2024 (12) TMI 1290 - HC - GST

Violation of principles of natural justice - Jurisdiction to issue SCN - wrongfully availing the benefit of an exemption on the supply of Kulcha by misclassifying it as bread under S. No. 97 of N/N. 02/2017-Central Tax (Rate) dated June 28, 2017 - denial of reduction of the Petitioner s outward tax liability based on credit notes issued for deficient services and destroyed goods - suppression of facts or not - violation of principles of natural justice. HELD THAT - Upon a thorough examination of the documents presented to the Court and taking into account the arguments put forth by the parties, this Court finds that the writ petition is not maintainable. This Court shall refrain from adjudicating or delving into the merits of the case as the issues raised in the present writ petition pertain to complex questions of fact and law that are squarely within the jurisdiction of the adjudicating authority under the Central Goods and Services Tax (CGST) Act, 2017. The petitioner s grievances primarily relate to the invocation of the extended period of limitation, allegations of misclassification of goods and denial of Input Tax Credit (ITC). Each of these issues necessitates a detailed factual inquiry, which is outside the purview of this Court in its writ jurisdiction. In Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others 1998 (10) TMI 510 - SUPREME COURT , the Hon ble Supreme Court explained that writ petitions may be entertained against show cause notices where the petitioners seek enforcement of any fundamental rights, where there is a violation of principles of natural justice or where the order or proceedings are wholly without jurisdiction or where the vires of the Act is itself challenged. None of these circumstances are made out in the present petition. Simply alleging that the impugned SNC are without jurisdiction because, according to the petitioners perception, the exemption covers them, or the nil tax rate notification is insufficient. The usual adjudicatory process, where such a matter can be effectively adjudicated upon, cannot be scuttled by rushing to the writ court and securing stays on the adjudicatory process. It is well-settled that writ courts do not interfere in cases where statutory remedies are available unless there is a clear violation of fundamental rights, lack of jurisdiction, or procedural perversity leading to manifest injustice. The petitioner has not demonstrated any such exceptional circumstances warranting this Court's intervention. Instead, the statutory framework under the CGST Act provides adequate mechanisms for addressing the petitioner s concerns, including responding to the SCN, participating in adjudication proceedings and availing appellate remedies if dissatisfied with the outcome. The petitioner is advised to exhaust the statutory remedies provided under the CGST Act, 2017 including submitting a detailed response to the SCN. This Court reiterates that it shall not interfere in matters requiring fact-finding and adjudication, which fall squarely within the statutory domain. Petition dismissed.

Summary

Issues Involved:

1. Jurisdiction and validity of the Show Cause Notice (SCN) under the CGST Act.
2. Invocation of the extended period of limitation under Section 74 of the CGST Act.
3. Allegations of misclassification of goods and denial of exemption.
4. Denial of reduction in tax liability based on credit notes and non-reversal of Input Tax Credit (ITC).
5. Procedural defects in the issuance of SCN, including absence of pre-SCN intimation.
6. The applicability of restrictions on ITC for goods used in internal testing.
7. Bunching of demands for multiple financial years.
8. Maintainability of the writ petition and the jurisdiction of the High Court.

Detailed Analysis:

1. Jurisdiction and Validity of the SCN:
The petitioner challenged the jurisdiction and validity of the SCN, arguing it was issued in violation of the principles of natural justice. The SCN was alleged to lack evidence of fraud, suppression, or wilful misstatement, which are prerequisites for invoking the extended period of limitation under Section 74 of the CGST Act. The court, however, refrained from adjudicating these issues, stating that they involve complex questions of fact and law best addressed by the adjudicating authority under the CGST Act.

2. Extended Period of Limitation:
The petitioner contended that the extended period of limitation was invoked without jurisdiction, as the SCN failed to establish fraud or wilful misstatement. The court noted that the invocation of the extended limitation period is a mixed question of law and fact, falling under the jurisdiction of the adjudicating authority. The respondents argued that the extended period was validly invoked due to the petitioner's wilful misclassification of goods and availing of ineligible ITC with the intent to evade tax.

3. Misclassification of Goods and Denial of Exemption:
The SCN accused the petitioner of misclassifying "Kulcha" as "bread" to wrongfully avail of tax exemption. The petitioner argued that this classification issue did not demonstrate a deliberate intention to evade tax. The court emphasized that determining whether a product falls within a tariff entry is a factual matter requiring adjudication by the appropriate authority.

4. Denial of Reduction in Tax Liability:
The SCN denied the reduction of the petitioner's tax liability based on credit notes, arguing non-compliance with a circular imposing additional requirements. The petitioner contended that such requirements were beyond statutory provisions and that the department's insistence on verifying ITC reversals was untenable. The court did not delve into these issues, as they require factual inquiry by the adjudicating authority.

5. Procedural Defects in SCN Issuance:
The petitioner highlighted procedural defects, such as the absence of pre-SCN intimation in Form GST DRC-01A, rendering the proceedings defective. The court did not address these procedural issues, as they are part of the factual and legal questions to be decided by the adjudicating authority.

6. Applicability of ITC Restrictions:
The SCN categorized goods used for internal testing as free samples, thereby restricting ITC. The petitioner argued that these goods were not distributed as free samples, making Section 17 (5) (h) inapplicable. The court did not adjudicate this issue, leaving it to the appropriate authority to determine.

7. Bunching of Demands:
The SCN combined demands for multiple financial years, which the petitioner argued violated the CGST Act's requirement for year-wise determination. The court did not address this issue, as it involves factual determinations best suited for the adjudicating authority.

8. Maintainability of the Writ Petition:
The court dismissed the writ petition, stating that it is not maintainable as the issues involve complex factual and legal questions within the jurisdiction of the adjudicating authority. The court reiterated that writ courts do not interfere where statutory remedies are available unless there is a clear violation of fundamental rights, lack of jurisdiction, or procedural perversity leading to manifest injustice. The petitioner was advised to exhaust statutory remedies under the CGST Act, including responding to the SCN and participating in adjudication proceedings.

In conclusion, the court dismissed the writ petition, emphasizing the need for the petitioner to address the issues through the statutory framework under the CGST Act. The court refrained from expressing any opinion on the merits of the petitioner's claims, directing the adjudicating authority to independently decide the matter based on evidence and submissions.