2023 (2) TMI 359 - HC - GST

Validity of SCN - Levy of penalty - CIRP under IBS has been initiated - SCN issued invoking inter alia Section 122(1A) of the Central Goods and Services Tax Act, 2017 (CGST Act), which provides for penalties - HELD THAT - Since the adjudication proceedings are yet to commence, the better course would be to permit the Petitioners to raise all the pleas that they have urged in the present petitions in their reply to the impugned SCN that has been challenged in these writ petitions and for the adjudication proceedings to be concluded in a timebound manner. The Court also does not consider it appropriate therefore to express any view on any of the contentions raised in these writ petitions at the present stage. The following directions are issued (i) Each of the Petitioners will file their replies to the impugned SCN positively on or before 1st March, 2023; (ii) The Petitioners are permitted to urge all the pleas available to them in law, including the ones urged in the present petitions, in their reply to the impugned SCN. (iii) The adjudicating authority will take into account all such pleas and deal with them in the adjudication order to be passed after giving the Petitioners an opportunity of hearing and considering their requests, if any, as regards summoning persons or documents in accordance with law. (iv) The Court clarifies that it has not expressed any view in the matter. Needless to say that if the Petitioners are aggrieved by the adjudication order it will be open to them to seek appropriate remedies in accordance with law. Petition disposed off.

Summary

Issues:
Challenging Show Cause Notice invoking Section 122(1A) of CGST Act - Jurisdictional challenge due to insolvency proceedings - Entertaining writ petitions at SCN stage.

Analysis:
The judgment deals with three writ petitions challenging a Show Cause Notice (SCN) issued by the Directorate General of Goods and Services Tax Intelligence under Section 122(1A) of the Central Goods and Services Tax Act, 2017 (CGST Act). The SCN was issued to the petitioners, who were associated with a company, for transactions prior to the provision coming into force. The petitioners had not replied to the SCN despite the lapse of time. The petitioners argued that the proceedings were without jurisdiction due to the company's insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). They relied on legal precedents to support their contention, emphasizing that they could not be held liable for dues prior to the Insolvency Resolution Plan. The court noted that adjudication proceedings had not yet taken place and directed the petitioners to file their replies to the SCN by a specified date, allowing them to raise all legal pleas during the adjudication process.

Regarding the issue of entertaining the writ petitions at the SCN stage, the petitioners relied on legal precedents to support their position. The court considered the submissions and decided to permit the petitioners to raise all their arguments during the reply to the SCN and in the subsequent adjudication proceedings. The court refrained from expressing any view on the contentions raised in the writ petitions at that stage. It issued directions for the petitioners to file their replies, ensuring that all pleas would be considered during the adjudication process. The court clarified that it had not expressed any opinion on the matter and stated that the petitioners could seek appropriate remedies if aggrieved by the adjudication order. The writ petitions were disposed of with the given directions, and an urgent certified copy of the order was to be issued in accordance with rules.