2025 (1) TMI 1247 - HC - GST

Territorial Jurisdiction to adjudicate the SCN issued to the petitioners - levy of penalty on the petitioners under section 122 (1) (i) (x) (xvii) (xviii) and (xix) of the Central Goods and Service Tax Act 2017 - invocation of writ jurisdiction under Article 226 of the Constitution to challenge the SCNs - alleged evasion of tax by the three concerns - unaccounted production and clandestine supplies/clearances of pan masala and scented tobacco/jarda - HELD THAT - It appears that the petitioners have tried to raise the contentions with regard to the jurisdiction of adjudication of the show cause notices by Additional Commissioner Kanpur heavily relying upon para no. 7.1 which is inserted by Circular No. 169 of 2022 in Circular No. 31 of 2018 which provides for powers of adjudication of the show cause notice issued by DGGI where the principal place of business of noticee/s fall under jurisdiction of multiple Central Tax Commissionerate or where multiple show cause notices are issued on the same issue on different noticee/s such show cause notices may be adjudicated irrespective of amount involved in the show cause notices by one of the Additional/Joint Commissioners of Central Tax empowered with All India jurisdiction as per Notification No. 2 of 2022. Therefore reliance is placed on Notification No. 2 of 2022 which refers to Principal Commissioners/ Commissioners of the Central Tax which includes the Principal Commissioner of Lucknow only. The petitioners have therefore referred to Notification No. 2 of 2017 which provides for notified officers having jurisdiction and as per Entry no. 12 Principal Commissioner of Lucknow falls within the Principal Chief Commissioner Lucknow whereas Commissioner Kanpur also would be under the territorial jurisdiction of the Principal Chief Commissioner of Lucknow. It was therefore contended that as per para no. 7.1 of the Circular no. 169/2022 Principal Commissioner Kanpur would not have All India jurisdiction as per Notification No. 2 of 2022 and as such Additional Commissioner Kanpur shall not have any power to adjudicate the impugned show cause notices qua the petitioners. It appears that petitioners have been swayed away by the territorial jurisdiction prescribed in Notification No. 2 of 2017 whereas the impugned show cause notices are issued by DGGI Ahmedabad and as per Notification No. 31 of 2018 proper officer under sections 73 and 74 under the GST Act and IGST Act would be Additional or Joint Commissioner of Central Tax who is required to determine the liability of tax and interest in the hands of the main noticee/s. Conclusion - It would not be proper to entertain the writ petitions while exercising extraordinary jurisdiction under Article 226 of the Constitution of India in view of the fact that allegations made in the show cause notices are required to be examined in the adjudication proceedings before one adjudicating authority only it is opined that no interference is called for in the impugned show cause notices at this stage and the petitioners may raise all the contentions which are raised in these petitions before the adjudicating authority including the issue of jurisdiction as all the questions raised by the petitioners herein are left open to be adjudicated by the adjudicating authority. Petition dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the Additional/Joint Commissioner, Kanpur, has jurisdiction to adjudicate the show cause notices issued to the petitioners.
• The applicability of Section 122 and Section 122(1A) of the GST Act concerning the imposition of penalties on the petitioners.
• The appropriateness of invoking the writ jurisdiction under Article 226 of the Constitution to challenge the show cause notices.

2. ISSUE-WISE DETAILED ANALYSIS

Jurisdiction of Adjudicating Authority:

• Relevant Legal Framework and Precedents: The petitioners relied on Notification No. 02/2017-Central Tax and Notification No. 02/2022-Central Tax, arguing that the jurisdiction for adjudicating the show cause notices lies with the Additional/Joint Commissioner under the Lucknow Central Tax Commissionerate, not Kanpur. They also cited Circular No. 31/2018 and Circular No. 169/2022.
• Court's Interpretation and Reasoning: The Court analyzed the notifications and circulars, concluding that the territorial jurisdiction of the Kanpur Commissionerate is valid for adjudication as the main noticees are located in Kannauj, which falls under Kanpur's jurisdiction.
• Application of Law to Facts: The Court found that the petitioners, as co-noticees, are subject to the jurisdiction of the Kanpur Commissionerate due to the location of the primary noticees and the nature of the alleged offenses.
• Conclusions: The Court held that the Additional/Joint Commissioner, Kanpur, has jurisdiction to adjudicate the show cause notices.

Applicability of Section 122 and Section 122(1A) of the GST Act:

• Relevant Legal Framework and Precedents: The petitioners argued that Section 122(1) and 122(1A) pertain to taxable persons and cannot be applied to them as they are not directly involved in tax evasion.
• Court's Interpretation and Reasoning: The Court noted that the allegations involve aiding and abetting tax evasion, which falls under the scope of these sections. The Court also referenced the legislative intent to include beneficiaries of fraudulent transactions within the ambit of these provisions.
• Conclusions: The Court found that the provisions of Section 122 and 122(1A) are applicable to the petitioners based on the allegations in the show cause notices.

Invocation of Writ Jurisdiction under Article 226:

• Relevant Legal Framework and Precedents: The respondents argued against the maintainability of the writ petition, citing the availability of alternative remedies and the lack of jurisdictional error in the show cause notices.
• Court's Interpretation and Reasoning: The Court emphasized that writ jurisdiction should not be exercised to interfere with show cause notices unless there is a clear lack of jurisdiction or violation of natural justice principles.
• Conclusions: The Court declined to entertain the writ petitions, directing the petitioners to raise their objections during the adjudication process.

3. SIGNIFICANT HOLDINGS

• The Court upheld the jurisdiction of the Additional/Joint Commissioner, Kanpur, to adjudicate the show cause notices, dismissing the petitioners' jurisdictional challenge.
• The Court affirmed the applicability of Sections 122 and 122(1A) of the GST Act to the petitioners, based on the allegations of aiding and abetting tax evasion.
• The Court declined to exercise writ jurisdiction under Article 226, emphasizing the availability of alternative remedies and the absence of jurisdictional errors in the show cause notices.
• The Court noted that all contentions raised by the petitioners are open to be adjudicated by the competent authority during the adjudication proceedings.