Case Law Details
AKA Logistics Private Limited Vs Union of India (Jharkhand High Court)
GST Show Cause Notice Can Be Challenged in Writ Due to Prima Facie Lack of Jurisdiction; Jharkhand HC Refuses to Relegate Taxpayer to Alternative Remedy Due to Jurisdictional Challenge; Writ Against GST Show Cause Notice Maintainable Because Composite vs Mixed Supply Issue Is Legal Question; Jharkhand HC Finds Prima Facie Abuse of Process in GST Show Cause Proceedings.
The writ petition challenged a show cause notice issued under the CGST/JGST Act. The revenue raised a preliminary objection that the petitioner had approached the High Court by bypassing the statutory procedure under the GST laws and that all objections, including the contention that the transaction constituted a composite or mixed supply, could be raised before the assessing officer. The revenue relied on judicial precedents to contend that writ petitions should ordinarily not be entertained against show cause notices and that the petitioner had an alternative remedy. It also referred to decisions concerning the powers of a “proper officer” and the invocation of the extended period of limitation.
The petitioner argued that the impugned show cause notice was without jurisdiction and amounted to an abuse of process of law. It contended that the dispute involved a pure question of law, namely whether the supply in question was a “composite supply” under Section 8(a) read with Sections 2(30) and 2(90) of the Act, or a “mixed supply” under Section 8(b) read with Section 2(74). The petitioner further submitted that the transportation of power plant ash up to a distance of 50 km was being sought to be taxed under headings relating to “other services” and “cargo handling services,” raising a pure legal issue suitable for determination in writ jurisdiction.
The Court observed that there was no dispute regarding the facts and that the controversy involved a pure question of law. Referring to decisions of the Supreme Court, it noted that although interference at the stage of a show cause notice is ordinarily avoided, exceptions exist where the notice is issued without jurisdiction or constitutes an abuse of the process of law.
Upon examining the show cause notice and undisputed facts, the Court found a prima facie case of lack of jurisdiction and abuse of process. It further observed that where taxing authorities act beyond jurisdiction or invoke provisions not applicable to the case, writ jurisdiction may be exercised notwithstanding the existence of an alternative remedy. The Court also referred to its earlier decision holding that the extended period of limitation is not invocable in cases involving issues of interpretation.
Holding that relegating the petitioner to an alternative remedy would result in palpable injustice, the Court ruled that the writ petition was maintainable and directed the matter to be listed for further hearing on merits on 16 July.
FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT
Heard learned counsel for the parties.
2. At the outset, Mr. P.A.S. Pati, Sr. S.C representing the revenue has raised a preliminary objection to the extent that the petitioner has challenged the show cause notice in the instant case circumventing the procedure of the CGST/JGST Act. As a matter of fact, this is not a case where the writ application should be entertained at this initial stage and the petitioner can very well raise all the grounds before the assessing officer contending that it is a case of composite/mixed-supply.
In this regard, he has also referred the judgment passed in the case of Commissioner of Central Excise Haldia Versus Krishna Wax Private Limited, reported in (2020) 12 SCC 572, wherein the Hon’ble Apex Court at para 14 has held as under:-
“14. It has been laid down by this Court that the excise law is a complete code in itself and it would normally not be appropriate for a writ court to entertain a petition under Article 226 of the Constitution and that the person concerned must first raise all the objections before the authority who had issued a show-cause notice and the redressal in terms of the existing provisions of the law could be taken resort to if an adverse order was passed against such person. For example in Union of India v. Guwahati Carbon Ltd. [Union of India v. Guwahati Carbon Ltd., (2012) 11 SCC 651] , it was concluded; “The Excise Law is a complete code in order to seek redress in excise matters and hence may not be appropriate for the writ court to entertain a petition under Article 226 of the Constitution”, while in Malladi Drugs & Pharma Ltd. v. Union of India [Malladi Drugs & Pharma Ltd. v. Union of India, (2020) 12 SCC 808] , it was observed:
“… The High Court, has, by the impugned judgment held that the appellant should first raise all the objections before the Authority who have issued the show-cause notice and in case any adverse order is passed against the appellant, then liberty has been granted to approach the High Court …
… in our view, the High Court was absolutely right in dismissing the writ petition against a mere show-cause notice.”
3. He further submits that the question of proper officer raised by the petitioner in the instant application has been dealt with in the case of Yasho Industries Limited Versus Union of India reported in 2021 SCC Online Guj 3131; wherein at para 13 the Hon’ble Apex Court has held as under:
“13. From the bare reading of section 70 of the CGST Act, it clearly emerges that the proper officer has the power to summon any person whose attendance he considers necessary either to give evidence or to produce the documents in any inquiry in the same manner in the case of a civil court under the CPC. Now, as per the definition of “proper officer” as contained in section 2(91), a “proper officer” in relation to any function to be performed under the CGST Act means the Commissioner or the officer of the Central Tax, who is assigned that function by the Commissioner in the Board. It is pertinent to note that as stated in the petition itself, respondent No. 3 is an officer of Directorate General of Goods and Services Tax Intelligence (DGGI) holding the designation of Senior Intelligence Officer, who was appointed as the Central Tax Officer with all the powers under the CGST Act and IGST Act and the Rules made thereunder, as are exercisable by the Central Tax Officers of the corresponding rank of Superintendent as specified in the Notification No. 14 of 2017-CT dated July 1, 2017 issued by the Central Board of Excise and Customs. It is further pertinent to note that respondent No. 3 being the officer of the Central Tax and the Superintendent under the CGST Act by virtue of the said notification dated July 1, 2017, he was also assigned the powers of proper officer by the Board vide circular dated July 5, 2017 issued in exercise of the powers conferred by clause (91) of section 2 of the CGST Act read with section 20 of the IGST Act. Therefore, respondent No. 3 is a proper officer in relation to the function to be performed under the CGST Act as contemplated under section 2(91), and as such, was entitled to issue summons under section 70 of the CGST Act in connection with the inquiry initiated against the petitioner.”
4. On the question of extended period of limitation, Mr. Pati referred the judgment passed in the case of ITW Signode India Ltd. Versus Collector of Central Excise reported in (2004) 3 SCC 48; wherein at para 66 and 67 the Hon’ble Apex Court has held as under:
“66. It is, therefore, evident that the contention of the appellant was that Rule 9(2) cited in the show-cause notice was not applicable. But, unfortunately, despite the same it had not been adverted to by the Tribunal. We must notice that the appellant herein succeeded before the Appellate Collector. The Revenue went up in appeal. The Tribunal was, therefore, bound to take the aforementioned question into consideration inasmuch as a finding of fact was required to be arrived at that the period of limitation for issuing such notices under Section 11-A of the Act would depend upon the question as to whether such short-levy was due to any act of fraud, collusion, wilful misstatement or suppression of facts, (sic) the extended period of limitation of five years could not have been invoked.
67. Such an extended period of limitation can be invoked only if a positive act of fraud etc. on the part of the assessee is found. Such a positive act must be in contradistinction to mere inaction like non-taking of licence etc. It has to be pleaded and established. (See Padmini Products, P&B Pharmaceuticals Ltd. and Pushpam Pharmaceuticals Co.”
By relying upon the aforesaid judgments, learned counsel for the revenue contended that since it is the very initial stage of show-cause, the petitioner-company should be relegated to the assessing officer. Had there been a case that assessment order would have been passed; then of course the case could have been entertained subject to the principle on maintainability. He reiterated that the instant application may be dismissed at this stage as the same is not maintainable on the ground of alternative remedy.
5. Mr. K. Kurmy, learned counsel representing the petitioner-company in all these writ applications contended that the impugned show cause notice is completely without jurisdiction and is an abuse process of law. It is true that normally writ court should not interfere at the stage of issuance of show-cause; however, it is also a settled principle of law that the aforesaid rule is not without exception and in the instant case, the show cause notice has been issued without jurisdiction.
He further submits that in the instant case, a composite supply principal for transportation of power plant Ash up to distances of 50 km is sought to be taxed under heading 9997 i.e. the other services and heading no. 99671 which is for cargo handling service; which is a pure question of law, as such the preliminary objection of the revenue is not sustainable in the eye of law as the dispute in the instant case is purely a question of law which can be decided by this Court itself.
He further referred to the judgment passed in the case of Magadh Sugar & Energy Ltd. Versus State of Bihar reported in (2021) SCC Online SC 801: wherein it has been held that the show cause notice which has been issued invoking some provisions which are not attracted and also the jurisdiction of taxing authorities under challenge, the High Court can entertain writ.
6. Having heard learned counsel for the rival parties and after perusing the show-cause notice annexed with the writ application; prima-facie it appears that the dispute in the instant case relates to pure question of law as to whether the supply is “composite supply” within the meaning of Section 8(a) of the CGST Act/JGST Act read with Section 2(30) read with Section 2(90) or the supply is “mixed supply” within the meaning of Section 8(b) read with Section 2(74) of the Act. There is no dispute as regards facts of the case.
In the case of Aircel Ltd. Vs. CTO reported in (2016) (6) TMI 1063-SC, it was held by the Hon’ble Supreme Court that “however it is not disputed that these questions are pure question of law and could be gone into in a writ petition under the peculiar circumstances. In our considered opinion on the question that have been raised being pure question of law, the High Court should have heard these matters”.
7. The stand of the petitioner that the impugned show cause notice is completely without jurisdiction and is an abuse of the process of law; it is profitable to refer the judgment rendered in the case of UOI Vs. Vicco Laboratories reported in (2007) 13 SCC 270, wherein the Hon’ble Apex Court has held at Para 31 that normally writ court should not interfere at the stage of issuance of show cause notice which is the normal rule; however, the said rule is not without exceptions. Where a show cause notice is issued either without jurisdiction or in an abuse of the process of law, certainly or in that case, the writ court should not hesitate to interfere even at the stage of show cause notice. It should be prima facie established that the show cause notice is without jurisdiction and in an abuse of the process of law.
8. In the instant case, a composite supply principally for transportation of Power Plant Ash up to distance of 50 km is sought to be taxed under Heading 9997 i.e. other services (Textile, Washing, Cleaning, Dying) and Heading 99671 i.e. Cargo Handling Service (Container handling service, Customs House Agent Service, Other Cargo and Baggage Handling Service, Cleaning and Forwarding Services). After going through the show-cause and the factual aspects, which are undisputed; it prima facie appears that the Petitioner has been able to establish a prima facie case of abuse of process of law and lack of jurisdiction.
The three judge larger bench of the Hon’ble Apex Court in the case of Magadh Sugar & Energy Ltd. Vs. State of Bihar reported in (2021) SCC Online SC 801 (Vol-I Page 69) under Para 26 has held that if the taxing authorities have acted beyond their jurisdiction which goes to the root of the matter, writ is maintainable. Under Para 27 it is held that where show cause notice is issued by taxing authority invoking provision which are not attracted/applicable and the jurisdiction of taxing authorities is under challenge, the High Court can entertain writs. Under Para 25 considering a series of judgment it has been held that when proceeding by taxing authorities are without jurisdiction writ would be maintainable as an exception. An alternative remedy itself does not divest the High Court of its power under Article 226. In view of aforesaid discussions and the decision referred to herein above, the judgment relied upon by the Respondent is not applicable in the facts and circumstances of this case.
9. Further, the impugned show cause notice has been issued under Section 74 of the Act. This Court in the case of Central Coalfields Ltd. Vs. UOI reported in (2024) 14 Centax 307 (Jhar.) following judgment of the Hon’ble Supreme Court in the case of International Merchandising Co. Vs. CST reported in (2022) 1 Centax 31 (S.C.), has held under Para 21 that where case involves interpretation issue, extended period of limitation is not invokable.
In the above back ground of the case, judgment in the case of ITW Signode India Ltd. Vs. CCE reported in (2004) 3 SCC 48 relied upon by the Respondent is distinguishable. Further, the judgment of the Allahabad High Court in the case of R.C. Infra Digital Solutions Vs. UOI reported in 2024 SCC Online All 36 (relied by the Respondent), is distinguishable, inasmuch as, in that case the authority of Government who issued Notification No. 14/2017-CT dated 01-07-2017 was under challenge contending that U/s 5(2) of the CGST Act, on the ground that only the Board could have issued the said notification not Government. The said judgment does not deal with assignment of function of proper officer by Circular No.3/3/2017-GST dated 20-07-2017 to the officer of DGGI, hence, distinguishable. The judgment of the Hon’ble Delhi High Court in the case of National Building Construction Company Vs. UOI reported in W.P.(C) No.1144/2016 dated 11-12-2020 is under the old Service Tax regime where power was vested in every Central Excise officer U/s 73 of Service Tax unlike the “proper officer” to whom power is vested under the CGST Act/JGST Act, hence, the said case is distinguishable.
Further, Circulars dated 10/02/2015, dated 03/03/2015, dated 10/03/2017 relied by the Respondent are all issued under the old Service Tax/Central Excise regime and are not applicable to GST regime for aforesaid reason. The Hon’ble Gujarat High Court while delivering its judgment in the case of Yasho Industries Ltd. Vs. UOI reported in (2002) 104 GSTR 301: 2021 SCC Online Guj 1131 (cited by the Respondent) did not had the benefit of judgment of the Hon’ble Supreme Court in case of CC Vs. Sayed Ali reported in (2011) 3 SCC 537 (Para 19, 20, 21, 24, 25) which is directly on the point of assignment of function of “proper officer”. Hence, the said judgment of the Gujarat High Court is not a good law.
10. Having regard to the aforesaid discussions coupled with the background of the instant case, relegating the Petitioner to alternative remedy will be a palpable in-justice. Accordingly, we hold that the instant writ application is maintainable.
11. List this case for further hearing on merit on 16th July,
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