HC Says SCN Only a Preliminary Step; Taxpayer Had Chance to Furnish Objections Before Final Decision

The Allahabad High Court dismissed a writ petition filed by Dev Trading Company, however, granting the company a time period of two weeks to file a further reply to the show cause notice dated April 16/17, 2026. The tax authorities have also been instructed to consider the company’s reply and pass a reasoned order thereafter.

During the personal hearing before the Allahabad High Court, the petitioner, Dev Trading Company, argued that the tax authorities ignored its declarations submitted for the month of February 2026 regarding the use of manual and mechanical processes in the manufacture of pan masala and wrongly assumed that two machines were installed during March and April 2026.

The petitioner also questioned the jurisdiction of the Assistant Commissioner, Central GST, Kanpur, saying that CGST authorities were not authorised to act under the Health Security and National Security Cess Act, 2025, and the related rules. Additionally, it was argued that the show-cause notice (SCN) reflected a pre-decided view against the company despite earlier favourable consideration of its declarations.

However, the tax authorities opposed the claims made by the petitioner, stating that the notice was only a preliminary step and, hence, the petitioner had a chance to furnish objections before any final decision was taken. It further argued that the question of machine installation was a factual issue that could be examined after considering the petitioner’s reply. On the jurisdiction issue, the department submitted that the relevant government orders had already vested the necessary powers in CGST officers.

When the high court analysed the case, it endorsed the submissions made by the tax authorities. It noted that the show-cause notice (SCN) did not contain any final determination and that the petitioner could raise all factual and legal objections before the adjudicating authority. The court also held that the relevant orders empowered assistant and deputy commissioners under the CGST framework to exercise jurisdiction under the rules, and a difference in the designation stamp used by the officer did not affect the validity of the proceedings.

The court held that, “on the issue of jurisdiction, we are not impressed with the submissions advanced inasmuch as Order No. 01/2026 creates authorities. Read in conjunction with Order No. 02/2026, it provides that the deputy or assistant commissioner under the CGST Act would be vested with jurisdiction under Rule 11 of the Rules. The objection raised on that count is unfounded. Once authority created under the Act read with the Rules does vest in the signatory to the show-cause notice, no material difference or lack of jurisdiction may arise for reason of wrong/other rubber stamp impression affixed below that signature.”

Accordingly, the writ petition was dismissed. However, the Court allowed the petitioner to file an additional reply in light of the corrigendum notice within two weeks from the date of releasing the judgement in the present case, i.e., May 21, 2026, directing the authority to consider all replies and pass a reasoned and speaking order.