A Walk through to

essentials of Show
Cause Notice with
Master Circular by
CBIC in Pre-GST
Regime

Circular No. F.NO

96/1/2017-CX.1-
Dated: 19th January,
2017-

CA Dr Arpit Haldia
Circular No. F.NO 96/1/2017-CX.1-Dated: 19th January,
2017-Although the Circular is of Per-GST Regime but
gives a walk through to the essentials of SCN and
highlights the key aspects of a valid SCN. This
presentation contains aspects which are relevant in GST.

The original circular can be accessed at this link-

https://taxguru.in/excise-duty/cbec-master-circular-on-
show-cause-notice-adjudication-recovery.html
2.2 Structure of SCN: A SCN should ideally comprise of the following parts, though it may
vary from case to case:
a) Introduction of the case
b). Legal frame work
c). Factual statement and appreciation of evidences
d). Discussion, facts and legal frame work,
e). Discussion on Limitation
f). Calculation of duty and other amounts due
g). Statement of charges
h). Authority to adjudicate.

2.4 Legal framework: The authority issuing the SCN should clearly lay down the legal
provisions in respect of which the person shall be put to notice. While specifying
the provisions, care should be taken to be very accurate in listing all the provisions
and the law in respect of which the contraventions are to be alleged in the SCN.
2.5 Factual statement and appreciation of evidence: In this part of SCN, the facts relating to
act of omission and commission pertinent to the initiation of the proceedings against the
noticee need to be stated in a most objective and precise manner. All evidences in form of
documents, statements and material evidence resumed during the course of enquiry
/investigation should be organised serially in a manner so as to establish the charges against
the noticee. While discussing the facts and evidences, care should be taken to be precise and
succinct in expression so that unnecessary details are avoided.

3.4 Extended period in disputed areas of interpretation: There are cases where either no
duty was being levied or there was a short levy on any excisable goods on the belief that they
were not excisable or were chargeable to lower rate of duty, as the case may be. Both trade
and field formations of revenue may have operated under such understanding. Thus, the
general practice of assessment can be said to be non-payment of duty or payment at lower
rate, as the case may be. In such situations, Board may issue circular clarifying that the
general practice of assessment was erroneous and instructing field formations to correct the
practice of assessment. Consequent upon such circular, issue of demand notice for extended
period of time would be incorrect as it cannot be said that the assessee was intentionally not
paying the duty.
3.7 Second SCN invoking extended period: Issuance of a second SCN invoking extended period after
the first SCN invoking extended period of time has been issued is legally not tenable. However, the
second SCN, if issued would also need to establish the ingredients required to invoke extended
period independently. For example, in cases where clearances are not reported by the assessee in
the periodic return, second SCN invoking extended period is quite logical whereas in cases of wilful
mis-statement regarding the clearances made under appropriate invoice and recorded in the
periodic returns, second SCN invoking extended period would be difficult to sustain as the
department comes in possession of all the facts after the time of first SCN. Therefore, as a matter of
abundant precaution, it is desirable that after the first SCN invoking extended period, subsequent
SCNs should be issued within the normal period of limitation.

13.0 Service of Show Cause Notice and Relied Upon Documents: A show cause notice and the
documents relied upon in the Show Cause Notice needs to be served on the assessee for initiation of
the adjudication proceedings. The documents/records which are not relied upon in the Show Cause
Notice are required to be returned under proper receipt to the persons from whom they are seized.
Show Cause Notice itself may incorporate a clause that unrelied upon records may be collected by
the concerned persons within 30 days of receipt of the Show Cause Notice. The designation and
address of the officer responsible for returning the relied upon records should also be mentioned in
the Show Cause Notice. This would ensure that the adjudication proceedings are not delayed due to
non-return of the non-relied upon documents.
14.5 Adjudication order: The adjudication order must be a speaking order. A speaking order is
an order that speaks for itself. A good adjudication order is expected to stand the test of
legality, fairness and reason at higher appellate forums. Such order should contain all the
details of the issue, clear findings and a reasoned order.

14.6 Analysis of issues: The Adjudicating authority is expected to examine all evidences, issues
and material on record, analyse those in the context of alleged charges in the show cause
notice. He is also expected to examine each of the points raised in the reply to the SCN and
accept or reject them with cogent reasoning. After due analysis of facts and law, adjudicating
authority is expected to record his observations and findings in the adjudication order.

14.7 Body of the order: The adjudication order should generally contain brief facts of the case,
written and oral submissions by the party, observation of the adjudicating authority on the
evidences on record and facts of omission and commission during personal hearing and finally
the operating order. At any cost, the findings and discussions should not go beyond the scope
and ground of the show cause notice.
14.8 Quantification of demand: The duty demanded and confirmed should be clearly quantified
and the order portion must contain the provisions of law under which duty is confirmed and
penalty is imposed. The duty demanded in an adjudication order cannot exceed the amount
proposed in the Show Cause notice.

14.9 Corroborative evidence and Cross-examination: Where a Statement is relied upon in the
adjudication proceedings, it would be required to be established though the process of cross-
examination, if the noticee makes a request for cross-examination of the person whose
statement is relied upon in the SCN. During investigation, a statement can be fortified by
collection of corroborative evidence so that the corroborative evidence support the case of the
department, in cases where cross-examination is not feasible or the statement is retracted
during adjudication proceedings. It may be noted retracted statement may also be relied upon
under given circumstances.
15. Corrigendum to an adjudication order: A corrigendum to an adjudication order can only be
issued to correct minor clerical mistakes which do not alter the adjudication order per se.
Therefore, adjudicating order should normally be issued after careful examination of details
obviating the need to issue any corrigendum. It may be noted that after issuing an adjudication
order, the adjudicating authority becomes functus officio, which means that his mandate comes
to an end as he has accomplished the task of adjudicating the case. As a concept, functus
officio is bound with the doctrine of res judicata, which prevents the reopening of a matter
before the same court or authority. It may also be noted that under the Central Excise Act,
adjudicating authority does not have powers to review his own order and carry out corrections
to the adjudication order.

16. Transfer of adjudicating authority: Adjudicating officers are expected to issue orderin-
original before being relieved in cases where personal hearing has been completed. The
successor in office can not issue any order on the basis of personal hearing conducted by the
predecessor. The successor in office should offer a fresh hearing to the noticee before deciding
the case and issuing adjudication order/formal order.
CA DR ARPIT HALDIA
9

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