Calcutta High Court refuses to quash GST show cause notice where adjudication is yet to begin
Background of the dispute
The matter in ISC Processors Private Limited Vs Superintendent (Calcutta High Court) arose from a writ petition filed under Article 226 of the Constitution of India. The assessee questioned the legality of a show cause notice dated 10.03.2026 issued under the Central Goods and Services Tax Act, 2017 (CGST Act 2017).
The central controversy was whether such a show cause notice could be struck down at the very outset on the basis that:
- The proposed demand was entirely founded on an allegation that the supplier was non-existent, and
- The authority had not properly appreciated the statutory scheme nor undertaken an adequate enquiry before initiating proceedings.
The assessee requested the Calcutta High Court to quash the show cause notice itself, contending that the notice was without jurisdiction and amounted to misuse of statutory powers.
Assessee’s core contentions
Challenge to the show cause notice
The assessee attacked the legality, validity and sustainability of the show cause notice dated 10.03.2026. The key grounds put forward were:
Sole reliance on supplier’s alleged non-existence
- The entire demand was premised on the assertion that the supplier, from whom the assessee had obtained inward supplies and claimed input tax credit (ITC), was non-existent.
- No independent enquiry regarding the genuineness of the assessee’s transactions or its conduct was stated to have been undertaken.
Improper appreciation of statutory provisions
- It was urged that the respondent CGST authority had issued the notice without correctly understanding the scope of inspection under
Section 74A(5)(ii)of the CGST Act, 2017. - According to the assessee, the impugned notice suffered from an inherent lack of jurisdiction, as the statutory preconditions for such proceedings were not met.
- It was urged that the respondent CGST authority had issued the notice without correctly understanding the scope of inspection under
Status as bona fide purchaser
- The assessee claimed to be a bona fide purchaser, having:
- Obtained supplies in the usual course of business; and
- Discharged consideration, including the applicable GST, through banking channels.
- On this basis, the assessee contended that it had fulfilled all obligations expected of a genuine recipient of supplies.
- The assessee claimed to be a bona fide purchaser, having:
ITC denial not permissible solely on supplier’s default
- The assessee argued that input tax credit cannot be denied to the recipient solely because:
- The supplier is alleged to be non-existent, or
- The supplier is in default of depositing tax,
unless: - action is first initiated against the supplier, and
- the department establishes fraud, collusion, or wilful misstatement on the part of the assessee.
- The assessee argued that input tax credit cannot be denied to the recipient solely because:
Jurisdictional error justifying writ intervention
- The assessee asserted that, since the notice was ex facie without jurisdiction and constituted an abuse of process, the High Court should intervene under Article 226, even though an alternative remedy of adjudication and subsequent appeal was available.
In essence, the assessee’s stand was that the show cause notice itself was fundamentally flawed and that it should not be compelled to undergo a full adjudication where the very basis of the proceedings was illegal.
Stand of the GST department
Preliminary objection on maintainability
The respondents, represented by the CGST authorities, strongly opposed the writ petition and raised a preliminary objection: