2025 (1) TMI 1140 - HC - GST

Challenge to impugned demand/SCN on the premise that jurisdictional fact necessary for invoking Section 122 (1A) of the Central Goods and Services Tax Act 2017 does not exist - HELD THAT - To a pointed question as to if there is any provision which mandates that obtaining a statement was a condition precedent for issuance of show cause notice the learned counsel for the petitioner was unable to point out any provision. It is open to the petitioner to file their objections to the notice within a period of 4 weeks from the date of receipt of a copy of this order. If any such objections/ reply is filed by the petitioner needless to say the respondents shall consider the same in accordance with law after affording the petitioner a reasonable opportunity of hearing and proceed with assessment/ adjudication process keeping in view that this Court has not expressed any view of merits. The writ petition stands disposed of.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the jurisdictional fact necessary for invoking Section 122(1A) of the Central Goods and Services Tax Act, 2017 (CGST Act) exists in the present case.
Whether the writ petition challenging the show cause notice is maintainable at this stage.
Whether the issuance of a show cause notice without a prior summon or statement from the petitioner is valid.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Jurisdictional Fact for Invoking Section 122(1A) of the CGST Act

Relevant Legal Framework and Precedents: Section 122(1A) of the CGST Act imposes a penalty on any person who retains the benefit of a transaction covered under certain clauses and at whose instance such transaction is conducted.
Court's Interpretation and Reasoning: The court examined whether the jurisdictional fact, i.e., the petitioner's involvement in retaining the benefit of a transaction, was established.
Key Evidence and Findings: The respondents relied on the show cause notice, particularly paragraph 25, which detailed the petitioner's involvement in a fraudulent scheme to pass on input tax credit.
Application of Law to Facts: The court noted that the show cause notice contained findings that suggested the petitioner's involvement, thus providing a basis for invoking Section 122(1A).
Treatment of Competing Arguments: The petitioner argued the absence of jurisdictional facts, while the respondents pointed to specific findings in the notice.
Conclusions: The court did not delve into the merits of the jurisdictional fact at this stage, indicating that it was not appropriate to assess this issue before the completion of the adjudication process.

Issue 2: Maintainability of the Writ Petition Challenging the Show Cause Notice

Relevant Legal Framework and Precedents: The court referred to several precedents, including Union of India v. Hindalco Industries and State of U.P. v. Anil Kumar Ramesh Chandra Glass Works, which discourage the interference of courts at the stage of show cause notices.
Court's Interpretation and Reasoning: The court emphasized that writ jurisdiction should not be exercised to quash show cause notices unless there is a clear lack of jurisdiction.
Key Evidence and Findings: The court found no exceptional circumstances justifying the interference with the show cause notice.
Application of Law to Facts: The court determined that the petitioner should respond to the notice and exhaust alternative remedies before seeking judicial intervention.
Treatment of Competing Arguments: The petitioner claimed the notice was premature, while the court held that the petitioner should first address the notice through the prescribed channels.
Conclusions: The writ petition was deemed premature, and the court directed the petitioner to file objections to the notice.

Issue 3: Validity of Issuing a Show Cause Notice Without Prior Summon or Statement

Relevant Legal Framework and Precedents: The court examined whether the CGST Act mandates a prior summon or statement before issuing a show cause notice.
Court's Interpretation and Reasoning: The court noted the absence of any statutory requirement for a prior summon or statement before issuing a show cause notice.
Key Evidence and Findings: The petitioner's counsel could not point to any provision requiring such a procedure.
Application of Law to Facts: The court held that the issuance of the notice without prior procedures was not invalid.
Treatment of Competing Arguments: The petitioner argued procedural impropriety, but the court found no legal basis for this claim.
Conclusions: The court allowed the petitioner to respond to the notice, affirming the validity of its issuance.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Writ jurisdiction is discretionary jurisdiction and hence such discretion under Article 226 should not ordinarily be exercised by quashing a show-cause notice or charge-sheet."
Core Principles Established: The court reiterated the principle that writ petitions should not be entertained at the stage of show cause notices unless there is a clear lack of jurisdiction.
Final Determinations on Each Issue: The court concluded that the petitioner should file objections to the show cause notice, and the respondents should consider these objections in accordance with the law. The writ petition was disposed of as premature.

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