"Can GST Dues Be Recovered Without a Show Cause Notice? The Legal Tug-of-War"

🔍 Introduction

GST has brought in significant automation, but also procedural challenges. One recurring issue for taxpayers is whether the department can initiate recovery of tax dues without issuing a Show Cause Notice (SCN). This blog delves into the legality of such recovery actions with supportive case laws.

⚖️ Legal Provision in Question

• Section 73 & 74 of CGST Act: Mandates issuance of SCN before determination of tax dues.

• Section 75(12): Allows recovery of “self-assessed tax” declared in returns (especially GSTR-1) without an SCN.

• Controversy: Whether discrepancies between GSTR-1 & GSTR-3B can trigger recovery under Section 75(12) without an SCN.

✅ Favourable Judgments for Assessees

1. KUN Motors Pvt. Ltd. v. AC, SGST (Ker. HC, 2024)Recovery without SCN quashed. Court stressed due process and natural justice.

2. LC Infra Projects v. UOI (Kar. HC)Held interest can’t be recovered without SCN under Section 73.

3. Mahadeo Construction Co. v. UOI (Jharkhand HC)Court prohibited recovery unless preceded by adjudication and notice.

4. Refex Industries Ltd. v. AC, CGST (Madras HC)Department’s power to recover is not absolute; procedural compliance mandatory.

5. Sheetal Dilip Jain v. State of Maharashtra (Bom HC)Reiterated importance of opportunity to be heard before recovery.

❌ Unfavourable Interpretations for Assessees

• Section 75(12) read with CBIC Circular No. 170/02/2022-GSTAllows recovery without SCN for differences between GSTR-1 & GSTR-3B.

🔍 Conclusion

While the department relies on the argument of “self-assessed tax” under GSTR-1 for recovery without notice, High Courts have consistently ruled in favour of the assessee, especially when procedural safeguards are ignored.

📌 Key Takeaway: Always challenge recovery if SCN is not issued. Courts have upheld that natural justice cannot be bypassed.