of principle of natural justice.
- With respect to invocation of Section 74 of CGST Act, HC stated that wherein the investigation indicates of material evidence of fraud or wilful-misstatement or suppression of fact to evade tax on the part of the taxpayer, in such cases only Section 74 can be invoked. Also, such evidence shall form part of SCN.
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