2024 (8) TMI 442 - HC - GST

Challenge to demand-cum-show-cause - opportunity to submit written explanation not provided - violation of principles of natural justice - HELD THAT - Normally, writ Court would not entertain writ challenging show-cause notice. Show-cause notice would not affect the rights of the parties. No person would be aggrieved on receiving show-cause notice. A person would be aggrieved only when show-cause notice is translated into adverse order. It is not that show-cause notice cannot be challenged at all. Show-cause notice could be challenged, if one establishes that authorities which issued show-cause notice lacks inherent jurisdiction and is not competent to issue such show-cause notice. The Hon ble Apex Court in the case of SPECIAL DIRECTOR VERSUS MOHD. GHULAM GHOUSE 2004 (1) TMI 378 - SUPREME COURT , while considering appeal arising out of show-cause notice issued under the provisions of Foreign Exchange Regulation Act, 1973 and Foreign Exchange Management Act, 1999, has held ' Whether the show cause notice was founded on any legal premises is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court. Further, when the Court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is accorded to the writ petitioner even at the threshold by the interim protection, granted.' By following the principles laid down by the Hon ble Apex Court in the case of Mohd. Ghulam Ghouse, the writ appeal is declined to be entertained and the petitioner is relegated to approach the authorities by replying to the demand-cum-show-cause notice dated 23.09.2021. It is open for the petitioner to raise all contentions raised here before the authorities and authorities shall consider the same and pass appropriate orders in accordance with law. Appeal disposed off.

Summary

Issues:
Challenge to demand-cum-show-cause notice under GST Act.

Analysis:
The case involved a challenge to a demand-cum-show-cause notice issued under the Goods and Services Tax Act, 2017. The petitioner, a company engaged in the manufacture and sale of sugar products, contested a notice demanding GST on Extra Neutral Alcohol (ENA) supplied for human consumption. The petitioner argued that ENA supplied for human consumption was exempt from GST, citing relevant notifications and recommendations. The respondent, Joint Commissioner of Central GST and Central Excise, defended the notice, stating that ENA supplied for manufacturing alcohol for human consumption attracted GST. The High Court considered whether the challenge to the notice was premature and whether the authorities had the jurisdiction to issue the notice.

The Court highlighted that challenging a show-cause notice before it translates into an adverse order is generally not entertained, as it does not affect the parties' rights immediately. The Court referred to the Supreme Court's stance on challenging show-cause notices, emphasizing that unless the notice lacks jurisdiction, it should be responded to before seeking judicial intervention. In this case, the Court refrained from delving into the jurisdictional questions raised by the petitioner, directing them to address their concerns before the authorities first.

The Court noted the petitioner's arguments regarding the absence of a notification prescribing GST rates for ENA supplied for human consumption and the recommendations of the GST Council. However, it emphasized that the authority should examine these factual aspects based on the material presented. The Court declined to entertain the appeal, advising the petitioner to respond to the notice and present their contentions before the authorities for appropriate consideration in accordance with the law.

In conclusion, the Court disposed of the writ appeal, granting the petitioner time to reply to the notice and directing the authorities to hear the petitioner's objections and decide on the matter lawfully. The Court instructed the authorities not to take any precipitative action based on the notice until a decision was reached. If the petitioner failed to respond within the stipulated time, the authorities were permitted to proceed as per the law.