GST SCN Solely Based On CAG Report Is Vague & Liable To Be Quashed: Punjab & Haryana High Court

The Punjab & Haryana High Court has quashed a show cause notice issued to Abbott Healthcare holding that the entire proceedings were vitiated due to reliance on an incorrect premise that the Comptroller and Auditor General of India (CAG) had conducted an audit. The bench of Justice Deepak Sibal and Justice Lapita Banerji held: (i) the CAG; filed affidavit in reply; stating that it did not conduct audit of the petitioner company and State agreed; hence; the foundational aspect of the show cause notice itself was wrong; (ii) copy of such purported audit report was also not served/attached; (iii) the show cause notice was vague and ‘non specific’ intelligible allegations; (iv) it does not fulfil its purpose of putting the petitioner to notice of the intent of the department; (v) refers to section 73(3) to hold that every notice must contains “details”; which; the impugned notice does not. The case arose from a writ petition challenging a show cause notice dated January 31, 2024, issued under Section 73(1) of the CGST/PGST Acts. The petitioner argued that the notice was vague, factually incorrect, and lacked foundational material. The High Court, after examining the record, found merit in these submissions. A striking aspect of the ruling is the Court’s detailed scrutiny of the so-called “CAG audit,” which formed the sole basis of the show cause notice. The notice alleged that discrepancies—such as excess Input Tax Credit (ITC) availment, ITC mismatches, and short payment under reverse charge—were identified during a “special audit conducted by the CAG.” However, as recorded in the judgment, the State itself admitted that no audit had actually been conducted by the CAG. Instead, the audit was carried out by departmental GST authorities, not by the constitutional audit body. The Court held that this mischaracterization strikes at the root of the proceedings. The very foundation of the notice being incorrect, the show cause notice was rendered unsustainable. The bench observed that when a notice is premised on a non-existent or incorrect fact—especially involving a constitutional authority like the CAG—it reflects a serious lapse in administrative diligence and legal scrutiny. The Court further noted that even the alleged CAG report—which formed the sole basis of the demand—was never supplied to the assessee. This omission was held to be a clear violation of the principles of natural justice, as the taxpayer was denied an opportunity to effectively respond to the allegations. The judgment underscores that when a notice relies on an external audit or report, such material must be furnished to the noticee. Failure to do so renders the proceedings procedurally defective. Beyond the flawed CAG premise, the Court also found the show cause notice to be hopelessly vague and lacking in statutory particulars. While the notice listed various alleged discrepancies—such as excess ITC based on GSTR-9 and mismatches with GSTR-2A—it failed to provide the underlying computation, methodology, or factual basis for these conclusions. Referring to Section 73(3) of the CGST Act, the Court emphasized that a valid show cause notice must clearly spell out the “details” of tax not paid, short paid, or ITC wrongly availed. Mere reproduction of figures without supporting reasoning or documentation does not meet this statutory threshold. The bench concluded that the impugned notice was not only based on an incorrect premise but was also bereft of essential details, thereby depriving the assessee of a meaningful opportunity to defend itself. By quashing the show cause notice, the Punjab & Haryana High Court has reinforced that GST enforcement must operate within strict legal boundaries. The judgment is particularly notable for its “CAG angle,” highlighting that reliance on incorrect or exaggerated institutional authority can render proceedings void ab initio. Case Details Case Title: Abbott Healthcare Pvt. Ltd. vs. Excise and Taxation Commissioner, Punjab Citation: JURISHOUR-679-HC-2026(P&H) Case No.: CWP-4495-2024 (O&M) Date: 02.04.2026 Counsel For Petitioner: Bharat Raichandani Counsel For Respondent: Sourabh Kapoor Click Here To Read Order Read More: Bail Granted in Excise Case Involving Alleged Possession of Foreign Liquor Without License

GST SCN Solely Based On CAG Report Is Vague & Liable To Be Quashed: Punjab & Haryana High Court

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