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2025 (3) TMI 820 - HC - GSTSCN issued u/s 73 of the CGST Act was within the jurisdiction of the authority - irregularity in the transitional credit of CGST availed under TRAN 1 - HELD THAT - An identical issue was decided by the Hon ble Division Bench of the High Court of Jharkhand in the case of Usha Martin Limited vs. Additional Commissioner Central GST and Excise Jamshedpur and Ors. 2022 (11) TMI 1266 - JHARKHAND HIGH COURT . In paragraph 9 of the said judgment the contention raised by the Department has been noted and in fact the learned Senior Standing Counsel appearing for the respondents/Department has made identical submission before us to sustain the impugned show-cause notice. The Hon ble Court firstly considered as to the scope of entertaining a writ petition under Article 226 of the Constitution challenging a show-cause notice when the normal course to be adopted is to submit a reply and face the adjudication proceedings. The Court after taking note of the several decisions of the Hon ble Supreme Court held that there is always an exception to the rule of alternate remedy but when the orders of proceedings are wholly without jurisdiction there is an exception drawn and writ petitions were held to be maintainable - Thus when a jurisdictional issue is being canvassed the alternate remedy provided under the CGST Act would not operate as a restriction for this Court to decide upon the jurisdiction of the respondents to issue the show-cause notice invoking the provisions of the CGST Act. The Court in the case of Usha Martin Limited vs. Additional Commissioner Central GST and Excise Jamshedpur and Ors. noted section 174 of the C.G.S.T Act and other Constitutional provisions and held it is obvious the new regime had to make provisions for the transactions which remained incohate under the existing law. It is also a well-settled legal position that on account of the new legislation the implementation of the G.S.T. regime could not be left to a realm of uncertainty. For a violation under the existing law parallel proceedings could not be conducted under the existing law at the behest of jurisdictional officer and at the same time under the new law at the instance of another jurisdictional officer of the G.S.T. Act. Conclusion - There are no hesitation to hold that the impugned show-cause notice is without jurisdiction. Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment is whether the show-cause notice dated 18th September, 2023, issued under Section 73 of the Central Goods and Services Tax (CGST) Act, was within the jurisdiction of the authority, particularly concerning alleged irregularities in the transitional credit of CGST availed under TRAN 1. Additionally, the court examined whether the writ petition challenging the show-cause notice was maintainable under Article 226 of the Constitution, given the existence of an alternate remedy. 2. ISSUE-WISE DETAILED ANALYSIS Jurisdiction of the Show-Cause Notice: - Relevant Legal Framework and Precedents: The court referred to Sections 140 and 174 of the CGST Act, which deal with transitional arrangements for input tax credit and the repeal and savings provisions, respectively. The court also cited a precedent from the High Court of Jharkhand in Usha Martin Limited vs. Additional Commissioner, Central GST and Excise, which addressed similar jurisdictional issues. - Court's Interpretation and Reasoning: The court reasoned that the transitional provisions under the CGST Act were intended to facilitate the transition of admissible CENVAT credit from the previous tax regime to the GST regime. It was emphasized that the new legislation could not leave unresolved transactions from the previous regime in a state of uncertainty. - Key Evidence and Findings: The court noted that the appellants had been in continuous communication with the tax authorities since 2018 regarding the verification of transitional credit, and no demand had been raised during this period. The issuance of the show-cause notice in 2023 was viewed as lacking jurisdiction, given the prolonged and unresolved verification process. - Application of Law to Facts: The court applied the legal principles from the Usha Martin Limited case, which held that proceedings for alleged contraventions under the previous tax regime could not be initiated under the CGST Act, as it would lead to jurisdictional conflicts and legal uncertainty. - Treatment of Competing Arguments: The court considered the Department's arguments but found them insufficient to justify the jurisdiction of the show-cause notice under the CGST Act. - Conclusions: The court concluded that the show-cause notice was issued without jurisdiction and quashed it, allowing the appellants' appeal. 3. SIGNIFICANT HOLDINGS - Verbatim Quotes of Crucial Legal Reasoning: The court quoted the Usha Martin Limited judgment, emphasizing that "proceedings for transition of CENVAT Credit alleged to be inadmissible is permitted to be carried under the C.G.S.T. Act, it may lead to uncertainty not only in the minds of the ordinary citizen but also in the minds of the Tax authorities." - Core Principles Established: The judgment reinforced the principle that jurisdictional issues concerning transitional credit under the previous tax regime should not be adjudicated under the CGST Act. It also affirmed the maintainability of writ petitions challenging jurisdictional overreach, even when alternate remedies exist. - Final Determinations on Each Issue: The court set aside the order of the learned Single Bench, allowed the writ petition, and quashed the impugned show-cause notice. However, it granted the respondent authorities the liberty to initiate proceedings under the provisions of the then-existing law, such as the Finance Act, 1944, and CENVAT Credit Rules, 2004, in accordance with the law.
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