It is common knowledge that the Authorities often travel beyond the scope of the Show Cause Notice in Administrative/ Quasi-Judicial proceedings. The Courts have categorically held that such orders passed by authorities cannot go beyond the scope of the show cause notices and such orders are ab- initio illegal & bad in law and ought to be set aside/quashed at the very outset.

The Show Cause Notice is not just a normal notice. It is primarily an opportunity of leading evidence to refute/counter the allegations and gives an opportunity to the person/firm/company charged with certain allegations to represent and adduce evidence against the allegations/charges made out against them. A show cause notice flows from the rule that no party is condemned unheard. It is noteworthy that the right to be heard is an important legal right and therefore the show cause notice needs to be substantive & unambiguous. The party must precisely know the exact case he has to meet and reasonable opportunity to present his case ought to be mandatorily provided.

The basic ingredients & process of show cause notice can be summed up thus:

1. The Show Cause Notice should be issued by the authority only after proper inquiry/investigation after ascertaining the correct facts of the case.
2. The Show Cause Notice should be in writing. The date of issue of Show Cause Notice should be clearly written.
3. The date by which the reply/explanation ought to be furnished should also be clearly mentioned.
4. The Show Cause Notice should be specific and unambiguous.
5. The Show Cause Notice should be brief, comprehensive and to the point. There should be no repetition of facts.
6. The Show Cause Notice should be clear on facts and legal provisions. Violation of the provisions of law should be clearly indicated in the Show Cause Notice.
7. The charges should be specific. They should not be vague/or contradictory.
8. Copies of the documents relied upon should be listed in seriatim as per the references made in the Show Cause Notice and given as Annexures to the Notice.
9. No order should be passed before the expiry of the time limit provided in the Notice.
10. The Show Cause Notice should clearly mention whether the noticee(s) are to be heard in person or required to file written submissions/explanations.
11. The Notice should clearly show the name of the Authority to which the Show Cause Notice is answerable and also the postal/email address where the reply ought to be filed.

It is no longer Res Integra that the contents/charges mentioned in the show cause notice serve as the foundation for all subsequent proceedings and any deviation from the contents render the entire proceedings including the order null and void. In legal parlance, order on any ground not stated in the notice is violative of the established principles of Natural Justice. The doctrine of audi alteram partem (the right to be heard) underlines the importance of ensuring that parties are fully aware of the allegations against them.

Discrepancy between the show cause notice and the subsequent order would be sufficient for the court to quash the said illegal order. It is imperative that the Show cause notices must clearly outline the grounds and nature of offenses so that the parties get adequate opportunity to rebut the same. The same is indispensable for ensuring due fairness in administrative actions.

It is apropos to refer to the case of Commissioner of Customs, Mumbai v. Toyo Engineering India Ltd., (2006) 7 SCC 592 wherein the Apex Court categorically held that the action to be taken against a person is required to be mentioned in the show cause notice. The Court held thus:

6. Learned counsel for the Revenue tried to raise some of the submissions which were not allowed to be raised by the Tribunal before us, as well. We agree with the Tribunal that the Revenue could not be allowed to raise these submissions for the first time in the second appeal before the Tribunal. Neither the adjudicating authority nor the Appellate Authority had denied the facility of the project import to the respondent on any of these grounds. These grounds did not find mention in the show-cause notice as well. The Department cannot travel beyond the show-cause notice. Even in the grounds of appeals these points have not been taken.

7. Furthermore, in Commissioner of Central Excise, Bhubaneshwar v. Champdany Industries Ltd., (2009) 9 SCC 466, the Supreme Court has held as under:

38. Apart from that, the point on Rule 3 which has been argued by the learned counsel for the Revenue was not part of its case in the show-cause notice. It is well settled that unless the foundation of the case is made out in the show-cause notice, the Revenue cannot in Court argue a case not made out in its show-cause notice. (See Commr. of Customs v. Toyo Engg. India Ltd. [(2006) 7 SCC 592) Similar view was expressed by this Court in CCE v. Ballarpur Industries Ltd. [(2007) 8 SCC 89] In para 27 of the said Report, learned Judges made it clear that if there is no invocation of the Rules concerned in the show-cause notice, it would not be open to the Commissioner to invoke the said Rules.

It would be appropriate to refer to Commnr. Central Excise, Delhi vs M/S. Ace Auto Comp. Ltd (2011) 1 SCC 666, wherein the Apex Court reiterated that the case must be confined to the allegations contained in the show cause notice. The Court observed thus:

Moreover, the Revenue had not made any such allegation in the show cause notice, and in light of the decisions of this Court in Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. (2006) 7 SCC 592 and Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries Ltd (2007) 8 SCC 89 it is trite that the foundation of the Revenue's case is laid in the show cause notice, and the same must be confined to the allegations contained therein.

It would be relevant that the Apex Court in:
C.C.E., Bhubaneswar-1 vs M/S. Champdany Industries Ltd (2009) 9 SCC 466 ruled that the foundation of the case should be made out in the show cause notice itself. The Court observed thus:

50. Apart from that, the point on Rule 3 which has been argued by the learned counsel for the Revenue was not part of its case in the show-cause notice. It is well settled that unless the foundation of the case is made out in the show- cause notice, Revenue cannot in Court argue a case not made out in its show-cause notice. {See: Commissioner of Customs, Mumbai Vs. Toyo Engineering India Limited - (2006) 7 SCC 592, para 16}.

The Apex Court in Precision Rubber Industries (P) Ltd. vs Commissioner of Central Excise, Mumbai (2016) 334 E.L.T. 577 (S.C.) held the show cause notice is the foundation of the case & observed thus:

Our attention has also been drawn to Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd. [2007 (215) ELT 489 (SC)] wherein this Court held in para 21 that it is well settled that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest.

It would be germane to refer to Commissioner of Central Excise, Chandigarh v. Shital International, (2011) 1 SCC 109 wherein the Apex Court ruled that the foundation of the case is to be laid in the show cause notice and observed thus:

19. As regards the process of electrifying polish, now pressed into service by the Revenue, it is trite law that unless the foundation of the case is laid in the show-cause notice, the Revenue cannot be permitted to build up a new case against the assessee. (See Commr. of Customs v. Toyo Engg. India Ltd. [(2006) 7 SCC 592], CCE v. Ballarpur Industries Ltd. [(2007) 8 SCC 89] and CCE v. Champdany Industries Ltd. [(2009) 9 SCC 466) Admittedly, in the instant case, no such objection was raised by the adjudicating authority in the show-cause notice dated 22-6-2001 relating to Assessment Years 1988-1989 to 2000-2001. However, in the show-cause notice dated 12-12-2000, the process of electrifying polish finds a brief mention. Therefore, in the light of the settled legal position, the plea of the learned counsel for the Revenue in that behalf cannot be entertained as the Revenue cannot be allowed to raise a fresh plea, which has not been raised in the show-cause notice nor can it be allowed to take contradictory stands in relation to the same assessee.

It would be worthwhile to refer to the case of Ramlala vs State of U.P. And 4 Others decided by the Division Bench of the Allahabad High Court recently on 21 November, 2023 (Neutral Citation No. - 2023:AHC:220646-DB) wherein the Court held thus:

9. The principle that emerges from the above judgements is patently clear that a show cause notice is required to provide details of the nature of the offence and the grounds on which the show cause notice has been issued. Furthermore, the order that is subsequently passed, based on the show cause notice, cannot go beyond the said show cause notice and cannot in any manner penalise the noticee on grounds that were not stated in the show cause notice.

10. The rationale for not allowing the respondents from going beyond the realm of the show cause notice is that the petitioner has to be given a chance to put up his case with regard to the said show cause notice. In the event, a particular case is made out in the show cause notice and the order passed subsequently is beyond the said show cause notice, the same would amount to violation of the principles of natural justice, as the petitioner would not have been aware of the new grounds or new factual elements and could never have placed his case for the above before the authority concerned. It is in this background that the Supreme Court in umpteen judgments has laid down the law that an order passed by an authority cannot go beyond the scope of the show cause notice.

In fact, the Supreme Court in the case of The Board of High School and Intermediate Education, U.P. and Others Kumari Chitra Srivastava and Others; 1970 (1) SCC 121 has categorically stated that the principles of audi alteram partem are required to be followed even if the same is burdensome in nature. Justice S.M. Sikri in his inimitable style stated as follows: Principles of natural justice are to some minds burdensome but this price – a small price indeed – has to be paid if we desire a society governed by the rule of law.

It would be trite to refer to the case of State of Punjab v. Davinder Pal Singh Bhullar and others 2011 (14) SCC 770 wherein the Apex Court have held that if the show cause notice is defective then the consequential proceedings would not stand and the order passed in such circumstances would be null and void. The Court held thus:

107. It is a settled legal proposition that if initial action is not in consonance with law, all subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. In such a fact-situation, the legal maxim sublato fundamento cadit opus meaning thereby that foundation being removed, structure/work falls, comes into play and applies on all scores in the present case.

108. In Badrinath v. State of Tamil Nadue & Ors., AIR 2000 SC 3243; and State of Kerala v. Puthenkavu N.S.S. Karayogam & Anr., (2001) 10 SCC 191, this Court observed that once the basis of a proceeding is gone, all consequential acts, actions, orders would fall to the ground automatically and this principle is applicable to judicial, quasi-judicial and administrative proceedings equally.

109. Similarly in Mangal Prasad Tamoli (dead) by Lrs. v. Narvadeshwar Mishra (dead) by Lrs. & Ors., (2005) 3 SCC 422, this Court held that if an order at the initial stage is bad in law, then all further proceedings, consequent thereto, will be non-est and have to be necessarily set aside.

110. In C. Albert Morris v. K. Chandrasekaran & Ors., (2006) 1 SCC 228, this Court held that a right in law exists only and only when it has a lawful origin. (See also: Upen Chandra Gogoi v. State of Assam & Ors., (1998) 3 SCC 381; Satchidananda Misra v. State of Orissa & Ors., (2004) 8 SCC 599; Regional Manager, SBI v. Rakesh Kumar Tewari, (2006) 1 SCC 530; and Ritesh Tewari & Anr. v. State of U.P. & Ors., AIR 2010 SC 3823).

In the case of Texmaco Rail And Engineering Ltd. & Anr. vs Union Of India & Ors. decided on 4 July 2022, the Division Bench of the Delhi High Court dealt with show cause notice on the basis of predetermined mindset and observed thus:

vii. This Court has jurisdiction to set aside a show cause notice that is vitiated by procedural mala fides, and also one which is non- speaking, and is on the basis of a predetermined mindset.

From the aforesaid, it is undisputed that the order passed by any authority cannot transgress the contents/scope of the show cause notice and any order in excess of the show cause notice is null & void and is liable to be quashed/ set aside.

Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]