2023 (2) TMI 178 - MADRAS HIGH COURT

Jurisdiction - power of DGGI to issue SCN - Transition to GST regime - Exemption Notification 25/2012 dated 20.06.2012 - case of petitioner is that the Notifications under which the officials of the DGGI have assumed jurisdiction have not been expressly saved under Section 174(2) of the CGST Act and hence the impugned orders/notice are non-est in law.

Whether, the Notifications under which the DGGI/officials of the Intelligence Department have drawn sustenance to issue show cause notices for assessment under the Finance Act 1994, survive the transition from the erstwhile regime of taxation (Service tax) to the new regime of Goods and Service tax (GST), effective from 01.07.2017? - whether the assumption of jurisdiction by the DGGI for issuance of show cause notice under Finance Act 1994 read with Section 174(2) of the CGST Act, is proper in law?

HELD THAT:- In the case of Sheen Golden Jewels (I) P. Ltd. [[2019 (2) TMI 300 - KERALA HIGH COURT]] and Prosper Jewel Arcade LLP [[2018 (10) TMI 1527 - KARNATAKA HIGH COURT]], the Kerala and Karnataka High Courts held adverse to those petitioners rejecting their arguments that with the shift to the GST regime, all levies under the erstwhile service law regime had lapsed. The conclusion arrived at was that Section 174 of the respective State GST enactments saved all the rights, obligations or liabilities acquired, accrued or incurred under the repealed enactments which included Service Tax Act as well - To be noted that neither of the aforesaid decisions had dealt with the specific question/issue raised in these matters as to whether the Notifications issued under the Service tax regime, survived the transition to the GST regime. In any event, though a lukewarm ground has been raised to this effect, it is admittedly not the case of the petitioners before me that the levy of service tax in itself erroneous post 01.07.2017, but only that the assumption of jurisdiction by the DGGI in issuing show cause notices, is. Had the notices been issued by the correct officer, the petitioner are unanimous in stating that the present challenge would be a non-starter.

Section 174, according to the Bench, thus unequivocally saved all rights, obligations, privileges and liabilities that had enured under the old laws which would continue in the new regime.

In Canon India [ [2021 (3) TMI 384 - SUPREME COURT]], the issue that arose was whether an officer of the Directorate of Revenue Intelligence (DRI) had the authority in law to issue a show cause notice under Section 28(4) of the Customs Act, 1962 when the goods were initially cleared for import by a Deputy Commissioner of Customs who was of the opinion that the said goods were exempted from duty. It was held that the officer of the DRI would not be a proper officer to review the original order of exemption granted by the Deputy Commissioner as the enactment did not provide for identically placed officers of different Departments exercising the powers of re-assessment or review in regard to each other’s orders - That apart, they also held that the Additional Director General of the DRI who had issued the recovery notice was not the proper officer, by a combined reading of the definitions of ‘proper officer’ under Sections 2(34), 6 and 28 of the Customs Act. The ratio of this judgment, although rendered in a different context, may well support the revenue rather than the petitioners.

The expansive constitution of Section 88 of the Tamil Nadu Value Added Tax Act that specifically includes subordinate legislation has been cited by the petitioners as a counter to the move restricted construction of Section 174. Notwithstanding this difference, it is reiterated that in interpreting the reach of Section 174, this Court does not wish to loose sight of the necessity to ensure a seamless application of the levy following the consistent procedure followed under the old and new enactments - Section 174(2) states that repeal as per subsection (1) shall not affect any rights, privileges or obligations or liability acquired, accrued or incurred under the old Act and the proviso carves out an exception in regard to tax exemption granted as an investment against investment through 'Notification'. In such cases, such exemptions shall continue until rescinded. What I gather by implication, is that Notifications in other situations continue.

The assumption of jurisdiction by the officials of the DGGI is valid. These writ petitions are dismissed.