2024 (12) TMI 927 - HC - GST

Challenge to SCN - no justification for either alleging any suppression or invoking the extended period of limitation under section 74 of the Central Goods and Services Tax Act, 2017 - HELD THAT - The record shows that the Petitioner was audited, and an audit report was prepared on September 26, 2023. However, the impugned show-cause notice refers to the Petitioner s response at the pre-show-cause stage, after the audit report was prepared. Clause 3.5 of the show-cause notice refers to the statement of the petitioner's Finance Manager, which was recorded on July 1, 2024. These statements accept that the Petitioner is not registered as a Bank but a payment aggregator as per the RBI norms. At this stage, what is relevant is that the show cause notice is based upon findings of investigations that were ordered into the matter. No doubt, such findings are necessarily tentative. The scope of judicial review is extremely narrow at the stage of issuing a show cause notice. At this stage, it cannot be expected to decide whether the factual allegations are correct or not, but it is not thought that any case is made to halt further proceedings under the show-cause notice. Based on the premise that the audit had cleared the Petitioner or that allegedly complete disclosures were made during the audit, no case is made to interfere with the impugned show cause notice or the invocation of section 74 of the CGST Act. In any event, the contentions can always be raised in response to the show cause notice, and there is no reason to believe that such defences would not be considered and dealt with in accordance with the law. In the case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai and Others 1998 (10) TMI 510 - SUPREME COURT , the Hon ble Supreme Court has explained that the writ petition may be entertained at the show cause notice stage, where the Petitioner seeks enforcement of any fundamental rights, where there is violation of the principles of natural justice or where the order or the proceedings are wholly without jurisdiction. It is satisfied that under all these circumstances are not made out in this case, and the Petitioner is only bent upon taking a chance to see if the proceedings are halted or hurdles are created in them. In the case of The Special Director and another Vs. Mohd. Ghulam Ghouse and Another 2004 (1) TMI 378 - SUPREME COURT , the Hon ble Supreme Court has held that unless the High Court is satisfied that the show cause notice was totally non est in the eyes of law for absolute want of jurisdiction of the authority and to investigate the acts, the writ petition should not be entertained, for mere asking and as a matter of routine. The writ petitioner should merely be directed to respond to the show cause notice and raise all defences and contentions that may be highlighted in the petition. It is satisfying that no case is made out to interfere with the impugned show cause notice - petition dismissed.

Issues:
1. Formal amendment in the cause-title sought in an interim application.
2. Challenge to a show cause notice issued by the Directorate General of GST Intelligence.
3. Allegations of suppression and invocation of extended period of limitation under the CGST Act.
4. Dispute regarding exemption from GST on transactions up to Rs. 2,000.
5. Jurisdictional error in issuing the show cause notice.
6. Prima facie case of suppression based on investigations.
7. Invocation of section 74 of the CGST Act.
8. Interpretation of recommendations by the Treatment Committee of GST Council.
9. Allegations of wrongful input tax credit and investigations revealing higher amounts.
10. Exhaustion of alternate remedies and interference with the show cause notice.
11. Entertaining a writ petition at the show cause notice stage.

Analysis:

1. The High Court allowed the formal amendment in the cause-title in an interim application and dispensed with re-verification.

2. The petitioner challenged a show cause notice issued by the Directorate General of GST Intelligence, claiming complete disclosures were made during an audit and contesting allegations of suppression and invocation of the extended limitation period under the CGST Act.

3. The petitioner argued that no suppression occurred and questioned the jurisdiction of invoking the extended limitation period without specifying the nature of suppression in the show cause notice.

4. The petitioner relied on the recommendations of the Treatment Committee of GST Council regarding exemption from GST on transactions up to Rs. 2,000, contending that a mere claim for input tax credit does not constitute suppression or fraud.

5. The respondent argued that the show cause notice was based on findings of investigations indicating prima facie suppression, justifying the invocation of an extended limitation period.

6. The court noted that the show cause notice was based on post-audit statements suggesting the petitioner may not be entitled to exemption or input tax credit, emphasizing the preliminary nature of such findings at the show cause notice stage.

7. The court rejected the petitioner's argument that the audit report's clearance precluded interference with the show cause notice, highlighting that defenses could be raised in response to the notice.

8. The court addressed the petitioner's contentions regarding the Treatment Committee's recommendations but found no grounds to interfere with the show cause notice solely based on the committee's views.

9. The court acknowledged allegations of wrongful input tax credit and higher utilizations revealed in investigations, emphasizing that the petitioner could challenge these allegations in response to the show cause notice.

10. Referring to precedents, the court declined to interfere with the show cause notice, emphasizing the need to exhaust alternate remedies before seeking judicial intervention.

11. Citing relevant case law, the court concluded that the petitioner failed to establish a violation of fundamental rights, principles of natural justice, or jurisdictional errors warranting interference with the show cause notice.

Conclusion:
The court dismissed the petition without costs but granted the petitioner an extended period to file a reply to the show cause notice.

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