2024 (8) TMI 982 - HC - GST

Challenge to SCN - respondents have proceeded to issue notice under Section 74 of the Act, which is against the directions of the Court - fraud or suppression or concealment of facts - HELD THAT - The respondent were allowed to proceed against the petitioner invoking powers under Section 73 of the Act. It, however, appears that later on, the respondents moved an application before this Court seeking appropriate modification in order dated 25.07.2023 and liberty to the extent that instead of Section 73 of the Act the issue may be left open to be considered/adjudicated under the provisions of the Act. The text and tenor of the aforesaid order, in the light of the prayer which was made by the department, clearly appears to be a liberty given to the department to proceed against the petitioner. The very object and purpose of filing modification application was to remove the restriction which was imposed on the department to proceed only under Section 73 of the Act - The liberty which was granted by the court clearly meant that the respondents would be at liberty to proceed under the provisions of the Act which included powers which are exercisable under any of the provisions of the Act and could not be restricted to Section 73 alone - the challenge to impugned notice under Section 74 of the Act, cannot be allowed to be assailed. The second ground which has been raised by learned counsel for the petitioner, in our opinion, is premature at this stage - HELD THAT - Though, learned counsel for the petitioner disputes this aspect, we do not see any reason why writ court should interdict at this stage when the petitioner is only asked to show cause against proposed action. The authority, undoubtedly has jurisdiction to issue notice under Section 74. Whether or not present is a case of suppression of fact, warranting invocation of jurisdiction under Section 74 of the Act, is an issue of fact and not of law. Petition disposed off.

Summary

Issues:
Challenge to show cause notice under Section 74 of the CGST Act, 2017 based on Court directions and nature of the case.

Analysis:
The petitioner challenges the show cause notice dated 30.04.2024 on two grounds. Firstly, the petitioner argues that the respondents deviated from the Court's directions by proceeding under Section 74 instead of Section 73 of the Act. The petitioner contends that the case involves short payment of tax without any fraud or concealment, making Section 74 inapplicable. The petitioner relies on the provisions of sections 73 and 74 of the Act, along with a circular dated 13.12.2023. On the contrary, the respondent argues that during the investigation, it was found that the case involved suppression of facts, justifying the use of Section 74. The Court had initially allowed proceedings under Section 73 but later granted liberty to proceed as per law, not restricting the respondents to Section 73 only.

The Court examines the previous order dated 25.07.2023 and subsequent modifications. It finds that the respondents were initially allowed to proceed under Section 73 but later sought liberty to consider other provisions of the Act. The Court clarifies that the department is not limited to Section 73 and can act under the Act of 2017 as per law. The liberty granted was not restricted to Section 73 alone but encompassed all provisions of the Act. The Court emphasizes that both orders must be read together to understand the scope of the liberty given to the department.

The Court dismisses the challenge to the notice under Section 74, stating that the grounds raised are not sufficient. It deems the challenge premature as the petitioner is yet to respond to the notice. The Court notes that the authority has the jurisdiction to issue notices under Section 74 based on prima facie considerations of suppression. The determination of whether suppression exists is a factual issue, not a legal one. The Court refrains from commenting on the merits and advises the petitioner to submit a reply to the show cause notice to address the contentions effectively.

In conclusion, the Court decides to dispose of the writ petition. It instructs the petitioner to file a reply to the show cause notice within 30 days for the authority to consider it appropriately and proceed in accordance with the law. The Court refrains from making any judgment on the merits of the case at this stage.