Case Law Details
Marjit Basumatary Vs Union of India (Gauhati High Court)
The Hon’ble High Court of Gauhati, after examining detailed submissions, directs DGGI to produce original records in the court for inspection of the court to ascertain whether there was ‘reason to believe’ or was it a mere pretence.
The petitioner is a works contractor. It undertakes mining of sand etc. under license from the State Government (through the Forest department). It pays royalty to the State Government. Alleged intelligence was gathered, purportedly under Section 67 of the Act, that the petitioner is liable to pay GST on the said royalty on reverse charge basis. The summons under Section 70 of the Act came to be issued to it. During such investigation, the DGGI started conducting audit under Section 65 of the Act and issued show cause notice proposing demand of GST on different grounds including proposed mismatch, delay in filing returns etc. The petitioner made a representation under Section 67(10) seeking “reasons to believe” which led to investigation by DGGI. The said representation was rejected in as much as the SCN has been issued and it contains all grounds and documents. Hence, petition came to be filed challenging the show cause notice and such rejection.
The Hon’ble High Court of Gauhati, after examining detailed submissions, directs DGGI to produce original records in the court for inspection of the court to ascertain whether there was “reason to believe” or was it a mere pretence. Notes that the issue about payment of GST on royalty is pending before the 9 Judge Bench of the Hon’ble Supreme Court and therefore, what is the “reason to believe” for the DGGI to investigate.
The matter was argued by Ld. Counsel Adv. Bharat Raichandani
FULL TEXT OF THE JUDGMENT/ORDER OF GAUHATI HIGH COURT
Heard Mr. B. Raichandani, learned counsel for the petitioner, Ms. P. Tamuli, learned counsel appearing on behalf of Mr. K. Phukan, learned CGC for respondent no. 1 and Mr. S.C. Keyal, learned standing counsel for the GST, appearing for the respondent nos. 2 to 5.
2. By filing this writ petition under Article 226 of the Constitution of India, the petitioner has assailed the legality and validity of the show-cause notice dated 16.09.2022 (Annexure-A), as well as the letter dated 20.01.2023 (Annexure-B), both issued by the Deputy Director, Directorate of GST & Service Tax Intelligence, Guwahati Zonal Unit (respondent no.4).
3. As per the show cause notice dated 16.09.2022, the petitioner is engaged in works contract services by way of construction of roads and bridges of Government bodies and that such service is stated to be defined under section 5 (Construction Services) of Chapter 99 and classifiable under SAC 9954 of GST tariff. The petitioner is also engaged in extraction of sand, stone, gravel as a lease holder under DFO, Gossaigaon, Assam, and paying royalty to the Forest Department, which is stated to be a service defined and classifiable under SAC 9973 of the GST tariff.
4. The learned counsel for the petitioner has submitted that in the show cause notice, it has been alleged that (i) the petitioner did not declare correct turnover in GSTR-3B return filed for the financial period from July, 2017 to March, 2018 and April, 2018 to March, 2019, in respect of which the petitioner had undeclared taxable income of Rs.6.73 crore; (ii) the petitioner had not paid tax on the machinery rental income for financial year 2017-18 amounting to Rs.7,16,949/- and Rs.1,99,708/- for financial year 2018-19; (iii) on royalty paid to the Forest Department, Govt. of Assam on extraction of sand, stone and gravel, the petitioner had not paid GST amounting to Rs.4,50,717.80 for financial year 2017-18 and Rs.13,62,358.00 for financial year 2018-19; (iv) the petitioner is liable to pay tax on mis-match of data comparing GSTR-2A with monthly ITC availed in GSTR-3B amounting to Rs.25,24,897.50 for financial year 2017-18 and Rs.22,87,435.80 for financial year 2018-19.
5. It was submitted that upon notice being issued, the petitioner had produced his books of accounts and records before the respondent no. 4. It is alleged that initially the respondent no. 4 had proceeded under Section 67 and 70 of the GST Act, which was then proceeded as an “audit” as envisaged under Section 65 of the GST Act.
6. It was also submitted that the issue of levy of GST on mining lease and/or royalty paid to the State Government is the subject matter of decision by a larger Bench of the Supreme Court of India. In support of the said submission, the learned counsel for the petitioner has cited (i) order dated 19.09.2018, passed by the High Court of Gujarat in the case of Gujmin Industry Association v. Union of India, R/Special Civil Appl. No. 8167/2017, with R/Special Civil Appl. No. 4603/2017, with R/Special Civil Appl. No. 4606/2017, (ii) order dated 06.01.2022, passed by High Court of Jharkhand in the case of Ratan Black Stone v. Union of India & Ors., W.P.(T) 4609/2021, (iii) order dated 07.02.2022, passed by High Court of Andhra Pradesh in W.P. No. 2769/2022, Veerabhadar Minerals Pvt. Ltd. v. State of Andhra Pradesh, (iv) order dated 04.10.2021, passed by the Supreme Court of India in the case of Lakhwinder Singh v. Union of India, W.P.(C) 1076/2021.
7. It was also submitted that the petitioner had submitted a petition vide Annexure-C to this writ petition before the respondent no. 4 to demand a copy of certain documents, which were not furnished till date. Hence, it was submitted that due to non-providing of documents, the petitioner has been prevented from submitting an exhaustive show-cause reply.
8. Per contra, the learned counsel for the respondent nos. 2 to 5 has submitted that the show-cause notice would indicate that all the materials on which the show-cause notice was issued, was contained in the show cause notice. The respondent no. 4 was not liable to disclose the materials which have given him the “reasons to believe”, which was his subjective satisfaction, based on cogent and reliable materials. Nonetheless, the particulars of escapement of tax was disclosed to the petitioner vide the show-cause notice. It is submitted that the documents relied upon by the GST authorities were provided to the petitioner, which is mentioned in Annexure-R appended to the show cause notice (page 131 of the writ petition). Hence, it was submitted that the petitioner was not entitled to any more material than what was already disclosed to the petitioner.
9. Examined the materials on record and also considered the submissions made by the learned counsel for the petitioner and the revenue.
10. In this case, the demand of GST on the petitioner is not only based on levy of GST on mining lease and/or royalty paid to the State Government which is the subject matter of decision by a larger Bench of the Supreme Court of India, but the demand is also based on other claims as morefully mentioned in para-4 above.
11. Therefore, before issuance of notice in the matter, the Court is inclined to examine the records relating to show-cause notice for the purpose of examining whether “reasons to believe” exists or it is a mere pretence.
12. Therefore, the respondent no. 4 is directed to produce the records relating to show-cause notice dated 16.09.2022 (Annexure-A). The learned standing counsel for the petitioner shall send a downloaded copy of this order to the respondent no. 4 so as to enable him to send the relevant record for the perusal of the Court.
13. It is made clear that the records have been called only for the perusal of the Court and therefore, copies of any part of the record would not be made available to the petitioner.
14. As an interim measure and till the next date of listing, the respondent no. 4 is directed to defer the proceeding.
15. List on 19.06.2023.
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