# M/s Associated Switch Gears and Projects Ltd., Greater Noida v. State of U.P. & Ors

- **Citation:** (2024) 2 ILRA 174
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-01-25
- **Case number:** Writ Tax No. 276 of 2020
- **Bench:** Shekhar B. Saraf
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-associated-switch-gears-and-projects-ltd-greater-noida-v-state-of-u-p-ors-51313
- **Pages:** 6

## Headnote

Taxation Law- U.P. Goods and Services
Tax Act, 2017 - Principles of Natural Justice -
2 All. M/s Associated Switch Gears and Projects Ltd., Greater Noida Vs. State of U.P. & Ors. 175
Show Cause Notice - Petitioner challenged
penalty order dated 24.07.2018 and appellate
order dated 20.08.2019 for imposing penalty on
expired e-way bill, not mentioned in show cause
notice - Held, authorities cannot impose penalty
on grounds beyond those in show cause notice,
violating audi alteram partem - Commissioner of
Customs
Vs
Toyo
Engineering
Ltd.,
Commissioner of Central Excise Vs Champdany
Industries Ltd., Commissioner of Central Excise
Vs Shital International, Ramlala Vs St. of U.P.,
and Jitendra Kumar Vs St. of U.P. followed,
emphasizing that revenue cannot change or
supplement grounds post-notice - Impugned
orders quashed for transgressing show cause
notice scope, denying petitioner opportunity to
defend - Refund of deposited amount ordered
within four weeks. (Para 4-13)

Writ petition allowed.

List of Cases Cited:

## Text

174 INDIAN LAW REPORTS ALLAHABAD SERIES
imposition of penalty and mere technical
error would not lead to imposition of
penalty [see M/s Modern Traders v. State of
U.P. and others (Writ Tax No.763 of 2018,
decided
on
9.5.2018),
M/s
Galaxy
Enterprises v. State of U.P. and others (Writ
Tax
No.1412
of
2022,
decided
on
6.11.2023 and Hindustan Herbal Cosmetics
v. State of U.P. and others (Writ Tax
No.1400 of 2019, decided on 2.1.2024].

7. The imposition of penalties within
the realm of tax laws should not be based
solely on insignificant technical errors
devoid of any financial consequences. The
foundational
principle
guiding
this
approach is the commitment to maintain a
tax system that is characterized by fairness
and justice, where the severity of penalties
corresponds to the gravity of the offense
committed. While penalties serve a pivotal
role in ensuring compliance with tax laws, legal
frameworks stress the importance of establishing
the actual intent to evade taxes as a prerequisite for
their just imposition. This emphasis underscores
the critical need to differentiate between
inadvertent technical errors and purposeful
attempts to circumvent tax obligations. Penalties,
according to this principle, should be reserved
exclusively for cases where concrete evidence
points to a deliberate and fraudulent act against the
tax system, rather than being applied to situations
involving unintentional mistakes. The legal
rationale supporting this principle recognizes that
the primary purpose of taxation statutes is not to
penalize inadvertent errors but rather to address
intentional acts of non-compliance. Consequently,
the burden of proof falls squarely on tax
authorities to demonstrate the genuine intent to
evade tax before penalizing taxpayers. This
safeguard is indispensable to shield individuals
and entities from punitive measures arising from
honest mistakes, administrative errors, or technical
discrepancies that lack any malicious intent. The
fundamental principle requiring an intent to evade
tax for the imposition of penalties is crucial for
preserving the fairness and integrity of taxation
systems. In order to uphold a balanced and
equitable approach to tax enforcement, it is
imperative to recognize and acknowledge the
distinction
between
technical
errors
and
intentional evasion.

8. In light of the above, I am of the view that
the orders impugned in this writ petition are not
sustainable in law wherein the authorities have
exceeded their jurisdiction and have not acted in
accordance with the provisions of the statutes.
Accordingly, the order September 13, 2018 and
October 3, 2019 are quashed and set-aside. The
amount deposited by the petitioner be
refunded within a period of four weeks
from date. Other consequential reliefs to
follow.

9. The writ petition is, accordingly,
allowed.
----------
(2024) 2 ILRA 174
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 25.01.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.

Writ Tax No. 276 of 2020

M/s Associated Switch Gears and Projects
Ltd., Greater Noida ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Rishi Raj Kapoor

Counsel for the Respondents:
C.S.C.

Taxation Law- U.P. Goods and Services
Tax Act, 2017 - Principles of Natural Justice -
2 All. M/s Associated Switch Gears and Projects Ltd., Greater Noida Vs. State of U.P. & Ors. 175
Show Cause Notice - Petitioner challenged
penalty order dated 24.07.2018 and appellate
order dated 20.08.2019 for imposing penalty on
expired e-way bill, not mentioned in show cause
notice - Held, authorities cannot impose penalty
on grounds beyond those in show cause notice,
violating audi alteram partem - Commissioner of
Customs
Vs
Toyo
Engineering
Ltd.,
Commissioner of Central Excise Vs Champdany
Industries Ltd., Commissioner of Central Excise
Vs Shital International, Ramlala Vs St. of U.P.,
and Jitendra Kumar Vs St. of U.P. followed,
emphasizing that revenue cannot change or
supplement grounds post-notice - Impugned
orders quashed for transgressing show cause
notice scope, denying petitioner opportunity to
defend - Refund of deposited amount ordered
within four weeks. (Para 4-13)

Writ petition allowed.

List of Cases Cited:

1.
Commissioner
of
Customs
Vs
Toyo
Engineering Ltd.; (2006) 7 SCC 592

2.
Commissioner
of
Central
Excise
Vs
Champdany Industries Ltd.; (2009) 9 SCC 466

3. Commissioner of Central Excise Vs Shital
International; (2011) 1 SCC 109

4. Commissioner of Central Excise Vs Ballarpur
Industries Ltd.; (2007) 8 SCC 89

5. Ramlala Vs St. of U.P.; 2023 SCC OnLine All
2479

6. The Board of High School and Intermediate
Education, U.P. Vs Kumari Chitra Srivastava;
(1970) 1 SCC 121

7. Jitendra Kumar Vs St. of U.P.; 2023 SCC
OnLine All 2837

(Delivered by Hon'ble Shekhar B. Saraf, J.)

(Judgment dictated in Open Court)

1. Heard counsel appearing on behalf
of the parties.

2. This is a writ petition under
Article 226 of the Constitution of India
wherein the petitioner is aggrieved by the
order dated August 20, 2019, passed in
appeal by the Respondent No. 2/Additional
Commissioner
Grade-II
(Appeal),
Commercial/State
Tax,
Gautam
Budh
Nagar and the penalty order dated July 24,
2018, passed by the Respondent No.
3/Assistant
Commissioner,
State
Tax/Commercial Tax, Gautam Budh Nagar.

3. Upon examination of the order
dated August 20, 2019, passed in appeal, it
appears that the plea that had been taken in
the show cause notice at the time of
detention, that is, that the vehicle was
travelling to a destination not mentioned in
the invoice, was accepted in appeal by the
authorities.
However,
the
appellate
authority has imposed penalty on a
different ground, that is, that the e-Way Bill
had
expired
though
the
same
was
accompanied with goods.

4. It is pertinent to mention here that
the Supreme Court on numerous occasions
has upheld that the authorities cannot
transgress the boundaries of the show cause
notice. In Commissioner of Customs,
Mumbai -v- Toyo Engineering Ltd.,
reported in (2006) 7 SCC 592, the Supreme
Court emphasized upon the necessity of
specifying the grounds for taking action
against an individual in the show cause
notice. The relevant paragraph of the
judgment is delineated below:

"16. Learned counsel for the
Revenue tried to raise some of the
submissions which were not allowed to be
raised by the Tribunal before us, as well.
We agree with the Tribunal that the
Revenue could not be allowed to raise these
submissions for the first time in the second
176 INDIAN LAW REPORTS ALLAHABAD SERIES
appeal before the Tribunal. Neither the
adjudicating authority nor the Appellate
Authority had denied the facility of the
project import to the respondent on any of
these grounds. These grounds did not find
mention in the showcause notice as well.
The Department cannot travel beyond the
show-cause notice. Even in the grounds of
appeals these points have not been taken."

5. In Commissioner of Central
Excise, Bhubaneshwar -v- Champdany
Industries Ltd., reported in, (2009) 9 SCC
466, the Supreme Court held as follows:

"38. Apart from that, the point on
Rule 3 which has been argued by the
learned counsel for the Revenue was not
part of its case in the show-cause notice. It
is well settled that unless the foundation of
the case is made out in the show-cause
notice, the Revenue cannot in Court argue a
case not made out in its showcause notice.
(See Commr. of Customs v. Toyo Engg.
India Ltd. [(2006) 7 SCC 592] ) Similar
view was expressed by this Court in CCE v.
Ballarpur Industries Ltd. [(2007) 8 SCC 89]
In para 27 of the said Report, learned
Judges made it clear that if there is no
invocation of the Rules concerned in the
show-cause notice, it would not be open to
the Commissioner to invoke the said
Rules."

6. Finally, in Commissioner of
Central Excise, Chandigarh -v-
Shital International, reported in
(2011) 1 SCC 109, the Supreme
Court,
stated
that
unless
the
foundation of the case is laid in
show-cause
notice,
the
Revenue
cannot be permitted to build up a
new case against the assessee. The
relevant paragraph of the judgment
is delineated below:

"19. As regards the process of
electrifying polish, now pressed into
service by the Revenue, it is trite law that
unless the foundation of the case is laid in
the show-cause notice, the Revenue cannot
be permitted to build up a new case against
the assessee. (See Commr. of Customs v.
Toyo Engg. India Ltd. [(2006) 7 SCC 592] ,
CCE v. Ballarpur Industries Ltd. [(2007) 8
SCC 89] and CCE v. Champdany Industries
Ltd. [(2009) 9 SCC 466] ) Admittedly, in
the instant case, no such objection was
raised by the adjudicating authority in the
show-cause notice dated 22-6-2001 relating
to Assessment Years 1988-1989 to 20002001. However, in the show-cause notice
dated
12-12-2000,
the
process
of
electrifying polish finds a brief mention.
Therefore, in the light of the settled legal
position, the plea of the learned counsel for
the Revenue in that behalf cannot be
entertained as the Revenue cannot be
allowed to raise a fresh plea, which has not
been raised in the showcause notice nor can
it be allowed to take contradictory stands in
relation to the same assessee."

7. One crucial limitation placed upon
the exercise of authority is the concept of a
"show cause notice". This administrative
instrument serves as a vital checkpoint,
delineating the boundaries within which
any authority can operate. At its core, a
show cause notice represents the initial step
in an administrative or legal process,
wherein an individual or entity is formally
apprised of allegations or discrepancies
attributed to them. This notice serves as a
mechanism to afford the recipient an
opportunity to present their side of the
story, provide clarifications, or rectify any
perceived errors before any punitive action
is taken. By issuing a show cause notice, an
authority acknowledges the principle of
audi alteram partem, or "hear the other
2 All. M/s Associated Switch Gears and Projects Ltd., Greater Noida Vs. State of U.P. & Ors. 177
side", ensuring fairness and due process in
its proceedings.

8. The significance of adhering to the
confines of a show cause notice lies in
upholding the rule of law and preventing
arbitrary exercises of power. Any action
taken by an authority beyond the scope
defined in the notice risks transgressing the
boundaries of legality and procedural
fairness.
Such
overreach
not
only
undermines the legitimacy of the authority
but also compromises the rights of the
individuals or entities involved, potentially
leading to legal challenges and erosion of
public trust. Moreover, the issuance of a
show cause notice imposes a duty on the
part of the authority to meticulously outline
the
specific
allegations
or
concerns
prompting its issuance. This requirement
fosters transparency and accountability, as
the recipient is entitled to a clear
understanding of the charges against it,
enabling it to formulate an informed
response. Any attempt by the authority to
expand the scope of inquiry or introduce
new allegations beyond those articulated in
the notice would violate this principle of
specificity, depriving the recipient of a fair
opportunity to address the accusations
leveled against it.

9. The issuance of a show cause
notice represents a pivotal juncture in
administrative proceedings, demarcating
the boundaries within which any authority
can exercise its powers. By adhering to the
confines of the notice, authorities uphold
principles
of
fairness,
accountability,
procedural regularity, and legal certainty
essential
for
the
legitimacy
and
effectiveness of governance systems. Any
attempt to transcend these limits not only
violates the rights of the individuals or
entities involved but also undermines the
rule of law and public trust in the
institutions tasked with upholding it. Thus,
this Court holds that, adhering to the show
cause notice is not merely a procedural
formality, but a mandatory requirement,
beyond the scope of which, no action can
be taken. Adherence to the show cause
notice is a fundamental safeguard against
arbitrary exercises of power, ensuring that
authority remains tethered to the principles
of justice and the rule of law.

10. In Ramlala -v- State of U.P and
Ors., reported in, 2023 SCC OnLine All
2479, this Court, while placing reliance on
The
Board
of
High
School
and
Intermediate Education, U.P. -v- Kumari
Chitra Srivastava, reported in, (1970) 1
SCC 121, held that the reason to not allow
the authorities to go beyond the show cause
notice is that a person must be given a
chance to put up his case with regard to the
said
show
cause
notice.
Relevant
paragraphs are extracted below:

"9. The principle that emerges
from the above judgments is patently clear
that a show cause notice is required to
provide details of the nature of the offence
and the grounds on which the show cause
notice has been issued. Furthermore, the
order that is subsequently passed, based on
the show cause notice, cannot go beyond
the said show cause notice and cannot in
any manner penalise the noticee on grounds
that were not stated in the show cause
notice.

10. The rationale for not allowing
the respondents from going beyond the
realm of the show cause notice is that the
petitioner has to be given a chance to put
up his case with regard to the said show
cause notice. In the event, a particular case
is made out in the show cause notice and
the order passed subsequently is beyond the
178 INDIAN LAW REPORTS ALLAHABAD SERIES
said show cause notice, the same would
amount to violation of the principles of
natural justice, as the petitioner would not
have been aware of the new grounds or
new factual elements and could never have
placed his case for the above before the
authority
concerned.
It
is
in
this
background that the Supreme Court in
umpteen judgments has laid down the law
that an order passed by an authority cannot
go beyond the scope of the show cause
notice. In fact, the Supreme Court in the
case of The Board of High School and
Intermediate Education, U.P. v. Kumari
Chitra Srivastava, (1970) 1 SCC 121 has
categorically stated that the principles of
audi alteram partem are required to be
followed even if the same is burdensome in
nature. Justice S.M. Sikri in his inimitable
style stated as follows:

"Principles of natural justice are
to some minds burdensome but this price -
a small price indeed - has to be paid if we
desire a society governed by the rule of
law."

11. In Jitendra Kumar -v- State of
U.P. and Anr., reported in, 2023 SCC
OnLine All 2837, this Court, while dealing
with a similar factual matrix, stated that as
has been settled by various Supreme Court
judgments, once the Revenue had taken a
particular stand, the same cannot be
completely changed and/or supplemented
by a different reason or ground. Relevant
paragraphs are dellineated below:

"5. It is trite law, settled by a
catena of Supreme Court judgments, that
the Revenue cannot beat around the bush
and keep changing the goal post at each
stage. Once the Revenue had taken a
particular stand, the same cannot be
completely changed and/or supplemented
by a different reason or ground.

6. In the present case, it is clear
that the detention was made on the ground
that the goods were not accompanied by
valid documents. However, when the showcause notice was issued, there is no whisper
of any invalid document whatsoever. In
fact, the stand was completely changed by
the Revenue and this volte face cannot be
countenanced by this Court. The detention
of goods causes serious prejudice to an
assessee and the same can only be done on
the basis of specific, valid and reasonable
grounds. In the present case, it is quite
obvious that at the time of detention, the
ground that was stated by the Revenue was
incorrect. More so, there was no reason for
the Revenue to have detained the goods and
the consequential actions that followed,
were obviously vitiated."

12. In the present case, it is evident
that the authorities have travelled beyond
reasons provided in the show cause notice
and imposed penalty on the ground that
was never provided to the petitioner in the
show cause notice. The petitioner never had
any opportunity to defend itself on the said
ground, and therefore, the show cause
notice is directly in teeth of the principles
of natural justice, namely, the principle of
audi alteram partem.

13. Therefore, the impugned
orders in the instant case, cannot be
allowed to stand. Accordingly, a writ
of certiorari is issued against the
impugned orders dated August 20,
2019 and July 24, 2018. These orders
are hereby quashed and set aside.

14. This Court also directs the amount
deposited by the petitioner to be refunded
within a period of 4 weeks from the date of
this order. Other consequential reliefs to
follow.
2 All. M/s Royal Sanitations, Mathura Vs. Commissioner of Commercial Tax, UP, Lucknow
179

15. This writ petition is, accordingly,
allowed.
----------
(2024) 2 ILRA 179
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 25.01.2024

BEFORE

THE HON'BLE SHEKHAR B. SARAF, J.

Commercial Tax Revision No. 302 of 2022

M/s Royal Sanitations, Mathura
 ...Revisionist
Versus
Commissioner of Commercial Tax, UP,
Lucknow ...Respondent

Counsel for the Revisionist:
Sri Suyash Agarwal

Counsel for the Respondent:
C.S.C.

Limitation - U.P. Value Added Tax Rules,
2008 - Rule 39 - Condonation of Delay -
Revisionist challenged Tribunal's order dated
21.07.2022 condoning 1365-day delay in filing
revenue's appeal - Held, Tribunal justified in
condoning delay based on sufficient cause,
including staff shortages, employees' B.L.O.
duties during 2019 and 2022 elections, and
COVID-19 limitation exclusion from 15.03.2020
to 22.02.2022 as per Supreme Court directive -
N. Balakrishnan Vs M. Krishnamurthy and
Collector, Land Acquisition Vs Mst. Katiji
followed,
emphasizing
acceptability
of
explanation over length of delay - Chief Post
Master General Vs Living Media India Ltd.
distinguished - Rule 39 mandates assessee to
maintain
records
beyond
eight
years
if
proceedings
pending,
supporting
ongoing
assessment - Tribunal directed to decide appeal
within four months - Revision dismissed. (Para
5-8)

Revision petition disposed of.

List of Cases Cited:
1. Chief Post Master General & Ors. Vs Living
Media India Ltd. & anr.; (2012) 3 SCC 563

2. St. of M.P. Vs Bhure Lal; (not fully cited in
judgment)

3. M/s Anil Enterprises Vs Commissioner of
Commercial Tax, U.P. Lucknow; Sales/Trade Tax
Revision
No.
124
of
2020,
decided
on
20.07.2022

4. N. Balakrishnan Vs M. Krishnamurthy; (1998)
7 SCC 123

5. Collector, Land Acquisition, Anantnag &
anr.Vs Mst. Katiji & ors.; (1987) 2 SCC 107

(Delivered by Hon'ble Shekhar B. Saraf, J.)

1. Heard Sri Suyash Agarwal, learned
counsel for the revisionist and Sri Bipin
Kumar Pandey, learned Additional Chief
Standing Counsel for the State.

2. This revision petition has been filed
against an order dated July 21, 2022 passed
by
the
Commercial
Tax
Tribunal
(hereinafter referred to as "the Tribunal)
wherein delay of 1365 days in filing the
appeal has been condoned.

3. The question of law, that arises, is
as follows:

"A. Whether the Tribunal was
legally justified in condoning the delay of
1365 days in filing the appeal of revenue
before the Tribunal contrary to the decision
of Supreme court in the matter of Chief
Post Master General & Ors Vs. Living
Media India Ltd. and Anr and State of M.P.
Vs. Bhure Lal?"

4. Sri Suyash Agarwal, learned
counsel appearing on behalf of the
revisionist has relied upon a coordinate
Bench judgment of this Court in M/s Anil