Show cause and final orders stayed as non-uploaded SCN under Rule 142 and denial of cross-examination violated natural justice

Case Title: M/s Panjon Limited vs. Commissioner, CGST and Central Excise
Court: High Court of Madhya Pradesh, Indore Bench
Petition Number: W.P. No. 40867 of 2024
Date of Judgment: 10 February 2025
Category: Validity of Show Cause Notice and Natural Justice – Input Tax Credit / Section 74 Proceedings
Relevant Sections: Section 74, CGST Act, 2017; Rule 142, CGST Rules, 2017

Facts (Para 2–7)

The petitioner, M/s Panjon Limited, challenged a common show cause notice dated 29.09.2023 issued under Section 74 of the CGST Act, 2017, contending that it was never uploaded on the GST portal as mandated under Rule 142 of the CGST Rules, 2017. Despite the pendency of the writ petition, the department proceeded to pass a final order on 21.01.2025. The petitioner, therefore, amended the writ petition to also challenge the said order.

The petitioner relied on judgments such as New Hanumat Marbles v. State of Punjab (2023), Akash Garg v. State of M.P. (2020), and Shri Shyam Baba Edible Oils v. Chief Commissioner (2023), asserting that non-compliance with Rule 142 renders the SCN invalid. It was further argued that invocation of Section 74, meant for cases involving tax evasion, was without jurisdiction, as the present case related merely to circular trading with tax duly paid at each stage. The petitioner referred to CBIC Instruction No. 05/2023-GST (dated 13.12.2023), which clarifies that Section 74 should apply only when fraud, wilful misstatement, or suppression is evident.

Questions (Para 5–8)

1. Whether the non-uploaded SCN under Rule 142 invalidates subsequent proceedings under Section 74 of the CGST Act.

2. Whether issuance of SCN without tax evasion allegation falls outside the jurisdiction of Section 74.

3. Whether denial of cross-examination amounts to violation of natural justice, rendering the final order unsustainable.

Observations (Para 7–9)

The Court observed that the foundation of the proceedings—the show cause notice—was itself defective, being issued contrary to mandatory procedural requirements. Citing legal maxim “sublato fundamento cadit opus” (if the foundation is removed, the structure falls), it held that all subsequent orders based on an invalid SCN are also void. The Court also noted that denial of cross-examination of witnesses whose statements were relied upon contravenes principles of natural justice, referencing Andaman Timber Industries v. CCE (2016) and Nishad K.U. v. Joint Commissioner, Central Tax and Central Excise (2024).

Judgment (Para 9–12)

The High Court found a prima facie case in favour of the petitioner and ruled that irreparable injury would occur if the impugned order continued to operate. Consequently, it admitted the petitions for final hearing and stayed the operation of the common final order dated 21.01.2025 during pendency of the proceedings. The respondents were directed to file their reply, and rejoinder, if any, may follow.

Summary of Cited Cases

Between Fine Lines (Trade Impact)

This case reaffirms that GST adjudication must strictly comply with procedural mandates under Rule 142 and uphold natural justice. Any show cause notice not uploaded on the portal or issued without clear tax evasion allegation is jurisdictionally flawed, making the entire chain of proceedings—including final orders—liable to be struck down. For taxpayers, this underscores the defensive value of procedural irregularities in GST enforcement.

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