Case Law Details
Power And Instrumentation (Guj) Ltd. Vs Additional Commissioner Of Cgst And CE (Rajasthan High Court)
Rajasthan High Court ruled on the dispute between Power and Instrumentation (Guj) Ltd. and the Additional Commissioner of CGST and CE concerning a show cause notice issued under Section 74 of the CGST Act, 2017. Initially, the Court had permitted proceedings under Section 73, which addresses non-fraudulent tax shortfall cases. However, during subsequent investigations, the department alleged suppression of facts, prompting a notice under Section 74, which deals with fraudulent conduct. The petitioner challenged this on the grounds that the initial permission restricted action to Section 73 and that the case lacked any element of fraud or suppression.
The Court observed that its earlier orders provided liberty to the department to act under any provision of the CGST Act, not limited to Section 73. It noted that whether the case involves suppression is a matter of fact requiring further inquiry, making the challenge premature. The petitioner was directed to respond to the show cause notice, with the authorities required to evaluate the reply per legal provisions. The writ petition was dismissed, allowing proceedings under Section 74 to continue while ensuring procedural fairness.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. Heard.
2. Challenge to show cause notice dated 30.04.2024 is premised on two grounds; firstly, when initially the writ petition was filed, an order was passed by this Court on 25.07.2023 permitting the respondents to proceed under Section 73 of the CGST Act of 2017. However, the respondents have proceeded to issue notice under Section 74 of the Act, which is against the directions of the Court. Even though, subsequently modified order was issued by the Court on 24.04.2024, the respondents were restricted to proceed only under Section 73 of the Act. The second submission of learned counsel for the petitioner is that in any case, present case is not a case of any fraud or suppression or concealment but present is a case of short payment of tax without there being any suppression of material. Therefore, the respondents could not have proceeded under Section 74 of the Act. In support of his submissions, learned counsel for the petitioner relies upon the provisions contained in section 73 and 74 of the Act as also circular dated 13.12.2023.
3. Per Contra, learned counsel for the respondent submits that though initially this Court had observed in the order dated 25.07.2023 that the respondents may proceed under Section 73 of the Act, during the course of investigation carried out by the respondents, as prima facie material revealed that it is not merely a case of short payment of tax, but a case of suppression of fact, an application was moved before this Court and this Court granted liberty to proceed in accordance with law vide order dated 24.04.2024. He would submit that the impugned notice requires the petitioner to show cause against proposed action and it is open for the petitioner to submit his detailed reply which would be duly considered by the competent authority in accordance with law.
4. Having gone through the order dated 25.07.2023 passed by this Court in earlier writ petition no.5274/2023, we find that the respondent were allowed to proceed against the petitioner invoking powers under Section 73 of the Act. It, however, appears that later on, the respondents moved an application before this Court seeking appropriate modification in order dated 25.07.2023 and liberty to the extent that instead of Section 73 of the Act the issue may be left open to be considered/adjudicated under the provisions of the Act.
5. Considering the same, this Court observed that the department is not precluded from acting under the provisions of Act of 2017 and shall have freedom to proceed under the Act of 2017, strictly in accordance with law, as explained in para 16 of the earlier order dated 25.07.2023.
6. The text and tenor of the aforesaid order, in the light of the prayer which was made by the department, clearly appears to be a liberty given to the department to proceed against the petitioner. The very object and purpose of filing modification application was to remove the restriction which was imposed on the department to proceed only under Section 73 of the Act. The submission of learned counsel for the petitioner is that in para 16 of the order dated 25.07.2023, this Court had observed that respondents would proceed under Section 73 of the Act that would mean that the Court, even while considering the application for modification did not grant liberty. On carefully going through order dated 25.07.2023, particularly para 16 thereof and subsequent order dated 24.04.2024, we are of the view that the order passed by this Court cannot be construed narrowly. The liberty which was granted by the court clearly meant that the respondents would be at liberty to proceed under the provisions of the Act which included powers which are exerciseable under any of the provisions of the Act and could not be restricted to Section 73 alone. Para 16 of order dated 25.07.2023 details many other aspects and it is not that it only mandated proceedings under Section 73. Both the orders have to be read together.
7. Therefore, we are of the view that challenge to impugned notice under Section 74 of the Act, cannot be allowed to be assailed on the aforesaid ground.
8. The second ground which has been raised by learned counsel for the petitioner, in our opinion, is premature at this stage. The contents of notice dated 30.04.2024 show that the respondents have invoked power under Section 74 of the Act on prima facie consideration of it being a case of suppression. Though, learned counsel for the petitioner disputes this aspect, we do not see any reason why writ court should interdict at this stage when the petitioner is only asked to show cause against proposed action. The authority, undoubtedly has jurisdiction to issue notice under Section 74. Whether or not present is a case of suppression of fact, warranting invocation of jurisdiction under Section 74 of the Act, is an issue of fact and not of law.
9. Therefore, we are not inclined to comment on the merits of this aspect but leave the petitioner to file his reply to the impugned show cause notice dated 30.04.2024 and satisfy the authorities on the basis of material and contention which have been raised before us.
10. Without commenting upon merits, we would close this petition with the observation that in case, the petitioner files his reply to the show cause notice within a period or 30 days from today, the authority shall consider the same with due application of mind and proceed in accordance with law.
11. The present writ petition is disposed off.
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