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Show Cause Notice Is An Essential Feature In Administrative Action

The purpose of this article is to pronounce the Show Cause Notice it's importance, features, types, drafting and replying to a show cause notice. This Article uses case studies to analyze the effectiveness of show cause notice and their significance are addressed in a manner that will also be comprehensible to a non-legally trained readership.

A notice to show cause may be used in a wide variety of situations, from court case proceedings to workplace disciplinary proceedings. It allows the receiving party to tell their side of the story and explain why further action should not be taken. In other words, it offers procedural fairness to the party receiving the notice.

A notice to show cause has many forms. All types have a similar effect, being some form of disciplinary process. Additionally, it is usually issued to bring a matter to a head and prompt a decisive response.

Introduction:
The Principles Of Natural Justice must be followed in quasi-judicial functions. The first principle in natural justice is that there should be no bias. The rules against bias is expressed in maxim "no one must be a judge in his own cause" and "no party is condemned unheard"

A Show Cause Notice is nothing but a notice issued when a person/firm/company is held prima facie responsible for misconduct. In the Show Cause Notice the delinquent is required to be informed that he/she is responsible for such misconduct. He/she is required to submit his/her reply to the disciplinary authority as to why the Show Cause Notice should not be initiated against him/her within a stipulated period of time, as prescribed in the Show Cause Notice. If the charges against the delinquent is proved, then disciplinary authority issues a Show Cause Notice to the delinquent proposing the penalty prescribed under the rules.

Conditions:
  • Show Cause Notice must be issued only when the facts are ascertained and justified.
  • Show Cause Notice must be in written format.
  • The date of the issue of Show Cause Notice must be written.
  • Show Cause Notice must be specific.
  • Violations of the provisions of law must be clearly brought out in the Show Cause Notice.
  • In Show Cause Notice charges must not be vague or contradictory.
  • Misstatement of facts must be expressed as "willful" and contraventions of the provisions of the Act must be expressed as "with intent to evade payment of duty".
  • Adequate time shall be given for filing a reply.

Features:
  • Show Cause Notice is Cogent and straight forward
  • Show Cause Notice is written in simple language and in clear logic.
  • Show Cause Notice contains all the facts related to the case.
  • It contains all the legal provisions related to the wrong doing.

Importance Of Show Cause Notice:
Notice to show cause provides the person with the right to speak and be heard when any allegations are being imposed on him. The maxim "Audi alteram partem" is the principle of natural justice which gives the right to the person to be heard. Our law provides equality to every person before the law. As per the law, no person can be charged as guilty without giving him one chance to speak or prove not guilty.

Types Of Show Cause Notice:

Court
The court has the right to issue a show-cause notice during the proceedings in a case. This notice may require the person to justify or prove something in front of the judge. Normally court order this notice when needs more information related to the case before deciding the issue in the case.

Employment
The employer can also issue a show-cause notice to the employee for his conduct and behaviour in the company. It allows the employer to take disciplinary action according to the rules of the company if the employee failed to provide a suitable reason for his conduct. The employer of the company usually serves this notice related to serious misconduct or any matters which are related to the company.

Notice by consumer law
If any business is bridging the consumer laws, the body that regulates the consumer laws such as NSW etc. Main service notice against bad business to explain its conduct to avoid legal action against them.

Notice related to insolvency
The regulatory bodies related to the financial securities show-cause notice to a person in a case where these regulatory bodies believe that person has reached his duties by:
  • Committing any fraud
  • Feeling to have the correct insurance

Notice in the breach of contract
In a contract in which one party has done the breach of contract the other party may serve the notice to know why he should not break the contract.

Notice by the local council
If a landowner constructs a building that is not complying with the rules of the local authority, the local council may pass the legal notice against that landowner to show why the building should not be broken down.

There can be many other cases in which a person can use this notice to know the cause of the person doing the wrong act[1].

Drafting Of Show Cause Notice:

The Show Cause Notice must be issued only after investigation of the matter in all its aspects. Once the necessary investigations and critical examination of facts and evidence are completed. Appropriate narration of relevant facts and circumstances linked with or leading to an allegation must precede or follow each of the formulated allegations so as to clearly bring out the specific facts and acts of omission or commission which are alleged to have been committed by the assessee and which form the basis of an allegation.

It is absolutely essential that each specific allegation is duly and adequately supported with substantive evidence so as to impart factual and legal sustainability to the allegation. This must be done by clearly spelling out in the Show Cause Notice the specific evidence that is proposed to be relied upon, documentary or otherwise, in relation to each distinct allegation.

In matters involving complex question of law, especially where an assessee is likely to raise a dispute about correct interpretation of law, relevant citations from judicial pronouncements and settled case laws may be given in support of the case made out in the Show Cause Notice. Collect all the necessary material facts Check all the details or loss occurred due to the misconduct read all the provisions of the act which are going to be alleged in the notice.

The notice must be written in simple language. There should not be the use of tricky words which may confuse the defendant of the notice. Show Cause Notice will cover the name address and other necessary details of the party to whom notice is being served. The notice can be given to more than one party. In that case, the notice should contain details of all the persons in the dispute. The body of the notice should contain all the necessary facts related to the case.

If there is any specified date related to the case then the date must be written in the notice. If the information is taken from any sources, the sources should be mentioned. After laying down the facts of the case, write laws and provisions of the act which will apply to the case[2]. Link all the facts with these provisions and write penalty given in the Act. Footer of the Notice contains the exact time within which the person should respond.

The consequences of ignoring the Show cause letter should be mentioned. These are some important points related to the Show cause letter which should be mentioned while drafting the show cause notice. The Show Cause Notice must clearly specify the period to which the Notice relates and the excisable goods in respect of which alleged evasion of duty has occurred and must contain sufficient details (preferably in the form of a chart) to make clear to the noticee as to how the duty liability has been quantified[3].

The penal provisions proposed to be invoked against the assessee and the reasons i.e. existence of facts and circumstances resulting in contravention based on which such penal provisions are attracted, must also be clearly spelt out.

Supply Of Necessary Documents:

The Show Cause Notice must also incorporate a list of all the documents proposed to be relied upon in support of the case and this list must be carefully prepared keeping in view the need to ensure that no relevant evidence is missed out, (but at the same time no irrelevant documents need be listed) since it is the responsibility of the department to supply to each of the notices. A dated acknowledgement of receipt of legible copy of relied upon document must be obtained from the noticee. This is an area which requires special attention because non-supply/part supply of relied upon documents is seen to be one of the causes of delay in passing the adjudication order.

Responding To A Show Cause Notice:

  1. Check The Issue Carefully
    Check the issue carefully After receiving the notice you should check all the issues which are given in the notice. Check carefully whether the allegations or issues made are clear or not? If the issues are written in a way that you are unable to understand, you will not be able to give an effective response[4].
     
  2. Check The Laws Mentioned In The Notice
    Check all the laws carefully which are mentioned in the notice.
     
  3. Check The Date Of Response
    The legal notice always describes the date of response. After that check the consequences if you are filled to reply on time.
     
  4. Prepare For Reply
    After reading all the clauses, facts and laws related to the notice, start collecting the information for reply. You can take the help from a lawyer to provide an effective response to a show-cause notice. Taking advice from a lawyer is the best way to defend yourself because sometimes it happens that you may not be aware of the laws which are going to punish you[5]. In case you failed to prove yourself innocent, the law will be applicable against you and you may be punished or fined. In the case of employment, the employer may remove you from the job[6].
     
  5. Challenge The Notice
    After taking the advice from the lawyer, if you are clear that the notice served to you was incorrectly issued or the allegations imposed on you are incorrect, you may wish to challenge the notice.[7]
     
  6. Notice Of Any Action Taken
    If you think that the allegations imposed on you are correct, then you can take the action to remove these allegations and inform the authority that you have done something good related to these allegations. In that case, the authority can inspect the facts and steps taken by you.
For example, if you got the notice for a retaining wall which was made by you. The allegation was that the wall did not comply with the laws of the local authorities. In that case to remove these allegations you can make the necessary changes to the retaining wall. After doing necessary changes to this wall you can give notice to the local authority that you have made changes in the retaining wall. After your notice, they may re-inspect the property to confirm the actions taken by you.

Few Cases For Better Understanding:

  1. Rajammal Vs The Commissioner Pollachi Municipality W.P.No.8616 of 2019
    Judgement:
    Hon'ble High Of Madras held that On instructions from the learned Standing Counsel for the Pollachi Municipality would produce a copy of the special notice which has been, admittedly, served on a tenant of the petitioner. Acknowledgments from the tenant are available on file. It is the petitioners- case that he is unaware of the notice for assessment. That is on the one side. More relevantly, even admitted taxes are not being paid till date.

    Let the petitioner remit the admitted taxes up to date within a period of one week from today, upon compliance of which further orders will be considered in the writ petition. The learned Standing Counsel appearing for the Pollachi Municipality, confirms that the admitted taxes have been remitted up to date and what remains, is the enhanced amounts based on the usage of the property as commercial. In this regard, learned Standing Counsel appearing for the Pollachi Municipality would draw attention to a special notice of property tax that has been issued to the petitioner.

    The acknowledgement upon the notice is admittedly that of the tenant and this is cited to be the reason for non-response of the petitioner to the said notice, as, according to the learned counsel for the Petitioner this notice was not brought to its attention at all. In such circumstances and seeing as a copy of the special notice dated 15.11.2017 has been furnished to learned counsel for onward transmission to the petitioner, liberty is granted to the petitioner to file a reply to the special notice taking note of the position that the proposed enhancement relates to usage of the property as commercial premise.
     
  2. TRF Limited v. Commissioner of Central Excise & Service Tax, Jamshedpur 2013 (4) TMI 21 (Jharkhand HC)
    Judgement:
    The reasons for forming opinion against the delinquent are required to be reflected in the notice itself. It cannot render notice illegal as being issued with pre determined mind. However, notice reflecting in unequivocal terms decision on contentious issues rather than pulling question to delinquent, may something reflect pre-determined mind of issuing authority. The show cause notice should not show pre-determined mind of department. Such notice cannot be treated to be a notice to show cause in any manner.
     
  3. Mega Corporation V. Commissioner of Service Tax 2015 (1) TMI 1095 (Delhi High Court)
    Judgement:
    The High Court held that the petitioner should first respond to show cause notice and take recourse to such remedies as are available in law in the circumstances of the case. The petitioner is directed to file a reply or appropriately respond to the show cause notice.
     
  4. Tanushree Logistics Private Limited V. Union of India 2015 (9) TMI 420 (Rajasthan High Court)
    Judgement:

    Without even filing of reply to the show cause notice, approaching the High Court is premature. The High Court further held that if reply to show cause notice is furnished, it is always open to the authority to consider and decide in accordance with the law.
     
  5. SBQ Steels Ltd. v Commissioner of Customs, Central Excise and Service Tax, Guntur 2013 (1) TMI 359 (Andhra HC)
    Judgement:
    While issuing such show cause the department should ensure that it does not indicate any pre meditation or prejudgment by the Department.
     
  6. Infinity Infotech Parks Limited V. Union of India 2014 (12) TMI 36 (Calcutta High Court)
    Judgement:
    The conditions precedent for exercising of jurisdiction to invoke extended period of limitation are wholly absent. The Commissioner has not properly and independently applied his mind to the question of whether the conditions for invoking the extended period of limitation existed, but has acted mechanically, swayed by the inquiry report, which is itself appears to be illegal and unsustainable. The impugned show cause notice has been issued by wrongful invocation of jurisdiction. The writ petition is allowed for the reasons discussed above. The High Court set aside the impugned show cause notice.
     
  7. Shakti Shiva Magnets Pvt Ltd. V. Assistant Commissioner, 2022-VIL- 100-DEL
    Judgement:
    The Hon'ble High Court held that the impugned show cause notice contains no fact or reasons and is not supported by any document based on which the Petitioner's registration could not be suspended. Therefore, the Court quashed the show cause notice

Conclusion:
The show-cause notice can be considered as the last opportunity for a person to prove him innocent. If he failed to prove his points, the person who served the notice may take legal action against that person and the person may be charged a fine or punishment. That is why it becomes both the parties to give notice and respond to notice.

End-Notes:
  1. SBQ Steels Ltd. v Commissioner of Customs, Central Excise and Service Tax, Guntur 2013 (1) TMI 359 (Andhra HC)
  2. Shakti Shiva Magnets Pvt Ltd. V. Assistant Commissioner, 2022-VIL- 100-DEL
  3. Infinity Infotech Parks Limited V. Union of India 2014 (12) TMI 36 (Calcutta High Court)
  4. TRF Limited v. Commissioner of Central Excise & Service Tax, Jamshedpur 2013 (4) TMI 21 (Jharkhand HC)
  5. Tanushree Logistics Private Limited V. Union of India 2015 (9) TMI 420 (Rajasthan High Court)
  6. Mega Corporation V. Commissioner of Service Tax 2015 (1) TMI 1095 (Delhi High Court)
  7. Rajammal v/s The Commissioner Pollachi Municipality W.P.No.8616 of 2019
Written By:  V.Vishnu, III Year, B.B.A.Ll.B (Hons) -
The Tamil Nadu Dr.Ambedkar Law University, School Of Excellence In Law, Chennai.

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