2024 (10) TMI 1042 - HC - GST

Challenge to SCN - wrongful availment or short payment of tax - levy of GST on printing services - HELD THAT - Upon perusal of the show cause notice, one factor immediately strikes is there is no specific allegation with regard to wrongful availment or short payment of tax by reason of fraud, or any wilful misstatement or suppression of facts to evade tax . It is to be further noted that advance ruling authorities in the State of Karnataka, West Bengal and Chhattisgarh have also held that the activity of printing of books by publishers wherein the content is provided by NCERT or any similar educational board would amount to supply of goods and the fact that royalty is paid by such publishers would amount to the publishers playing the role of copy right holder as well as printer. The only other ground of challenge from the side of the respondents is that this writ petition is not maintainable as the petitioner is challenging the show cause notice. Counsel appearing on behalf of the respondents submitted that the petitioner should reply to the show cause notice and proceed with the alternative remedy available with the petitioner. It is to be noted that the Supreme Court in a catena of judgements has stated that interference at the show cause notice stage and/or when an alternative remedy is available to the petitioner, specially in cases of fiscal statutes that are self contained in nature is to be avoided by the High Courts. The Supreme Court in the case of Union of India and another v. Gauhati Carban Limited 2012 (11) TMI 885 - SUPREME COURT held that the power under Article 226 of the Constitution of India is an extraordinary power and should be exercised by the High Court only in those cases where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or where an order has been passed in total violation of the principles of natural justice causing prejudice to the petitioner. The petitioner has established a prima facie case in its favour and the balance of convenience and inconvenience lies in favour of the petitioner for obtaining an order of injunction. List this matter on December 17, 2024.

Summary

Issues:
Challenge to show cause notice under Article 226 of the Constitution of India regarding GST tax on printing services. Jurisdiction under Section 74 of the CGST Act. Maintainability of writ petition at the show cause notice stage.

Analysis:
The petitioner, aggrieved by a show cause notice related to GST tax on printing services, challenged the notice under Article 226 of the Constitution of India. The notice was issued based on a re-categorization by the Principal Chief Commissioner, directing action against book sellers. However, the notice lacked specific allegations of fraud or wilful misstatement regarding tax evasion by the petitioner. The court emphasized the distinction between Sections 73 and 74 of the CGST Act, highlighting that Section 74 requires the authority to be satisfied of fraud or wilful misstatement for jurisdiction. The court cited judgments to support the necessity of expressly mentioning fraud in the show cause notice under Section 74 for jurisdiction.

Moreover, advance ruling authorities in various states had held that printing educational books with content provided by educational boards constitutes supply of goods. The petitioner, paying royalty for content, was considered a copyright holder and printer. The court noted that these rulings were unchallenged by the government, indicating finality. The respondents argued the writ petition's non-maintainability at the show cause notice stage, suggesting the petitioner respond to the notice and pursue alternative remedies. However, the petitioner contended that the re-categorization leading to the notice was arbitrary and lacked fraud allegations against them.

The court acknowledged the general principle of avoiding interference at the show cause notice stage, especially in fiscal statutes with self-contained remedies. It cited Supreme Court judgments emphasizing the extraordinary nature of Article 226 powers and the importance of statutory compliance. Exceptions to the rule of alternative remedies were noted, including cases of patent illegality or lack of jurisdiction. In this case, the court found the show cause notice lacked fraud allegations against the petitioner and ignored final rulings by advance ruling authorities. Consequently, the court found a prima facie case in favor of the petitioner and stayed the show cause notice pending further proceedings.

The court directed the filing of counter affidavits and set a future hearing date, indicating a favorable balance of convenience for the petitioner in obtaining an injunction.