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TMI Blog2024 (12) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited Vs Union of India and Ors. 2021 (2) TMI 12 - Bombay High Court. 3. Mr. Sridharan, the learned counsel for the Petitioner, submitted that the impugned show cause notice is issued solely based on the observations of the Central Excise Revenue Audit ("CERA) audit conducted by the Director General of Audit (Central), Mumbai, functioning under the control of Comptroller and Auditor General ("CAG). He submitted that in terms of the law as clarified by this Court in Kiran Gems Private Limited (supra), the CAG or its officials have no jurisdiction to audit private companies like the Petitioner. 4. Mr Shridaran, therefore, submitted that the impugned show cause notice, which is entirely based on CAG's audit, which was itself without jurisdiction, is unsustainable, ultra vires and without jurisdiction. He submitted that in such a situation, interference by this Court is warranted without adverting to the rule of exhaustion of alternate remedies. In addition to Kiran Gems Private Limited (supra), he relied on East India Commercial Co. Ltd., Calcutta Vs. Collector of Customs, Calcutta 1983 (13) E.L.T. 1342 (SC). 5. Mr Sridharan, without prejudice to the above-mentioned contention, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice based entirely on the CERA report is misconceived. 10. Mr. Mishra and Mr. Ochani submitted that the ample material is referred to in the impugned show cause notice in support of the suppression allegations, etc. Accordingly, the extended period of limitation was correctly invoked. They submitted that all these matters can be examined once the Petitioner files a response and is granted the opportunity of hearing. However, they submitted that the impugned show cause notice cannot be said to be without jurisdiction to warrant interference at the threshold. 11. Mr. Mishra and Mr. Ochani relied on several decisions referred to in their affidavits to submit that this is not a suitable case to depart from the rule of exhaustion of alternate remedies. They submitted that the decision in Kiran Gems Private Limited (supra) is not applicable to the facts of the present case. 12. Mr. Joshi, the learned counsel for Respondent No.6, adopted Mr. Mishra's and Mr. Ochani's arguments. In addition, he clarified that the CAG conducted no audit of the Petitioner but conducted an audit only of the Respondents' department. He referred to paragraph 6 of the affidavit filed on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaining to the concerned Government office or department. 18. Further, in paragraph 23, the Coordinate Bench has held that the statutory responsibility of the CAG is to audit receipts of the Union and States. These receipts include both direct and indirect taxes. It is the duty of the Central Excise Revenue Audit (CERA) to see that sums due to the Government are properly assessed, realized and credited to the Government account. The scheme enacted and envisaged in Chapter III of the CAG's (DPC) Act, 1971 begins with the word "Comptroller or Auditor General to compile accounts of Union and or Stales. 19. The Court pointed out that the statutory scheme clearly states that the CAG shall, from the accounts compiled by it or by the Government or any person responsible for preparing in each year accounts showing under the respective heads, the annual receipts and disbursement for the purpose of the Union, each State or each Union Territory and shall submit the same to the President or the Governor or the Administrator, as the case may be. It is in such context that the provisions of Section 16 pertaining to audit of all receipts which are payable into the Consolidated Fund of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which may be found there is not intended to be an exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein. Therefore, the argument based on Kiran Gems Private Limited (supra) will have to be rejected since the ratio of Kiran Gems Private Limited (supra) will not apply in the facts of the present case. 23. In the reply filed on behalf of Respondent Nos. 3 to 5 it is pleaded and even clarified that the impugned show cause notice was not based entirely on the CERA Audit observations. There are averments which establish that the CAG had not conducted the audit of the Petitioner Company. CAG had only called for the details and the data downloaded from the GSTN from the jurisdictional officers to ascertain the correctness of the revenue realised from the taxpayer which has a direct nexus with the revenue receipt of the Government of India and the States. There is a reference to the provisions of Section 16 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. In any event, we do not pursue this line any further because, in this case, the impugned show-cause notice was not even based on any audit by CERA/CAG. 28. The affidavit also states that adverse material was shared with the Petitioner, and sufficient time was granted to respond and/or submit compliances. However, the petitioner did not satisfactorily respond or comply. The affidavit refers to revenue leakages and adds that the Petitioner will have the opportunity to present their case fully before the adjudicating authority and be granted an opportunity to be heard. 29. Besides, in this case, we have perused the impugned show cause notice dated 07 December 2023, and we cannot accept that the same is entirely based on the CERA/CAG's audit observations, as contended by Mr Sridharan. The impugned show cause notice reflects the independent application of mind by the adjudicating authority. The audit observations may have been shared with the Petitioner only to enable the Petitioner to offer comments/explanations. Such sharing was a measure of fairness and constituted compliance with the principles of natural justice. 30. The Petitioner's reply and the audit observations were an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs within 180 days nor reversed the ITC with interest. There are allegations about incorrect disclosures of the value of supply in the respective returns, resulting in short payment of tax. There are allegations about short payment of tax liability under RCM and non-reversal of ITC regarding obsolete inventory. There are allegations of suppression of the correct supply value in the returns. Based upon all such matters, the impugned show cause notice tentatively alleges evasion of GST to the extent of Rs. 231.78 crores. The show cause notice refers to several e-mails addressed to the Petitioner seeking clarification from the Petitioner and the alleged circumstances. No such clarifications, along with any documentary evidence or, in any event, satisfactory documentary evidence, were furnished by the Petitioner. 35. Recently, this Court, in the case of Oberoi Constructions Ltd. Vs. The Union of India and others Writ Petition (L) No.33260 of 2023 & connected matters decided on 11 November 2024, surveyed the precedents on exhausting alternate remedies or entertaining Petitions challenging show-cause notice. Even the decision in East India Commercial Co. Ltd, Calcutta (supra), was consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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