Cyclo Pharma Chem Vs Union of India (Gujarat High Court)
Gujarat High Court has addressed a petition filed by Cyclo Pharma Chem challenging the constitutional validity of the second proviso to Section 16(2) of the CGST Act, 2017. The petitioner argues that this proviso is arbitrary, unreasonable, and violates Articles 14, 19(1)(g), and 300A of the Constitution of India, in addition to being inconsistent with the Indian Contract Act, 1872. In response, the High Court has issued a Rule, returnable on February 12, 2024, and directed that a notice be issued to the Attorney General of India, acknowledging the challenge to the vires of the statutory provision.
Alongside the constitutional challenge, the petitioner sought to quash and set aside demand-cum-show cause notices dated May 26, 2023, issued by tax authorities. These notices initiated adjudicatory proceedings to determine the petitioner’s tax liability under Section 74(1) read with Section 50 of the CGST Act, 2017, and applicable penalties. However, the High Court declined to grant any interim relief to stay these show cause proceedings. The court clarified that it is disinclined to interfere with or stay show cause notices that are adjudication-bound in its writ jurisdiction. The petitioner retains the right to raise all contentions and arguments during the adjudication process initiated by the tax authorities. The High Court further specified that the challenge to the vires of Section 16(2)’s second proviso, and the ongoing legal proceedings related to it, will not serve as grounds for the petitioner to oppose the show cause notice or for the authorities to consider while adjudicating the merits of the case.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
