Testing the GST notices on technical grounds

Co-Authored by CA Aparna Nayak and CA Vikas Shenoy

Recently, taxpayers registered under the Goods and Services Tax (GST) have reported an influx of notices. While the substance of such notices is typically deemed crucial, it is equally important to scrutinize the technical grounds on which the notice has been issued. We are listing down few of the key pointers that are crucial and could serve as a robust ground for your response to GST notices.

Validity of the extension of deadline for issuance of notices

Notably, the fiscal year 2018-19 has emerged as the focal point of recent show cause notices with taxpayers registered under GST receiving a swamp of notices in the later part of December 2023. The department was found to be in an unforeseen hurry to issue these notices to meet the extended deadline notified by the Government by way of invoking the powers available to it only in exceptional cases of force majeure.

The agitated taxpayers have already picked up arms to tackle the inconsiderate approach of the Government by challenging the vires of the said notification.

Summary of Demand and Notice issued is required to be issued electronically

Show cause notices are issued under diverse sections, ranging from post-departmental audits and meticulous scrutiny of returns to routine adjudication processes. As mandated by GST law, these notices are required to be accompanied by a succinct summary outlining the details of the demand that has to be made available to the taxpayer electronically on the GST portal.

In recent times, there has been a notable trend where taxpayers are receiving show cause notices, yet the mandatory summaries are conspicuously absent. This discrepancy becomes even more pronounced in instances where the notices are dispatched through traditional postal services, wherein the likelihood of electronic transmission, let alone the provision of a demand summary, is notably remote.

In such a scenario, taxpayers can draw upon a recent judgment from the Hon’ble Delhi High Court. The court, in its directive, emphasized that the tax officer is obligated to promptly issue the summary of the impugned notice and the associated demand electronically. This judicial pronouncement, among various others, underscores the importance of expeditiously providing essential information to the taxpayer for clarity and transparency in the adjudicative process. This aspect can serve as a pivotal argument, especially in situations where no summary accompanies the show cause notice.

Bunching of notices for matters pertaining to different fiscal years

Taxpayers are encountering notices that consolidate matters spanning over different financial years. This is posing a challenge to the taxpayer to respond to the allegations due to varying provisions across these fiscal periods.

Nevertheless, the Hon’ble Madras High Court, upon observing such practice, has recently directed the revenue to issue notices separately for each individual fiscal year providing the taxpayer a reasonable timeframe to respond to each individual notice.

Date of receipt of Notice

It’s easy to overlook the importance of checking the receipt date when notices are delivered via postal services. However, this becomes crucial as the due date for response and appeal hinges entirely on when the notice is received. This provides a valuable buffer for the taxpayer when the service date differs from the receipt date. It is imperative to retain evidence of receipt as a supporting document.

This distinction may not apply in the case of notices appearing on portals or through emails, where the receipt date aligns with the serving date unless a valid reason suggests otherwise.

Requirement to submit physical copy of the reply

A common query arises as to whether the response letter, inclusive of pertinent annexures, must be physically submitted to the adjudicating or appellate authority. While there is no mandatory requirement for physical submission in routine adjudication matters, in some cases submission of physical copies may prove to be crucial for the taxpayer to ensure that the concerned tax authorities have indeed received the response letter and accompanying annexures.

This is particularly necessary as the adjudication process can only proceed when the reply letter is received by the designated proper officer. Failure to ensure this may result in the matter being subject to ex-parte adjudication.

Show Cause Notice issued without DIN

Taxpayers frequently receive notices under the GST law, which originates either from Central or State Jurisdiction. It’s crucial to emphasize that notices falling under Central jurisdiction must invariably be accompanied by a Document Identification Number (DIN). This requirement is binding on the department as per the circular issued in this respect, establishing the mandate of DIN in such communications.

This requirement holds paramount importance, as the absence of a Document Identification Number (DIN) not only plays a pivotal role but also establishes legitimate grounds for challenging the notice. A notice lacking DIN will be deemed invalid.

Conclusion

While emphasizing the merits of the case is crucial, recent trends indicate that technical grounds can also hold substantial weight, especially when the department is expeditious in seeking closure on the matter.

Only a handful of technical grounds have been touched upon in this article with a view to showcase their importance to the reader. Nevertheless, legal jurisprudence is witness to the fact that technical failures by the tax authorities in issuing notices are fatal to their survival at higher appellate authorities or courts. Therefore, it would be worthwhile to test each notice on technical aspects, however trivial they may seem at the beginning.

This article was published in December 2023-January 2024 issue of the KCCI Journal