Adjudication proceedings in tax administration are crucial, providing taxpayers the essential opportunity to present their case before any action is taken against them. The issuance of a Show Cause Notice (SCN) is a fundamental step in this process, serving as a formal notification to the taxpayer about the proposed actions by the tax authorities. The adjudicating officer, responsible for reviewing the SCN, must carefully consider the taxpayer’s response and all relevant evidence before reaching a decision. To ensure the process is legally sound, an SCN must adhere to specific principles.
At its core, adjudication involves the judicial determination of disputes by applying the law to the facts and issuing an authoritative resolution. Section 75 of the CGST Act, 2017, outlines the fundamental principles for adjudication within the GST framework, guiding officers under Sections 73 and 74 and other relevant provisions.
Departmental officers, acting as quasi-judicial entities during adjudication, bear significant responsibility. They must execute their duties with the utmost impartiality and caution, free from any bias. It is crucial for them to thoroughly understand and accurately process the facts, applying the appropriate legal provisions and notifications pertinent to each case.
According to Section 75(4) of the CGST Act, 2017, a personal hearing opportunity must be provided to the taxpayer in specific circumstances: when a written request is made by the taxpayer or when an adverse decision is anticipated against them.
Navigating Show Cause Notices
Upon receiving an SCN and submitting a response, preparing for the adjudication hearing becomes critical. Key actions include ensuring attendance at the scheduled hearing. If attendance is not possible, a written request for adjournment, citing valid reasons, must be submitted. Note that no more than three adjournments will be granted. Failure to attend the hearing or seek adjournment can result in ex-parte adjudication, eliminating any argument of violating natural justice principles.
Drafting and preparing additional written submissions for presentation during the hearing is essential. These submissions, explicitly stated as supplementary to the initial SCN response, must be considered by the adjudicating authority. They may include new judicial precedents, additional defenses, circulars, clarifications, or binding precedents not previously provided. These documents may also need to be emailed upon request.
Conducting SCN Hearings
The adjudication of any SCN is a quasi-judicial process handled by the designated officer. Taxpayers or their representatives must attend personal hearings as scheduled, with the option to appoint a consultant or advocate via a power of attorney or vakalatnama. Arriving at the hearing with all relevant documents, explanations, and submissions is crucial, and these should be formally submitted, with an acknowledgment obtained or noted in the proceedings sheet.
During the hearing, the officer will prepare a proceedings sheet summarizing the discussion, which must be signed by both the taxpayer/representative and the officer. It is essential to ensure all defense arguments are presented comprehensively. If additional time or documents are required, requesting another hearing date is common, as multiple hearings are often granted. Accurately recording all discussions in the proceedings sheet is vital, and it is essential to insist on proper documentation.
The adjudicating authority often notes that the taxpayer “reiterated the reply to SCN and had nothing more to add.” It is crucial to agree or disagree with this statement as appropriate.
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