Case Law Details
Safset Agencies Pvt. Ltd. Vs Union of India & Others (Bombay High Court)
Bombay High Court, in Safset Agencies Pvt. Ltd. vs. Union of India & Others, refused to interfere with a show cause notice issued to the petitioner regarding taxation of a 5% discount given to owners of goods. The petitioner sought quashing of the notice, arguing that the tax authorities were attempting to override an Advance Ruling in its favor issued by the Appellate Authority on October 7, 2019. The Revenue Department, however, contended that the Advance Ruling was irrelevant to the current proceedings and that the discount constituted a taxable supply of service.
The petitioner maintained that the authorities were exceeding their jurisdiction by revisiting an issue already settled in the Advance Ruling. The Revenue, on the other hand, argued that the petitioner had admitted during an investigation that the 5% margin recovered from owners was a service. This, according to the authorities, was taxable under GST, warranting the issuance of a show cause notice.
The Court held that the petitioner must contest the claims before the tax authorities rather than seeking intervention at the show cause notice stage. It emphasized that the adjudicating authority is responsible for determining the validity of the tax demand, including whether the notice contradicts the previous Advance Ruling. The decision aligns with judicial precedents such as Union of India v. Coastal Container Transporters Association (2019), where courts have refrained from interfering in tax proceedings before adjudication.
Considering the petitioner’s request for additional time, the Court allowed four weeks for filing a reply to the show cause notice. The adjudication process must be completed within twelve weeks. The ruling underscores the principle that courts generally do not intervene in tax matters at the show cause notice stage, reinforcing the need for businesses to exhaust statutory remedies before approaching the judiciary.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The above Writ Petition is filed seeking the appropriate writ or order or direction to quash and set aside the impugned show cause notice dated 6th August, 2024.
2. The case of the Petitioner is that by the impugned show cause notice, the authorities are seeking to go beyond the Advance Ruling already given in favour of the Petitioner by the Appellate Authority vide its Order dated 7th October, 2019.
3. Per contra, it is the case of the Respondents that the show cause notice issued to the Petitioner has got nothing to do with the Advance It is their case that the 5% so called discount being given by the Petitioner to the owner, is nothing but a supply of service and is to be taxed accordingly.
4. It is also the case of the authorities that there is an admission on the part of the Petitioner (during course of investigation) that the 5% margin recovered by the Petitioner from the owner of the goods is a service provided to the owner.
5. After hearing Nankani, the learned Senior Advocate appearing on behalf of the Petitioner as well as Mr. Mishra, the learned Counsel appearing on behalf of the Respondent, we are of the view that this is certainly not a fit case where we should interfere at the show cause notice stage. Whether the show cause notice, in fact, seeks to do something which is also ruled upon in the Advance Ruling order, or otherwise, is something that the authorities will have to decide whilst adjudicating the show cause notice. Further, what tax has to be paid by the Petitioner and at what rate, will also have to be decided whilst adjudicating the show cause notice. At this stage, we are not inclined to interfere with the issuance of show cause notice and the Petitioner will have to face the same.
6. Keeping all contentions of the parties open, to be agitated before the authority, we dispose of the above Writ No order as to costs.
7. At this stage, Nankani, the learned Senior Advocate states that the hearing before the authorities has been kept tomorrow i.e. 10th January, 2025. Hence, the hearing be deferred and liberty be granted to the Petitioner to file a Reply/ Representation to the show cause notice.
8. Considering the aforesaid request, we direct that the Petitioner shall file its Reply/ Representation to the show cause notice within a period of four weeks from today and the show cause notice shall be adjudicated within a period of twelve weeks from today.
9. This order will be digitally signed by the Private Secretary/ Personal Assistant of this All concerned will act on production by fax or email of a digitally signed copy of this order.
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