A Fresh SCN Should Be Issued to Revise the Demand Raised in the SCN

Introduction

In the realm of tax disputes, the issuance of Show Cause Notices (SCN) marks a crucial step in determining liabilities. However, a recent ruling by the Hon’ble Madras High Court sheds light on the procedural aspect of revising demands raised in SCNs.

Facts of the Case

M/s. Vela Agencies found themselves contesting a tax demand raised through an SCN. Despite responding to the initial intimation and SCN, the final order passed by the Assistant Commissioner substantially differed from the demand stated in the SCN, leading to legal action.

Issue

The core issue revolves around the necessity of issuing a fresh SCN to revise the demand raised in the original notice, especially when there’s a significant discrepancy between the initial demand and the final order.

Held

The Hon’ble Madras High Court emphasized procedural fairness in tax adjudication. It observed that the final order deviated substantially from the SCN, indicating procedural irregularities. Therefore, the court ruled that a fresh SCN should have been issued if the respondent intended to modify the tax proposal in light of the petitioner’s reply. Consequently, the impugned order was set aside, leaving room for fresh proceedings.