2025 (1) TMI 1025 - HC - GST

Challenge to SCN issued by Joint Director D.G.G.I. Surat - facts necessary for invoking the provisions of Section 74 of CGST Act do not exist - violation of principles of natural justice - HELD THAT - The aspect pertaining to invoking extended period of limitation under Section 74 of the Act is essentially a jurisdictional aspect in the present matter as admittedly the petitioner has been paying GST under Entry No. 181-A since 2017 @ 5% for the product in question whereas for the products which are different from the product in question it is paying higher GST @ 12%. Further as apparently the Entry No. 181-A in Schedule-I is not different from sub heading 3003.31 of the Central Excise Tariff Act 1985 which was worded exactly in similar manner and has been repeatedly interpreted contrary to the allegations made in the show cause notice the aspect invoking the extended period of limitation in the circumstances requires consideration along with the binding nature of the deliberations of GST Council in its minutes dated 06.10.2017 - The issue as raised are jurisdictional in nature and therefore the aspect of availability of opportunity to respond to the show cause notice apparently would not come in way of the petitioner in maintaining the petition. The matter requires consideration - Issue notice.

Summary

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Allahabad High Court presents and considers the following core legal questions:

• Whether the show cause cum demand notice dated 03.08.2024 is without jurisdiction, arbitrary, and in violation of principles of natural justice.
• Whether the product 'Chyawanprash Awaleha' is correctly classified under Entry No. 181-A of Schedule-I of Notification No. 1/2017-CT (Rate) as amended, and whether the use of a brand name affects this classification.
• Whether the allegations that 'Chyawanprash Awaleha' is a registered trademark of the petitioner are substantiated.
• Whether the invocation of the extended period of limitation under Section 74 of the Central Goods and Services Tax Act, 2017 is justified.
• Whether the territorial jurisdiction for addressing the matter lies with the Allahabad High Court.
• Whether the recommendations of the 22nd GST Council meeting are binding and applicable to the classification of the product.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdiction and Natural Justice

• Relevant Legal Framework and Precedents: The principles of natural justice and jurisdictional authority under the Central Goods and Services Tax Act, 2017.
• Court's Interpretation and Reasoning: The court considered whether the notice was issued with proper jurisdiction and whether it adhered to natural justice principles.
• Key Evidence and Findings: The petitioner argued that the notice was issued with a premeditated mind and lacked jurisdiction.
• Application of Law to Facts: The court assessed the jurisdictional validity of the notice and the adherence to natural justice.
• Treatment of Competing Arguments: The respondent argued that the petitioner could respond to the notice, while the petitioner claimed jurisdictional overreach.
• Conclusions: The court found jurisdictional issues worth consideration and stayed further proceedings.

Issue 2: Classification of 'Chyawanprash Awaleha'

• Relevant Legal Framework and Precedents: Entry No. 181-A of Schedule-I of Notification No. 1/2017-CT (Rate) and judicial precedents on product classification.
• Court's Interpretation and Reasoning: The court evaluated whether the product fell under the specified entry despite being sold under a brand name.
• Key Evidence and Findings: The petitioner claimed the product matched the entry's description, and branding did not alter classification.
• Application of Law to Facts: The court analyzed the product's characteristics against the entry's criteria.
• Treatment of Competing Arguments: The respondent contended branding affected classification, while the petitioner disagreed.
• Conclusions: The court acknowledged the need for further examination of classification issues.

Issue 3: Trademark Allegations

• Relevant Legal Framework and Precedents: Trademark registration laws and evidence requirements.
• Court's Interpretation and Reasoning: The court scrutinized the claim that 'Chyawanprash Awaleha' was a registered trademark.
• Key Evidence and Findings: The petitioner denied trademark registration, and no evidence was provided by the respondent.
• Application of Law to Facts: The court required substantiation of trademark claims.
• Treatment of Competing Arguments: The petitioner challenged the trademark assertion, and the respondent failed to provide proof.
• Conclusions: The court found the trademark allegation unsubstantiated.

Issue 4: Extended Period of Limitation

• Relevant Legal Framework and Precedents: Section 74 of the Central Goods and Services Tax Act, 2017.
• Court's Interpretation and Reasoning: The court evaluated the justification for invoking the extended limitation period.
• Key Evidence and Findings: The petitioner argued that the necessary conditions for invoking Section 74 were absent.
• Application of Law to Facts: The court assessed whether the facts supported the extended limitation.
• Treatment of Competing Arguments: The respondent maintained the notice's validity, while the petitioner contested the extension.
• Conclusions: The court found the invocation of the extended period questionable.

Issue 5: Territorial Jurisdiction

• Relevant Legal Framework and Precedents: Jurisdictional rules under the Central Goods and Services Tax Act, 2017.
• Court's Interpretation and Reasoning: The court considered whether it had jurisdiction over the matter.
• Key Evidence and Findings: The petitioner argued jurisdiction based on corporate office location and demand concentration.
• Application of Law to Facts: The court evaluated jurisdictional claims based on location and demand.
• Treatment of Competing Arguments: The respondent contested jurisdiction, citing issuance and response locations.
• Conclusions: The court found jurisdictional arguments significant but not determinative.

Issue 6: GST Council Recommendations

• Relevant Legal Framework and Precedents: Binding nature of GST Council recommendations.
• Court's Interpretation and Reasoning: The court assessed whether the Council's recommendations were binding.
• Key Evidence and Findings: The petitioner argued that the recommendations were not reflected in the relevant entry.
• Application of Law to Facts: The court considered the applicability of Council recommendations.
• Treatment of Competing Arguments: The respondent relied on Council minutes, while the petitioner challenged their binding nature.
• Conclusions: The court found the binding nature of recommendations debatable.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The aspect pertaining to invoking extended period of limitation under Section 74 of the Act is essentially a jurisdictional aspect in the present matter."
• Core Principles Established: Jurisdictional validity, classification criteria, and the binding nature of GST Council recommendations require thorough examination.
• Final Determinations on Each Issue: The court stayed proceedings related to the show cause notice and scheduled further hearings to address jurisdictional and classification issues.