ISSUE
One of my clients is a management consultant engaged in providing advice and consultancy in the field of different areas of management. He has been paying GST and filing GST returns regularly. Since in respect of certain transactions, he did not deposit GST. The department issued show-cause notice (SCN) which is pending adjudication. The department has now issued another show-cause notice alleging that the amount recovered as reimbursement from the client has not been included in the value of taxable service shown in the GST return by my client. Please advice whether more than one show-cause notice can be issued in respect of the same assessee for the same period.
LAW POSITION
As per section 73/74 of the CGST Act’2017, where any GST has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason,, the Proper (GST) Officer may serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder. Section 73 is for normal genuine cases of mistake whereas cases of fraud etc are covered in Section 74.
There is no restriction in the above said provisions regarding the number of short show-cause notices which can be issued. The object behind issuing show levied or short paid. If after issuing one show-cause notice, the cause notice is to recover tax not levied or short levied the assessee, it can issue another show-cause notice for recovery of the department comes across further incriminating facts and material against tax not/short paid.
Of course, there is restriction of the time period for issuing show-cause notice which is 3 months prior to three years in normal case and 6 months prior to five years in cases involving fraud, or any wilful-misstatement or suppression of facts to evade tax. But there is no restriction on the number of show cause notices that can be issued by the department.
In the instant case, the first show-cause notice was pertaining to recovery of tax on certain amounts received by assessee in respect of certain transactions in respect of which tax was not paid and the second show cause notice pertains to non-payment of tax on the reimbursements received by assessee from his clients. Hence the department is not wrong in issuing more than one show-cause notice.
RELEVANT CASE LAWS FROM INDIRECT TAXES
In Garibdasji Distributors vs Commissioner of Central Excise, Coimbatore, (2008) 11STR 145 (CESTAT-Chennai) / 2008 TaxPub(ST) 0426 (CESTAT-Chen), by a second show-cause notice, department raised a demand of differential tax by adding to taxable value certain amount of expenses reimbursed to assessee by their principal (manufacturer). Assessees contended that it was not open to the department to reopen assessment already approved by way of issue of show-cause notice.
The Tribunal held that assessees had filed service tax returns, albeit belatedly, but those returns had returned only the amounts received as commission from principal. The reimbursed expenses were not returned. The department was, therefore, very much within their right to demand tax which escaped assessment and this was precisely what they did by issue of show-cause notice.
In the case of India Tourism Development Corportion Ltd vs Delhi Administration (2017) 52 STR 229 (HC – Del.) / 2017 TaxPub(ST) 1065 (Del-HC), Delhi High Court has held that quasi- judicial authority cannot review its earlier decision unless power of review is conferred by statute. The Collector of Central Excise while adjudicating upon the first show cause notice was clearly performing quasi-judicial function Second SCN after gap of five years cannot be issued once first SCN is adjudicated, became final and accepted by both parties.
In the case CCE vs Prince Gutka Ltd. (2017 ) 52 STR 83 (SC) / 2017 TaxPub(ST) 1023 (SC) , CESTAT has held that there could not have been second show cause notice on the same cause of action on which adjudicating authority had dropped the earlier demand . Supreme court has held that issue of second SCN on same cause of action is not permissible and that there was no error on Tribunal ‘s order setting aside demand under second SCN.
CONCLUSION
In view of provisions of section 73 or 74 of the act it appears that issue of second SCN by the proper officer on the same ground amount to review of its earlier order. The proper officer is not authorised to review its own order or decision. Hence, the proper officer cannot issue second notice for same period on same issue. Similarly, no SCN can be issued for subsequent period, when notice and adjudication order for previous period quashed by Court or Tribunal. But if something has been missed then second Show Cause Notice could be issued and Department has right to demand tax which has escaped assessment.
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