2022 (9) TMI 986 - HC - GST

Validity of interim order - Challenge to the SCN - Levy of GST - supply of Extra Neutral Alcohol (ENA) - Validity of interim order of the Single Judge bench of HC, directing bank guarantee to be furnished by the petitioner - Section 4 of the Karnataka High Court Act - HELD THAT - Despite the fact that the challenge is to the show cause notice, the writ petition is entertained. It is also noticed that remedy of appeal is available pursuant to the order to be passed by the authority in response to the show cause notice. Under the circumstances, the discretionary order passed by the learned Single Judge in imposing a condition to furnish bank guarantee to an extent of 25% of the amount mentioned in the show cause notice cannot be construed as an erroneous order to interfere in this intra court appeal on interim order. The contention of the appellant that appeal requires a deposit of only 10% and the filing of appeal on payment of 10% of the demand would automatically ensure stay of impugned order in terms of Sec.107(7) of the GST Act does not come to the rescue of the appellant to say that the impugned order is erroneous. The appellant has chosen to file the writ petition despite the opportunity of showing cause to the show cause notice is available to the appellant. Moreover, the right of appeal u/S 107 of the GST Act is available to the appellant. Hence, this court does not find any reasons to interefere with the discretion exercised by the learned Single Judge while considering the interim prayer. While granting interim order of stay, learned Single Judge has granted eight weeks time to furnish bank guarantee and it would come to an end on 31.01.2022. As the petitioner- appellant was in appeal, the time granted by the learned Single Judge to furnish bank guarantee is extended by another three weeks from 31.01.2022 - Appeal disposed off.

Summary

Issues:
Challenge to demand cum show cause notice for GST on supply of ENA; Jurisdiction of issuing show cause notice; Imposition of bank guarantee for interim stay order; Interpretation of CGST Act provisions; Applicability of GST on ENA for human consumption; Statutory deposit for appeal against tax liability; Validity of interim order directing bank guarantee; Availability of appeal remedy; Discretion exercised by Single Judge in interim order.

The judgment revolves around the challenge to a demand cum show cause notice for Goods and Services Tax (GST) on the supply of Extra Neutral Alcohol (ENA). The appellant contested the notice, questioning the jurisdiction of its issuance and the imposition of a bank guarantee for an interim stay order. The appellant argued that CGST could only be imposed based on the recommendation of the GST Council, and since there was no such recommendation for ENA supplied for human consumption, the GST imposition was without jurisdiction. The appellant also highlighted that the statutory deposit required for appealing a tax liability is only 10%, making the 25% bank guarantee condition unreasonable.

The respondent countered by asserting that the ENA supplied by the appellant, containing 95% alcohol, was not for human consumption but for industrial purposes, making it taxable under GST. The respondent emphasized that the appellant could raise all grounds, including jurisdictional issues, before the authority considering the show cause notice. The court noted that the order under consideration was interim, showing leniency by requiring a 25% bank guarantee based on the tax liability amount in the show cause notice. The court acknowledged the availability of the appeal remedy and declined to interfere with the Single Judge's discretion in imposing the bank guarantee condition.

The court further held that the appellant's argument regarding the 10% deposit for an appeal under the GST Act did not invalidate the interim order. The court refrained from delving into the merits of the case to avoid prejudgment, especially since the matter was pending before the Single Judge. Ultimately, the court disposed of the writ appeal, extending the time granted to furnish the bank guarantee by an additional three weeks to accommodate the appellant's appeal process.

In conclusion, the judgment upholds the interim order requiring a bank guarantee for the appellant challenging the GST imposition on ENA supply. It emphasizes the availability of appeal remedies and the discretion exercised by the Single Judge in granting the interim stay order. The court refrained from delving into the merits of the case, ensuring fairness and due process in the ongoing legal proceedings.