2024 (3) TMI 1316 - HC - GST

Liability of Collect Tax at Source (TCS) - Exempt supplies - Section 52 of the Central Goods and Services Tax Act, 2017 (CGST Act) - It is contended that payment for the contract can either be settled through the Petitioner s platform, or it can be settled directly between the buyer and seller. The Petitioner does not guarantee settlement of transactions by way of delivery of goods or payment. The Petitioner merely charges transaction fees for providing the platform to its members for the purpose of e-auction. HELD THAT - In the peculiar facts and circumstance of the case, when the Petitioner has raised an issue of the maintainability of the alleged demand on the ground that Section 52 of the CGST Act is not applicable, and more particularly considering the nature of the business and transaction involved, it would be appropriate that the adjudicating officer considers the same as preliminary issues and decide the same first in accordance with law. This Petition is disposed off by permitting the Petitioner to raise such preliminary issues before the adjudicating officer and the same shall be taken into consideration and decided by him in accordance with law.

Summary

Issues involved:
The issues involved in this case include the applicability of Section 52 of the Central Goods and Services Tax Act, 2017 (CGST Act) on the Petitioner's business model, the demand for Tax Collected at Source (TCS) liability, and the legality of the show cause notice issued by the Respondent.

Applicability of Section 52 of the CGST Act:
The Petitioner, engaged in providing e-auction services, argued that Section 52 of the CGST Act, pertaining to TCS, is not applicable to them as they do not guarantee settlement of transactions or collect TCS. Legal opinions obtained by the Petitioner supported this stance, stating that Section 52 does not apply to exempt supplies.

Demand for TCS Liability:
Despite submitting certificates showing GST discharge by suppliers, the Petitioner was informed of unpaid TCS liability amounting to Rs. 380.69 crores. The Petitioner contested this demand, stating they are not liable to pay TCS under Section 52 of the CGST Act.

Legality of Show Cause Notice:
The show cause notice issued to the Petitioner proposed to recover the TCS liability along with interest and penalty. The Petitioner argued that Section 73 of the CGST Act cannot be invoked for TCS recovery, as there is no provision for such recovery under Section 52. The High Court directed the Petitioner to raise preliminary objections before the adjudicating officer regarding the applicability of Section 52, to be decided as a preliminary issue.

Conclusion:
The High Court directed the Petitioner to raise preliminary objections before the adjudicating officer regarding the applicability of Section 52 of the CGST Act. The adjudicating officer was instructed to consider and decide these preliminary issues before proceeding with the show cause notice. The Petitioner was asked to appear before the adjudicating officer by a specified date, with all remedies kept open in case of an adverse decision.