Introduction

In recent legal proceedings, the Rajasthan High Court addressed a crucial issue concerning the powers of revenue authorities in relation to coercive actions without the issuance of a Show Cause Notice (SCN). This case has significant implications for businesses involved in export-related tax refunds under the Advance Authorization Scheme.

Facts of the Case

M/s. Reliance Chemotax Industries Ltd. (“the Petitioner”) found itself at odds with the Revenue Department over the legitimacy of an IGST refund claimed under the Advance Authorization Scheme. The Revenue Department sought to recover a portion of this refund, claiming it was wrongly availed.

Issue

The central question before the court was whether the Revenue Department could take coercive measures to recover funds without first issuing a Show Cause Notice (SCN) to the Petitioner.

Held

In its ruling on Civil Writ Petition No. 6961 of 2023, dated May 13, 2024, the Rajasthan High Court directed the Revenue Department to refrain from enforcing any coercive measures against the Petitioner until statutory requirements, including the issuance of a Show Cause Notice (SCN), were fulfilled. The court emphasized the procedural safeguards under the Central Goods and Services Tax Rules, 2017, particularly under Rule 96(10).

The Hon’ble Court further scheduled a subsequent hearing on July 22, 2024, to deliberate on the challenge to the validity (vires) of Rule 96(10) of the CGST Rules.

Conclusion

This case underscores the importance of adherence to due process by tax authorities and provides clarity on the rights of taxpayers facing disputed claims, particularly regarding coercive recovery actions.