Bombay High Court slaps ₹5 lakh costs on litigant for "taking a chance" by filing writ petition

The Bombay High Court recently imposed costs of ₹5 lakh on a company for "taking a chance" by filing a writ petition challenging a show cause notice issued by the Central Board of Indirect Taxes and Customs [Viswaat Chemicals Ltd. & anr v. Union of India]

A bench of Justices MS Sonak and Jitendra Jain said that the petition by Viswaat Chemicals Ltd., which alleged that the show cause notice was vague, was a maneuver to avoid available remedies since the company had raised no such grievance at the time of responding to the notice.

"This is nothing but an attempt to circumvent the alternate remedy and to take a chance to see whether any relief can be wriggled out of this Court," the Bench held.

The petition by Viswaat Chemicals was filed contesting the show cause notice issued on December 7, 2023. This notice had alleged irregularities in tax compliance and sought explanations from the company.

Viswaat Chemicals argued that the notice was vague and lacked essential details, hindering their ability to respond effectively.

The company sought quashing of both the notice and the subsequent order from July 22, 2024, which adjudicated their responses.

During the hearing, advocate Vishal Agrawal, representing the petitioners, asserted that the notice was "bereft of relevant particulars" and violated the principles of natural justice, leaving the company unable to adequately defend itself.

He further claimed that the adjudicating authority had acknowledged the vagueness of the notice in its order, resulting in gross violation of the principles of natural justice.

Advocate Jitendra B Mishra, representing the Union of India, argued that the show cause notice was comprehensive and provided a clear basis for the petitioners' defense.

He emphasized that the notice included "intelligence inputs" and referenced various legal provisions and past judgments.

The allegation of vagueness was an afterthought besides being frivolous, he argued.

The Court found that the petitioner had submitted a detailed reply to the notice in which it had addressed multiple allegations without indicating any significant confusion.

The Court noted that the company had not only failed to challenge the notice promptly but had also filed a detailed response without raising serious concerns about the alleged vagueness.

After the adjudication of the show cause notice and the issuance of the July 22 order, the petition before the High Court was initiated specifically to contest the notice issued on December 7, 2023.

If the petitioner genuinely regarded the show cause notice as vague or if there were any real difficulties in responding to the allegations, it was expected that they challenge such notice at the earliest instance, the Court said.

As a result, the Court imposed ₹5 lakh costs on the petitioner to deter frivolous litigation. The amount has to be paid to the Maharashtra Legal Services Authority within four weeks and proof of payment must be submitted by November 21, the Bench directed.

However, it permitted the company to pursue other legal remedies under the CGST Act.

Advocate Vishal Agrawal along with Advocates Abhishek Deodhar and Rishabh Jain of TLC Legal LLP appeared for the petitioner.

Advocates Jitendra B Mishra, Ashutosh Mishra, Sangeeta Yadav and Rupesh Dubey appeared for Union of India.

Advocates Satyaprakash Sharma and Megha Bajoria appeared for Assistant Commissioner of CGST and Customs.

[Read Order]