Writ Petitions Not Admissible for Challenging SCN Without Jurisdictional Grounds

[Kamal Aggarwal]

Recently the hon’ble Bombay High Court, in the matter of Oberoi Constructions Ltd. Vs. Union of India- 2024 (11) TMI 588 - BOMBAY HIGH COURT, has held that writ petition cannot be admitted when no case has been made by any of the petitioners to bypass the statutory alternate remedies as these petitioners have alternate remedies of appeal, etc., under the various statutes which govern them.

The Show Cause Notices (‘SCN’) were issued to the petitioners where they were called upon to pay Goods and Services Tax (‘GST’) on services rendered by the Municipal Corporation of Greater Mumbai (‘MCGM’) in relation to the functions entrusted to the MCGM under Article 243W of the Constitution.

The learned counsel for the petitioner argued that the services rendered by the MCGM pertain to functions entrusted to the MCGM under Article 243W of the Constitution. Accordingly, GST at nil rate of duty was payable on such services, given the Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017.

Further, several case laws were relied upon to establish that the rule of exhaustion of alternate remedies is not any constitutional or statutory rule but only a self-imposed restriction.

The hon’ble High Court observed that, in WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI & ORS. - 1998 (10) TMI 510 - SUPREME COURT, the Apex Court explained that the writ petitions against SCNs are only admissible in cases involving violations of fundamental rights, natural justice, lack of jurisdiction, or constitutional challenges. The petitioners' claims about exemptions or nil tax rates did not justify bypassing the normal adjudicatory process. The relevant extract has been reproduced below: -

“28. In Whirlpool Corporation (supra), 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 batch of petitions. Simply alleging that the impugned show cause notices 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 has been further observed by the hon’ble High Court that the petitioners' claims regarding exemption or nil tax rate notifications are debatable, and they acknowledged that some services in the SCN may be exempt while others may not. Since the resolution involves factual examination, the SCN cannot be quashed or split on the grounds of lack of jurisdiction.

Resultantly, the Court found no valid reason to bypass the statutory alternate remedies or entertain the petitions, as the petitioners have access to appeal and other legal remedies under relevant statutes. The relevant extract of the judgement is as follows: -

“47. Thus, for all the above reasons, we are satisfied that no case has been made by any of the petitioners to bypass the statutory alternate remedies and insist upon the entertainment of these petitions. No case is also made to grant the petitioner in Writ Petition No. 3624/2024 leave to amend the Writ Petition and challenge the order dated 30 April 2024. So also, no case is made out to entertain the challenge to the order made in Writ Petition No. 3085/2024. This is because these petitioners have alternate remedies of appeal, etc., under the various statutes which govern them.”

It is very important to adhere to the principle of exhaustion of alternate remedies. The case reinforces that writ petitions cannot be used as an easy bypass to challenge SCNs unless there are clear violations of fundamental rights, natural justice, jurisdictional issues or where the vires of the Act is itself challenged. Simply disagreeing with a tax exemption or rate, which is inherently fact-intensive and debatable, is not enough to skip the usual legal process. Referring to the Supreme Court's decision in Whirlpool Corporation (supra), the High Court emphasized that such issues should be handled through the proper adjudicatory process, not through hasty writ petitions. The judicial review should not be used to prematurely derail the statutory process, especially when effective alternate remedies are available to the petitioners under relevant statutes.