Drafting effective

Notices & Orders

Adv. Sanjay Dwivedi
 Today’s Agenda

A brief overview of the legal

1 eco-system

Essentials of a good notice

AGENDA 2 & order

3 Questions Answer
 Journey of a case

Show Cause Adjudication

Investigation Appeals
Notice Order
⊡ A good notice or an order is drafted,
keeping in view its fate in Tribunal & High
Court.
History of our success before
Tribunal & Courts
 Fate of Notices

For 1000 notices issued

No. of decisions against Taxpayer

Original Level 1st Appeal Tribunal High Court/ SC

(995) (600-700) 100 80

These are approximate figures guessed on the basis of general experience

 Value of Notice

⊡ Once a notice is served

□ It’s end of the investigation
□ No further evidence permissible

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 It doesn’t hurt if we lose a case on
merit.

But it hurts if we lose it merely because

we did not handle it properly. It hurts
both – our reputation as well as our self-
respect.

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 The normal sequence

59
61
(Self
(Scrutiny)
Assessment)

66 75
65 General
(Spl. Audit – CA/
(Dept. Audit) Provisions
CMA)

67 73/ 74
(Inspection, SCN &
Search, Seizure) Adjudication

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 Suspicion

⊡ Suspicion is not PROOF

⊡ Suspicion is a good starting point for
Investigation
⊡ But it’s a bad ending point
⊡ SCN based on mere suspicion – will not
survive

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 Suspicion is not the proof

Suspicion Investigation Opinion

Upon end of the investigation, the suspicion is either

• Confirmed
• Modified
• Discarded (due to ‘adverse evidence’ or ‘no evidence’)
 Suspicion

⊡ Upon end of the investigation, the suspicion is

either
□ Confirmed; or
□ Modified; or
□ Discarded (due to ‘adverse evidence’ or ‘no
evidence’)
⊡ The ‘notice’ is to be issued accordingly

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 Goal of an effective notice

⊡ If my case has merit, I should have very high

probability of winning it.
⊡ I should provide full opportunity to the Tribunal and
Courts to decide in my favour.
⊡ I should not lose a case merely because the notice or
the order is defective.

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 INGREDIENTS

IN AN EFFECTIVE NOTICE
⊡ All relevant facts must be included
⊡ All evidences must be disclosed & discussed
⊡ The legal arguments should be made
⊡ Allegations should be clear & precise
⊡ The proposed action should be clear & precise

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 SCN/ ORDER
⊡ Natural Justice
⊡ Burden of Proof
Things to ⊡ Speaking Order
take care of ⊡ Substance vs. Procedure
⊡ Act vs. rules vs. Circulars/
Instructions

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 Violation of Natural Justice

⊡ Copy of the relied upon documents not provided.

⊡ Noticee not heard personally.
⊡ Unnecessary haste in adjudication
⊡ Arguments of the noticee not discussed
⊡ Case laws cited by the noticee not discussed

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 Section 75

⊡ (4) Hearing must be granted if:

□ Party requests in writing or
□ Any adverse decision is contemplated (even if not
asked for).
⊡ (5) Maximum 3 adjournment may be granted
⊡ (6) The order must set out
□ the relevant facts and
□ the basis of the decision.

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 Section 75

(7) The amount of tax, interest and penalty

demanded in the order shall not be in excess of the
amount specified in the notice and no demand shall
be confirmed on the grounds other than the grounds
specified in the notice.

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 Sec 75 (7)

Notice Order
 Sec 75 (7)

Notice Order
 Time Limit

Sec 73 Sec 74
Order 3 years from due date for 5 years from due date
Annual Return for Annual Return
Notice At least 3 months before At least 6 months
the last date for order. before the last date for
order.
 Penalty

Payment* Sec 73 Sec 74

Before Notice Nil 15% of tax
Within 30 days of Nil 25% of tax
notice
After 30 days of notice 10% of tax or Rs. 50% of tax – if paid
10,000 (whichever within 30 days of
is higher) order
After 30 days of order --- do --- Equal to tax
* Payment = Payment of tax + interest + applicable penalty
 INGREDIENTS
⊡ fraud, or
⊡ any wilful-misstatement or

Section 74 ⊡ suppression of facts

…… to evade tax

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 SCN/ ORDER
⊡ Natural Justice
⊡ Burden of Proof
Things to ⊡ Speaking Order
take care of ⊡ Substance vs. Procedure
⊡ Act vs. rules vs. Circulars/
Instructions

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Essentials of a good
Notice & Order

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A CASE
⊡ A manufacturer of castings was classifying them
under heading 7325 and paying GST @18%
⊡ Department felt that the castings were actually
part of Diesel Engines chargeable to GST @28%

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 Show Cause Notice – Broad
framework

⊡ Introduction
⊡ Story of the investigation
⊡ Discussion on the evidences
⊡ Figures (period covered, amounts involved)
⊡ List of violations (legal provisions)
⊡ Proof of fraud or any wilful-misstatement or
suppression of facts to evade tax
⊡ Actions proposed

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 Contents of a notice -1

⊡ Introduce the party/parties

⊡ Provide background facts
⊡ Narrate the story of the Investigation:
□ How did the investigation begin
□ Discuss the visits, searches, detentions
□ What was found during searches – “quote from
the Panchnama”
□ Statements: highlight the points that support our
case
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 Contents of a notice - 2

⊡ Attach a list of all the “documents relied upon in

support of the allegations”. Mark them (for ex. RUD-
1, RUD-2…etc.).
⊡ Attach copy of the ‘relied upon documents’ to the
notice.
⊡ Discuss all the evidences in the notice (provide
references – as marked)
⊡ Clearly state the conclusion drawn from the
investigation.
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 Contents of a notice - 3

⊡ Discuss the relevant legal provisions

⊡ Show how the legal provisions were violated
⊡ Discuss the figures:
During the period ___ to ___ they made taxable
supplies valued at Rs. ____, but failed to
pay tax of Rs. _____leviable thereon as
detailed in the Annexure ‘A’ to this notice.

⊡ Finally, summarise the allegation in very brief: From

the investigation discussed hereinabove, it appears
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 Contents of a notice - 4

⊡ Finally, summarise the allegation in very brief: From

the investigation discussed hereinabove, it appears
that …….
⊡ Propose the actions:
□ Who is to show cause
□ To whom (authority & address)
□ How much tax is demanded
□ Demand interest
□ Penalties under which section….

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 Contents of a notice - 5

⊡ Give them a fixed time to file reply (we need to

complete adjudication within 3/5 years).
⊡ Ask them to produce all evidences… and say that if no
reply is received the case will be decided ex-parte
(but don’t decide without granting hearing)
⊡

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 Invoking Section 74

⊡ Make allegations of fraud, mis-statement (whatever

is applicable)
⊡ Discuss the proof to establish – fraud, wilful mis-
statement, suppression of facts
⊡ Establish the “intent to evade tax” by establishing
correlation between
□ ‘non-payment’ AND
□ “fraud, mis-statement, suppression…”

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 Personal Hearing

⊡ Issue letter providing date, time & place – ensure

that it is served
⊡ Give sufficient time
⊡ Keep a record of the hearing
□ Who was present
□ What did he argue
□ The noticee/ advocate should sign it
⊡ It’s a good practice to hand over a copy of the
“record of hearing” to the noticee
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 BROAD FRAMEWORK
⊡ Brief facts
⊡ Reply filed by the noticee

ORDER ⊡
⊡
Record of personal hearing
Discussion & Findings
⊡ Conclusion
⊡ Order

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 ORDER – Brief Facts

⊡ Introduce the parties

⊡ Summarise the facts from the notice
□ Story of the investigation
□ It therefore, appeared that …. (conclusion from the
investigation)
⊡ Accordingly, the show cause notice no. _____ dated
____ was issued, calling M/s. _____ to show cause as
to why:
(a) Tax of Rs. ____ should not be demanded from them
(b) Interest @____ for the period from ____ to ___ ……..
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 ORDER – Reply of the noticee

⊡ The noticee filed a reply vide letter dated ____

wherein they submitted that:
…………..
…………..
⊡ You may summarise the submissions (or may even
reproduce it in full with appropriate modifications)

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 ORDER – Record of Hearing

⊡ If effective hearing could not take place, mention

how many opportunities were granted (mention
dates), and what happened
⊡ Three adjournments = 4 dates
⊡ Additional written submissions
⊡ Mr. _____, Advocate appeared before me on _____.
He reiterated the submissions made in the written
reply and argued that: …………..

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 ORDER – Discussion & Findings-1

⊡ I have carefully gone through the facts of the case as

brought out in the notice, the evidences on record
and the oral and the written submissions made by
the noticee.
⊡ Frame the issues: The issues involved in the case are:
(a) ………….
(b) ………….

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 ORDER – Discussion & Findings-
2

⊡ Then take each issue one by one

□ The notice alleges that …..
□ The party has argued that ……
□ I find that….. (provide reasons for your
conclusions)
⊡ Do not miss to discuss the case laws

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 ORDER – Discussion & Findings-
3

⊡ Discuss how the elements of fraud or wilful

misstatement or suppression of facts are proved
⊡ Discuss how the ‘intent to evade’ is proved
⊡ Discuss the penal provisions and say how much
penalty is leviable under which provision
⊡ Discuss role of each person (on whom penalty is
proposed) – give reason why he is liable (or not
liable) to be penalized.

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 ORDER – Conclusion

⊡ Summarise your conclusions: In view of the findings

recorded above, I hold that:
(i) ………….
(ii) ………….
(iii) ………….

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 ORDER – Final Decision

⊡ I confirm the demand of tax of Rs. ______ under section 74 of

the ….
⊡ I order payment of interest @____ on the above tax from …….
under section ….
⊡ I impose a penalty of Rs. _______ under section 74
⊡ In terms of sub-section (11) of section 74, the penalty shall
stand reduced to Rs. _____ (i.e. 50% of the tax) if the full
amount of tax, interest and this reduced amount of penalty is
paid within 30 days of the receipt of this order by the noticee.
Do not go beyond the notice - Remember section 75 (7)

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 Preamble to the Order

⊡ State that the noticee is entitled to file appeal

⊡ Mention the forum (designation and address) before
whom appeal is to be filed
⊡ Mention the time limit within which the appeal
should be filed
⊡ State that 10% of the tax is required to be pre-
deposited

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 Recovery

⊡ Recovery without adjudication order is not

permissible
⊡ Before initiating any coercive procedures, ordinary
methods must be used
⊡ Appeal in GST operates as stay (pre-deposit of 10% is
taken)

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THANK YOU
Sanjay Dwivedi
Advocate
9320 456 555
sanjay@srdlegal.in

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SRD LEGAL
512, Ecstasy Citi of Joy,
JSD Road, Mulund (West),
Mumbai – 400 080.
+91 90048 25702; 84528 91102
High Court | Tribunals
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