Facts of the Case

The petitioner, a contractor who had executed various civil works for the Municipal Corporation (respondent no. 4) on a contract basis, filed this writ petition under Article 226 of the Constitution of India before the High Court of Andhra Pradesh at Amaravati. The petitioner had filed GST returns and GSTR-3B for the corresponding bills as and when TDS was deducted by respondent no. 4, since the contract amounts were not paid at once. Respondent no. 3, the Assistant Commissioner (ST), issued a show cause notice dated 12.01.2022 (GST No. 37AMQPS9417N1ZU) invoking Section 74 of the CGST Act, proposing tax, interest and penalty. The petitioner filed a reply on 31.01.2022 by registered post, but no decision had been taken on it even by the time of the hearing, nearly two years later.

Issues Involved

  1. Whether the show cause notice issued under Section 74 of the CGST Act was illegal, arbitrary and violative of natural justice and Article 14 for want of a decision despite the petitioner's reply having been filed.
  2. Whether a writ court should intervene on the merits of a pending show cause notice, or confine itself to directing timely adjudication.

Petitioner's Arguments

  • The show cause notice dated 12.01.2022 issued under Section 74 of the CGST Act was illegal, arbitrary, violative of principles of natural justice, and violative of Article 14 of the Constitution.
  • Sought a mandamus restraining respondent no. 3 from taking any further action pursuant to the notice.
  • The delay in payment stemmed from the Municipal Corporation's own failure to pay the contract amounts on time, not from any suppression by the petitioner, and GSTR-3B was filed as and when TDS was deducted.
  • A reply had already been filed on 31.01.2022 by registered post, yet no decision had been taken for nearly two years, causing continuing uncertainty.

Respondent's Arguments

  • Once the show cause notice had been issued and the petitioner had filed a reply, the competent authority should be permitted to pass appropriate orders in accordance with law.
  • No opposition was raised to a direction fixing a timeline for disposal of the pending matter.

Court Order/Findings

  • Since the petitioner had already filed a reply and the matter was still pending before the competent authority, the Court was not inclined to entertain the writ petition to run parallel proceedings.
  • The interest of justice would be met by directing the competent authority to decide the pending show cause notice, rather than quashing or otherwise interfering with it at the threshold.
  • Respondent no. 3 was directed to decide the pending matter, after considering the petitioner's reply, within six weeks from receipt of a copy of the order.
  • The petitioner was directed to produce a copy of the order along with a copy of the reply before the authority within one week; no costs were awarded.

Important Clarification

  • Writ courts are generally reluctant to quash a Section 74 show cause notice at the threshold once the taxpayer has filed a reply to it; the appropriate relief in such cases is a direction for timely disposal, not an injunction against the notice itself.
  • Where a reply is pending consideration, courts will decline to run a parallel merits-based challenge to the show cause notice alongside the departmental adjudication.
  • A concrete timeline fixed by the court (six weeks here) gives taxpayers facing prolonged inaction on SCN replies a workable benchmark to seek similar mandamus relief.

Sections Involved

  • Section 74, CGST Act, 2017 – determination of tax not paid or short paid by reason of fraud, wilful misstatement or suppression of facts.
  • Article 226, Constitution of India – writ jurisdiction invoked to challenge the show cause notice.
  • Article 14, Constitution of India – equality clause invoked to allege arbitrariness in the notice and its non-disposal.

Decision – In Favour of

Disposed of with directions, in part in favour of the Assessee. The challenge to the show cause notice itself was not accepted, but the petitioner secured a binding, time-bound direction for the pending reply to be considered and decided.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Andhra Pradesh at Amaravati
  • Case No.: Writ Petition No.29827 of 2023
  • CNR: Not available on record
  • Coram: Hon'ble Sri Justice Ravi Nath Tilhari and Hon'ble Sri Justice A.V. Ravindra Babu
  • Decision Date: 13.12.2023
  • Disposal Nature: Disposed of - authority directed to decide the pending Section 74 GST show cause notice

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