The Himachal Pradesh High Court has dismissed a petition filed by Himalaya Wellness Company, challenging a show cause notice (SCN) issued by the tax department seeking to recover ₹4.37 crores in allegedly inadmissible input tax credit (ITC). The company, a partnership firm, distributes personal care and pharmaceutical products and had employed Goods Transport Agencies (GTAs) to transport goods into and out of Himachal Pradesh. The tax department had imposed GST on the GTA services under Reverse Charge and the company had claimed ITC on the GST paid.
An audit was conducted by the Central Tax Department, which found discrepancies and issued a notice to the company. The company responded with a detailed explanation, but the department rejected it and issued a final audit report. A notice was then sent to the company demanding ₹4,37,17,830 under penalty and interest, which the company refused to pay. A show cause notice was subsequently issued proposing the recovery of ₹4,36,75,439 in inadmissible ITC, ₹27,446 in short-paid GST, and ₹14,945 as interest, along with applicable penalties.
The company approached the high court, challenging the SCN, but the court dismissed the petition, holding that acceptance of a show cause notice does not signify that the notice was prejudiced or in defiance of principles of natural justice. The court also held that it would be premature to acknowledge a writ petition under Article 226 of the Constitution at this stage, as the proceedings are still at the notice stage. The court noted that the SCN has the information to explain its issuance, and interfering at this stage would be interrupting another lawful administrative procedure in its tracks.
The decision validates that courts do not interfere in the phase of notice in tax cases unless there is factual proof of legal or constitutional breaches. The court’s decision was based on the principle of natural justice, which holds that a person has the right to be heard before a decision is made against them. In this case, the company had been given the opportunity to respond to the SCN and the court held that it would be premature to intervene at this stage. The petition was rejected, and the company will have to respond to the SCN and follow the due process of law.