Joint Commissioner & Anr. Vs Goverdhandham Estate Private Limited & Anr

The petitioner, a hotel operator registered under the GST Act, challenges a show cause notice and the order related to the scrutiny of his tax returns. The notice accused the petitioner of wrongly claiming Input Tax Credit (ITC) on certain purchases, indicating that they were not eligible for credit under Section 17(5) of the RGST Act. The petitioner argued that the equipment purchased was essential for his business and hence should qualify for ITC. After responding to the initial scrutiny notice, the authorities issued a show cause notice under Section 73 without adequately considering the explanation provided by the petitioner. Subsequently, the authorities found the petitioner’s reply satisfactory but still retained the show cause notice, leading the petitioner to file a writ petition. The high court held that the authorities acted unlawfully by not following the procedures mandated in Section 61, emphasizing that they needed to consider the petitioner's explanation before invoking Section 73. Consequently, the court declared the show cause notice invalid and set it aside. The Supreme Court sided with the High Court's interpretation, dismissing the SLP without interference.