Notice for evasion of GST by DGGI can be adjudicated by competent authority of GST

S. Kushalchand International Pvt. Ltd. & Anr. Vs Additional Director (Gujarat High Court)

Gujarat High Court held that the show cause notice issued for evasion of GST by DGGI shall be adjudicated by competent authority. Thus, there is no inherent lack of jurisdiction of competent authority. Hence, writ not entertained.

Facts- Petitioner company is carrying on business in the State of Maharashtra and State of Uttar Pradesh in India. The petitioners are served with three show cause notices for levy of penalty up on the petitioners for being beneficiaries for alleged evasion of tax by the three concerns namely M/s. Flora Naturale, M/s. Odochem Industries and M/s. Odosynth Inc. to whom the petitioner company has supplied the goods which was used as raw material for production of perfumery compounds and involved in clandestinely supplying perfumery compounds without payment of GST to M/s. Trimurti Fragrance Private Limited, Kanpur and M/s. Trimurti Fragrances and Flavours Private Limited, Kanpur for the unaccounted production and clandestine supplies/clearances of pan masala and scented tobacco/jarda.

A search was also carried out on 28/29.03.2022 at the additional places of business of the petitioners situated at Bhiwandi in the State of Maharashtra and it was found that there was shortage of goods purchased by the petitioners. During search, it was found that there was a shortage of 40 items of goods valued at Rs.2,78,41,680/- involving GST of Rs. 50,11,502/- and LRs/transport documents issued by M/s. Ganpati Road Carriers Private Limited were found showing payment of freight in cash, however, no such expenses were debited in the books of account of the petitioners and no expense was shown to be incurred by the petitioners for payment of transport charges in respect of supplies made to aforesaid buyers of the petitioner.

The petitioners thereafter were served with the impugned show cause notices dated 16.03.2023 wherein the petitioners were joined as co-noticee for imposition of levy of penalty u/s. 122 of the GST Act. Being aggrieved, the petitioners have preferred these three petitions.

Conclusion- Para no. 6 of circular no. 169/2022 provides that show cause notice issued by DGGI shall be adjudicated by the competent Central Tax Officer of the Executive Commissionerate in whose jurisdiction the noticee is registered. Therefore, it is necessary to refer to the main noticee/s who are situated at Kannauj and who would fall within the jurisdiction of Commissioner, Kanpur as per Entry No.54 of Table II of Notification No.2 of 2017 and Principal Commissioner, Kanpur would have the territorial jurisdiction of District of Kannauj. Therefore, the respondent authorities have rightly directed the petitioners and other noticee/s to file their respective replies before the Additional/Joint Commissioner at Kanpur for adjudication of the impugned show cause notices.

Held that thus when the challenge to the show cause notices qua other entities involved in the same transactions have failed, more particularly, when Hon’ble Allahabad High Court has given a finding that there is no inherent lack of jurisdiction of competent authority, by not entertaining the writ petition, we are also of the opinion that these writ petitions are not required to be entertained on the ground of territorial jurisdiction of the adjudicating authority.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. Heard learned Senior Advocate Mr. Mihir Joshi with learned advocate Mr. Dhaval Shah for the petitioners and learned Senior Standing Counsel Ms. Hetvi H. Sancheti for the respondents.

2. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Hetvi H. Sancheti waives service of notice of rule on behalf of the respondents.

3. These three petitions are filed by the petitioner company and its Director challenging three show cause notices dated 16.03.2022 issued by respondent no.1, the Additional Director, Directorate General of Goods and Service Tax Intelligence, Ahmedabad Zonal Unit proposing to impose penalty on the petitioners under section 122(1)(i)(x)(xvii)(xviii) and (xix) of the Central Goods and Service Tax Act, 2017 (For short “the GST Act”).

4. It is the case of petitioner company that it is carrying on business in the State of Maharashtra and State of Uttar Pradesh in India.

5. The petitioners are served with three show cause notices for levy of penalty up on the petitioners for being beneficiaries for alleged evasion of tax by the three concerns namely M/s. Flora Naturale, M/s. Odochem Industries and M/s. Odosynth Inc. to whom the petitioner company has supplied the goods which was used as raw material for production of perfumery compounds and involved in clandestinely supplying perfumery compounds without payment of GST to M/s. Trimurti Fragrance Private Limited, Kanpur and M/s. Trimurti Fragrances and Flavours Private Limited, Kanpur for the unaccounted production and clandestine supplies/clearances of pan masala and scented tobacco/jarda.

6. It is the case of the petitioners that petitioner company regularly imports and purchases locally various chemicals for trading in India. The petitioner company also avail the input tax credit on the GST paid on the purchases. The petitioner company also pays IGST and customs duty for the goods imported for home consumption.

7.Respondent no.1 initiated investigation against the aforesaid buyers of the petitioners on information received in intelligence that they were clandestinely supplying perfumery compounds without payment of GST.

8. In continuation of investigation, a search was also carried out on 28/29.03.2022 at the additional places of business of the petitioners situated at Bhiwandi in the State of Maharashtra and it was found that there was shortage of goods purchased by the petitioners. During search, it was found that there was a shortage of 40 items of goods valued at Rs.2,78,41,680/- involving GST of Rs. 50,11,502/- and LRs/transport documents issued by M/s. Ganpati Road Carriers Private Limited were found showing payment of freight in cash, however, no such expenses were debited in the books of account of the petitioners and no expense was shown to be incurred by the petitioners for payment of transport charges in respect of supplies made to aforesaid buyers of the petitioner.

9. The petitioners filed reply dated 14.04.2022 explaining that there was no shortage of stock and affidavits to that effect were also filed contending that search was conducted in only one area of the premises and other stocks kept in other areas of the premises was omitted to be considered.

10. Thereafter statements of petitioner no.2 were recorded on 27.04.2022, 28.04.2022, 07.06.2022 and 05.08.2022 wherein it was denied that there was any shortage and complete records of purchase and sale of goods by petitioner no.1 company was produced.

11. The petitioners thereafter were served with the impugned show cause notices dated 16.03.2023 wherein the petitioners were joined as co-noticee for imposition of levy of penalty under section 122 of the GST Act.

12. Being aggrieved, the petitioners have preferred these three petitions.

13. Learned Senior Advocate Mr. Mihir Joshi with learned advocate Mr. Dhaval Shah for the petitioners submitted that by the impugned show cause notices, respondent no.2 Additional/Joint Commissioner, Kanpur is designated as an adjudicating authority. It was submitted that respondent no.2 is not a “proper officer” for adjudication of the show cause notices qua the petitioners as respondent no.2 does not have jurisdiction to adjudicate the impugned show.

14. It was submitted that the petitioners could not have been made answerable to authority which does not have jurisdiction and as such, the impugned notices are void and illegal qua the petitioners.

15. In support of his submissions, learned Senior Advocate Mr. Joshi referred to and relied upon Notification No.02/2017-Central Tax dated 19.06.2017 issued in exercise of powers conferred under section 3 read with section 5 of the GST Act and section 3 of the IGST Act, 2017 showing the jurisdiction of the Notified Officer under the GST Act. It was pointed out that Table I of the said Notification No. 02/2017 provides for jurisdiction of the Principal Chief Commissioner/Chief Commissioner of Central Tax in terms of Principal Commissioners/ Commissioners of Central Tax, Commissioner of Central Tax (Appeals), Additional Commissioner of Central Tax (Appeals) and Commissioner of Central Tax (Audit) by dividing the GST Commissionerate into 21 zones. Reference was made to Serial No. 12 of the Table I in the said notification to point out that the Principal Chief Commissioner, Lucknow shall have the jurisdiction over the Commissioner of Kanpur.

16. It was submitted that the aforesaid Notification No. 02/2017-Central Tax was amended by Notification no. 02/2022-Central Tax dated 11.03.2022 wherein clause 3A is inserted to vest the powers of the Principal Commissioner with the Additional Commissioners or the Joint Commissioners of Central Tax, as the case may be, who were subordinate to the Principal Commissioners of Central Tax.

17. Reference was made to Table V issued in Notification No.02/2017 to submit that Additional Commissioner/Joint Commissioner of Central Tax having power for passing an order or decision in respect of notices issued by the office of Directorate General of Goods and Services Tax Intelligence and Serial No. 9 of Table V prescribes that Principal Commissioner, Lucknow is one of the persons having powers for passing an order or decision in respect of notices issued by the Directorate General of Goods and Services Tax Intelligence under the relevant provisions of the GST Act.

18. It was submitted that Table II of the Notification No. 02/2017 provides for territorial jurisdiction of Principal Commissioner/ Commissioner of Central Tax and Serial No. 54 thereof provides for the powers and jurisdiction of Principal Commissioner/ Commissioner, Kanpur and Serial No. 61 provides for the powers and jurisdiction of Lucknow Commissionerate. It was therefore, submitted that both Principal Commissioner/Commissioner, Kanpur and Lucknow are separate.

19. Reliance was also placed on Circular no. 31/05/2018 dated 09.02.2018 wherein clarification is made regarding the proper officers for proceedings under Sections 73 and 74 of the GST Act and the IGST Act. It was submitted that paragraph nos. 6 and 7 of the said Circular were amended by Circular No. 169/01/2022-GST dated 12.03.2022 regarding the powers of the Additional Commissioner/ Joint Commissioner of Central Tax of specified Central Tax Commissioner with All India Jurisdiction.

20. Referring to the said paras, it was submitted that in terms of Serial Nos. 18 and 19 of the Table annexed to the Circular dated 12.03.2022 in case where the principal place of business of the noticee having highest demand of tax involved, falls under the Lucknow or Meerut Zones, the Additional Commissioner or Joint Commissioner under the Lucknow Central Tax Commissionerate shall adjudicate the show cause notices issued by the Directorate General of GST Intelligence.

21. Referring to the above notifications it was submitted that the principal place of the main Noticee in three show cause notices are situated in Uttar Pradesh and therefore, they are governed by the jurisdiction of Lucknow Commissionerate.

22. It was submitted that both Lucknow and Kanpur Commissionerate are separate and independent as per Notification No. 02/2017, and both falls under the Principal Chief Commissioner at Lucknow (Central Tax Zone) as per Serial No.12 of Table I of Notification No.02/2017 and the Additional/Joint Commissioner of Central Tax under the Principal Commissioner, Lucknow are appointed as the proper officers for adjudicating the show cause notices issued by the DGGI in terms of Serial No.9 of Table V of Notification No.02/2017 and as such, respondent no.2 shall not have any jurisdiction to adjudicate the impugned show cause notices.

23. It was further submitted that as per Serial No. 18 and 19 of the Table annexed to the Circular dated 12.03.2022, in case where the principal place of business of the noticee having highest demand of tax involved, falls under the Lucknow and Meerut Zones, the Additional Commissioner and Joint Commissioner under the Lucknow Central Tax Commissionerate shall have the jurisdiction to adjudicate the show cause notice issued by the Directorate General of GST Intelligence.

24. It was further submitted that as per the impugned show cause notices issued to the petitioners, the petitioners are made answerable to Additional/Joint Commissioner, CGST, Kanpur Commissionerate which is contrary to the aforesaid notifications and therefore, the impugned show cause notices are liable to be quashed and set aside being without jurisdiction.

25. It was further submitted that invocation of Section 122(1) of the GST Act for imposition of penalty on petitioners is without jurisdiction as the said section is applicable qua the taxable person i.e. the supplier of goods or services, who commits any of the offences prescribed therein and such persons shall be liable to pay a penalty of Rs. 10,000 or the amount of tax evaded, whichever is higher.

26. It was further submitted that penalty under Section 122 of the CGST Act is applicable only on persons evading the tax whereas as per Paragraph No.41 of the impugned show cause notice, it is alleged that petitioner no. 1 has been supplying unaccounted raw materials to the principal noticee/buyer which is alleged to be found in absence of the transport ledger with the transporter M/s Ganpati Road Carrier Pvt. Ltd. despite having freight paid bills which fairly indicated the practice of unaccounted illicit supplies of raw materials to the aforesaid three buyers.

27. It was submitted that in spite of such allegation of supply of unaccounted raw materials by the petitioners, no duty is demanded under Section 73/74 of the GST Act against the petitioner company and the demand is only against the buyers of the petitioner company who have allegedly supplied unaccounted/ clandestine finished goods to its buyers. It was therefore, submitted that in absence of demand under Section 73/74 of the GST Act, penalty under Section 122(1)/122(1A) of the GST Act cannot be imposed on the petitioners.

28. It was further submitted that allegation against petitioner company is only for aiding and abetting in evasion of GST by its buyers and was complicit in willful acts of omissions or commissions of the acts of suppression of material facts from the department which resulted in evasion of huge GST by the buyers of petitioner no.1 company.

29. It was submitted that penalty for aiding and abetting is covered under Section 122(3) of the GST Act and hence, invocation of Section 122(1) of the GST Act proposing to impose penalty equal to the tax evaded by the buyers of the petitioner no. 1 is not tenable and not sustainable in law and therefore, the impugned notices are without jurisdiction.

30. It was submitted that under Section 122(3) of the GST Act, the maximum prescribed penalty cannot exceed Rs. 25,000/- and accordingly, the proposal to impose a penalty equal to the tax evaded by the buyers of the petitioner no. 1 is without jurisdiction.

31. In the alternative, it was submitted that penalty can be imposed only under section 127 of the GST Act as the proceedings against the petitioners is not covered under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130 of the GST Act.

32. It was therefore, submitted that the proposal to impose penalty equal to the tax evaded by the buyers of petitioner no.1 company which is a third party not connected or related to the petitioners is not an issue of quantification but of illegal assumption/conferment of jurisdiction since the only assessment contemplated under the impugned notices is that of the three entities/buyers for whom the adjudicating authority is also the proper authority and in the absence of any assessment notice being issued to the petitioners, it is evident that amount of tax evaded as may be quantified in the assessment of the buyers of the petitioner no.1 company is sought to be imposed on the petitioners, which renders the impugned notices illegal and beyond the scope of provisions of section 122(1) of the GST Act.

33. It was therefore, submitted that without invoking section 74 of the GST Act, penalty sought to be levied on the petitioners under section 122 of the GST Act, cannot be sustained to make the petitioners liable for penalty to the extent of the amount of tax evaded which may be assessed in the hands of the buyers. Reliance was placed to Explanation to section 74(11) of the GST Act to submit that no penalty can be levied upon the petitioners under section 122(1) of the GST Act.

34. It was submitted that so far as petitioner no.2 is concerned, section 122(1A) of the GST Act is sought to be applied which provides that “any person”, who retains the benefit of the transactions covered under clauses (i), (ii), (vii) or clause (ix) of Section 122(1) of the GST Act and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equal to the tax evaded or input tax credit availed or of passed on.

35. It was therefore, submitted that the provisions of section 122(1A) of the GST Act applies to a taxable person only whereas in facts of the case, no allegation is levelled against petitioner no.2 Director of the petitioner no.1 company for having received any benefit out of the transactions carried out by the buyers of the petitioner no.1.

36. It was therefore, submitted that no penalty can be levied upon petitioner no.2 as necessary conditions for invocation of section 122(1A) of the GST Act is not satisfied as penalty can be imposed only on “taxable person” who would fall under Section 2(107) read with Section 2(94) of the GST Act and on a person who retains the benefits of transactions covered under clauses (i), (ii), (vii) or clause (ix) of Section 122(1) of the GST Act.

37. It was submitted that the petitioner no. 2 who is an individual director of the petitioner no. 1 cannot be considered as “taxable” or “registered person” within the meaning and the purview of the GST Act so as to retain the benefits as per the provisions of section 122(1) of the GST Act in absence of any allegation to that effect in the impugned show cause notices.

38. It was submitted that there is no allegation against the petitioner no. 1 for retaining benefit of transactions covered under the aforesaid clauses of Section 122(1) of the GST Act as there is no demand raised towards any alleged non­payment/ short payment of tax and/ or erroneous availment of Input Tax Credit against the petitioner no. 1.

39. It was therefore, submitted that in the absence of basic elements to levy penalty, show cause notices issued to petitioner no. 2 would be rendered illegal for want of jurisdiction and further stands vitiated on the grounds of patent non-application of mind on behalf of the respondent no.1.

40. It was further submitted in the alternative that provisions of section 122(1A) of the GST Act is inserted with effect from 01.01.2021 by the Finance Act, 2020 whereas the period under dispute in the show cause notices for which demand is raised against the buyers of petitioner no.1 is from April 2018 to December 2021 and therefore, the provisions of section 122(1A) cannot apply to the transactions prior to 31.12.2020.

41. Reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT vs Vatika Township Pvt. Ltd. reported in 2015 (1) SCC 1.

42. It was further submitted that the jurisdictional officer of petitioner no. 1 is in Maharashtra and the DGGI has not initiated any proceedings against petitioner no. 1 for recovery of GST on purported unaccounted/ clandestine sale of goods and no investigation has been done with regard to the source from where the petitioners have purchased the raw material/goods which were allegedly clandestinely removed by the petitioner no. 1.

43. It was therefore, submitted that in the absence of any adjudication by the jurisdictional/proper officer having jurisdiction over the petitioner no. 1 about unaccounted/ clandestine clearance of goods by the petitioner no. 1 to its buyers, the impugned show cause notices for imposing penalty are without jurisdiction and premature.

44. It was submitted that no penalty can be levied under Section 122(1) of the GST Act on the basis of unaccounted supply by the buyers of petitioner company but it can be levied only if there is allegation of unaccounted/ clandestine supply by the petitioner no. 1. It was therefore, submitted that to impose penalty upon the petitioners there has to be determination/ adjudication of the unaccounted/
clandestine supply by petitioner no.1 company and in absence thereof no penalty can be levied.

45. It was submitted that the provisions of Section 74(10) of the GST provides for specific time limit from the due date for furnishing of the annual return for the financial year to which the tax dues relate and action under the provisions of section 74 must be completed within a designated year. It was therefore, submitted that issuance of a single show cause notice for multiple assessment years is not tenable and is contradictory to the settled legal position.

46. It was further submitted that the contention of the respondents that since there are number of noticee, it would prejudice the adjudication is misconceived because the show cause notices to all other noticee are even otherwise subject to the jurisdiction of the adjudicating authority and it is only the petitioners who would be prejudiced by further adjudication.

47. In support of his submissions, reliance was placed on the following decisions:

(i) Shantanu Sanjay Hundekari v. union of India reported in (2024) 17 Centax 18(Bom).

(ii) Sakshi Bahl v. Principal Additional Director General, DGGI, Delhi reported in 2023 (73) GSTL 330 (Del).

(iii) Veremax Technologie Services Ltd. Vs The Assistant Commissioner of Central Tax, Bengaluru, reported in 2024 (9) TMI 1347.

(iv) Titan Company Ltd. Vs The Joint Commissioner of GST & Central Excise, reported in 2024 (1) TMI 619.

(v) The State of Jammu and Kashmir and Ors Vs Caltex (India) Ltd., reported in (1966) (17) STC 612 – Supreme Court.

(vi) Kesar Enterprises Ltd. Vs State of UP & Ors., reported in 2010 SCC OnLine All 1608-Allahabad High Court.

48. On the other hand, learned Senior Standing Counsel Ms. Hetvi Sancheti for the respondents raised the preliminary objection regarding maintainability of the writ petition under Article 226 of the Constitution of India.

49. It was submitted that except the petitioner all other co-noticee have appeared before the adjudicating authority and have filed their replies and adjudication process is going on at the stage of cross examination of the witnesses.

50. It was submitted that the invocation of the jurisdiction of this Court by the petitioners only on the basis of powers of the respondent no.2 at Kanpur to adjudicate the show cause notice issued by respondent no.1 is without any basis inasmuch as the petitioners are not disputing the jurisdiction of respondent no.1 DGGI. It was submitted that the petitioners are co-noticee in the show cause notice issued upon M/s Flora Naturale, M/s Odochem Industries and M/s. Odosynth Inc. All the three concerns situated at Kannauj within the jurisdiction of respondent no.2 and accordingly, respondent no.1 while issuing the show cause notices has vested the adjudication process to respondent no.2 as there is violation of provisions of Central Goods and Service Tax Act, 2017 as well as Uttar Pradesh Goods and Service Tax Act, 2017 by the aforesaid noticee to whom the show cause notice is issued by respondent no.1. It was submitted that the three partners namely, Peeyush Kumar Jain, Shri Ambrish Kumar Jain and Maheshchand Jain of M/s. Flora Naturale and proprietor of other two concerns are all situated at Kanpur at Uttar Pradesh where the alleged transactions have taken place. It was submitted that search proceedings against the above three noticee took place at Kanpur and Kannauj which has resulted into issuance of the impugned show cause notices and therefore, as per Notification No.2/2022 dated 11.03.2022 and Notification No.169/2022 dated 12.03.2022, jurisdiction for adjudication of the impugned show cause notices would vest with respondent no.2.

51. It was submitted that the petitioners are supplier of materials to the aforesaid three noticee and during search premises at the place of business of the petitioners on 28.03.2022, discrepancies in stocks as well as involvement of the petitioners is found during the course of investigation for supplying the unaccounted raw material without payment of GST to above three concerns.

52. It was therefore, submitted that the contention of the petitioners regarding powers of respondent no.2 to adjudicate upon the show cause notices can be considered only by Hon’ble Allahabad High Court. It was submitted that the petitioners with a mala fide intent has not approached the Allahabad High Court whereas other co-noticee have filed petitions being Writ Tax No. 1280 of 2023, Writ Tax No. 1286 of 2023 and Writ Tax No.1290 of 2023 which have been dismissed by Hon’ble Allahabad High Court showing no indulgence.

53. It was submitted that contention of the petitioners challanging powers of respondent no.2 to adjudicate upon the show cause notices relying upon circular No.31/2018 dated 09.02.2018 as amended by Circular No.169/2022 dated 12.03.2022 is not tenable as there is a marked difference between levy and imposition of penalty under the GST Act. It was submitted that creation of a penal liability in form of a penalty is a function of the Parliament as a policy decision, whereas imposition of such penalty on a subject of tax upon certain action/omission is a function of the proper officer.

54. It was submitted that Chapter XIX of the GST Act provides for levy of penalty but provision for imposition of penalty falls under Chapter XV which provides for “Demands and Recovery”, where operation of invocation of Section 73 and Section 74 of the GST Act come into play.

55. It was therefore submitted that Section 122 (1) of the GST Act does not mention any “proper officer” or “any officer of GST” who can impose penalty in relation to an offence as enumerated in the said sections as the said provision only describes the levy of penalty and not imposition of penalty.

56. It was therefore, submitted that in absence of any such authority as mentioned in section 122(1), the proper officer as per the provisions of section 73/74 of the GST Act would be the person who would issue the show cause notice as well as pass the order in relation to such a show cause notice.

57. Reliance was placed on the Explanation to sections 73 and 74 wherein the word “proceedings” is used to submit that word “proceedings” connotes that proceedings under section 122 are to be adjudicated upon under Section 73 or 74 of the GST Act which is further found support in section 127 of the GST Act where words “proper officer” has been prescribed for imposition of penalty. It was therefore, submitted that for imposition of penalty under section 122, recourse has to be taken to sections 73 or 74 of the GST Act wherein proper officer is defined for the purpose of determination of tax and such proper officer automatically becomes the authority for imposition of penalty in respect of any show cause notice issued under Section 73 or 74 of the GST Act.

58. It was therefore, submitted that as per Explanation I and II to section 74 read with section 74(9) and section 127 of the GST Act, proper officer for imposition of penalty under section 122 would be the officer adjudicating the proceedings initiated under sections 73 or 74 of the GST Act under Chapter XVI of the GST Act. It was therefore, submitted that the adjudicating officer for determination of the tax under Sections 73 and 74 would be the proper officer for imposition of penalty under section 122 of the GST Act and therefore, respondent no.2 shall have the jurisdiction to continue with the proceedings initiated against other noticee including the petitioners who are joined y for imposition of penalty under section 122 of the GST Act.

59. Learned advocate Ms. Sancheti referred to para no. 5 of the Circular No. 31/2018 dated 09.02.2018 which provides that functions of “proper officers” are assigned based on the monetary limits mentioned in column nos. 3, 4 and 5 in the third Table of the said circular and Column No. 3 states “Monetary limit of the amount of central tax (including cess) not paid or short paid or erroneously refunded or input tax credit of central tax wrongly availed or utilized for issuance of show cause notices and passing of orders under Sections 73 and 74 of CGST Act. It was pointed out that similarly column no. 4 and 5 also speaks of the tax amount for the ITC wrongly availed or utilized.

60. It was submitted that the assignment of proper officer is based on “demand of tax” and not “penalty”. It was submitted that the impugned show cause notices have been issued under the head “Demand Cum Show Cause Notice Under Section 74(1) Of the GST Act, 2017 read with Section 74(1) Of the Uttar Pradesh GST Act, 2017 read with Section 20 Of the IGST Act, 2017”.

61. It was submitted that all the three show cause notices have been issued as tax has been demanded under Section 74 of the GST Act from only one noticee in each show cause notice and therefore, all other co-noticee would fall within the jurisdiction of respondent no.2 since tax is being demanded from a single noticee in all the three show cause notices. It was therefore submitted that the jurisdiction for the purpose of adjudication would be as per para no. 6 of Circular No. 169 of 2022 dated 12.03.2022 and hence the proper authority to adjudicate the case would be respondent no.2.

62. It was further submitted that the word “notice” appearing in para no.7.1 of Circular No. 169 of 2022 has to be read in conjunction with the subject of the Circular No 31 of 2018 as reference is made to the principal place of business of the noticee/s in order to determine the authority empowered to issue show cause notice or order under Section 73/74 of the GST Act.

63. It was therefore, submitted that both the circulars are for determination of quantum of tax demanded from the noticee/s for the purpose of deciding the authority to issue show cause notice/order and in this context, the words “Noticee” or “Noticee/s” appearing at para nos. 6 and 7.1 of the Circular 169 of 2022 cannot be read on a standalone basis but such words have to be read in conjunction with all the intent and purport of determining the jurisdiction of the proper officer by whom tax has to be demanded from the noticee/s, in absence of which all intent and rationale behind the issuance of Circular 31/2018 dated 09.02.2018 of “optimal distribution of work” would fail.

64. It was further submitted that if the contention of the petitioners regarding jurisdiction to issue show cause notices for levy of penalty is applied then for each penalty proceedings separate show cause notices will have to be issued by the concerned officer in whose jurisdiction petitioner is registered. It was submitted that interpretation of petitioners of circular No. 2 of 2022 dated 11.03.2022 read with Circular No.169 of 2022 dated 12.03.2022 would result in an anomaly for adjudication of the show cause notices issued by the Executive Commissionerate for determination of the tax and interest and along therewith adjudication of levy of penalty upon other co-noticee/s cannot be separated. It was submitted that such interpretation would result in an imbalance of workload amongst the adjudicating authority of the Executive Commissionerate and the adjudicating authority having All India Jurisdiction which would be against the basic intent of Circular No. 31 of 2018 dated 09.02.2018 which provides for optimal distribution of work to ensure speedy and efficient disposal.

65. It was further submitted that para no. 5 of Circular no. 31 of 2018 dated 09.02.2018 provides adjudication powers to the Central Tax Officers, in relation to show cause notices issued under Sections 73 and 74 of the GST Act and section 20 of the IGST Act, upto the monetary limits as prescribed in columns no.(3), (4) and (5) respectively of the Table. It was therefore, submitted that even if tax is demanded from a noticee in the jurisdiction of the adjudicating authority and penalty proposed on a noticee in some other jurisdiction, then also the show cause notice has to be adjudicated by the officer who is empowered to determine the tax amount under section 73/74 as per the monetary limits. It was therefore, submitted that applying the same analogy in case of show cause notices issued by DGGI, the adjudicating authority to issue order under section 73/74 would be the officer who is empowered to determine the tax and interest.

66. It was submitted that a literal meaning of “Noticee/s” mentioned in para no. 7.1 of Circular no 169/2022 dated 12.03.2022 would create a situation where there is one interpretation for show cause notice issued by the officers of Executive Commissionerate and another interpretation for show cause notice issued by DGGI which cannot be permitted inasmuch as the machinery provisions of section 74 concerning issuance of show cause notice and limitation of time for passing of order imposing penalty or determination of the amount of ITC wrongly availed or passed on to the proceedings to be conducted for taking penal action under section 122, in cases of fraudulent ITC without underlying supply of goods and issuing only invoices and not involving demand of ITC or tax, would have to be adjudicated by the same adjudicating authority. It was therefore, submitted that the combined reading of section 122 with section 6(2)(b) of the GST Act and Circular No. 31/2018 with Notification No. 2/2017, the adjudication of proceedings including penalties under section 122, should be conducted under the authority where the tax determination is being done which would ensure consistency in evaluating the facts and circumstances surrounding the tax evasion or default and avoidance of jurisdictional overlaps and conflicting adjudication so as to fulfill the principles of natural justice and judicial convenience. It was therefore, submitted that attempt on part of the petitioners to separate the jurisdiction of tax determination and jurisdiction for imposition of penalty is contrary to the intent of the legislative framework and the circulars and notifications issued from time to time resulting into inefficiencies and procedural complications in the adjudication process which would cause a lot of confusion regarding jurisdiction and parity in decision making process.

67. It was therefore, submitted that in view of fact that all the three assesses/noticee/s who are subjected to adjudication process for determination of tax and interest are situated within the jurisdiction for determination of tax component with Kanpur Commissionerate, the same Commissionerate shall have the jurisdiction for imposing penalty and therefore, in such cases para no. 7.1 of Circular No 169 of 2022 would not be applicable to the facts of the case.

68. With regard to contention of the petitioners that provisions of Section 122(1A) of the GST Act would apply to only taxable person, it was submitted by learned advocate Ms. Sancheti that such contention is not tenable in light of the Minutes of the 38th GST Council Meeting held on 18th December, 2019 in relation to Agenda 6(ii) wherein it is resolved by the Council that the person receiving the benefit of a fraudulent transaction is also liable for penalty and arrest and with the 8th amendment proposed goes to align the liability of master mind with a person who was taking fake input tax credit.

69. Reliance was placed on Memorandum explaining the Finance Bill, 2020, whereby amendment to section 122 was inserted to make the beneficiary of the transactions of passing on or availing fraudulent input tax credit liable for penalty similar to the penalty leviable on the person who commits such specified offences. It was therefore, submitted that the legislature in its wisdom has specifically chosen to use the word “Any Person” in section 122(1A) instead of “taxable person” for levying of penalty upon any person who has received benefits of any fraudulent transaction.

70. It was submitted that any other interpretation is not possible as the same would defeat the purpose of such amendment and hence, strict interpretation is required to be given. It was submitted that the decision of the Hon’ble Bombay High Court in case of Shantanu Sanjay Hundekari and others v. Union of India and others reported in 2024 (17) Centax 18 is being challenged before the Hon’ble Apex Court.

71. It was submitted that word “Person” is defined under section 2(84) of GST Act whereas words “taxable person’ is defined under section 2(107) of the GST Act and on perusal of both the definitions, it is apparent that definition of “person” is inclusive and wide and interpreting the same to mean “Taxable Person”, the ambit of the same cannot be curtailed contrary to the principles of interpretation.

72. It was submitted that petitioner no.2 therefore, would be covered by the impugned show cause notices as it cannot be said at the show cause notice stage that petitioner no.2 has not received any benefit out of the fraudulent transactions, more particularly, when more than 200 crores cash was recovered along with 23 kg of gold from main co-noticee who has voluntarily paid the tax. It was submitted that in the impugned show cause notices of more than 400 pages, reference is made to statements of many witnesses disclosing modus operandi of fraudulent transactions. It was submitted that there was a shortage of raw material in godown of the petitioners during the course of search proceedings and therefore, reading the entire show cause notice as a whole, petitioner no.2 prima facie is liable for penalty under section 122(1A) of the GST Act and in view of disputed facts raised by the petitioners denying the allegations made in the show cause notices, extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India should not to be exercised as show cause notices are required to be adjudicated upon, more particularly, when Hon’ble Allahabad High Court has also refused for such indulgence.

73. It was further submitted that other contentions raised by the petitioners are based on the facts which are disputed by the respondents in the detailed affidavit in reply which requires consideration at the time of adjudication of the show cause notices concerning admissibility or inadmissibility of the evidence, quality of evidence, etc. It was also pointed out that all other co-noticee/s have appeared before the adjudicating authority and have filed their replies and adjudication process is ongoing at the stage of cross examination of the witnesses. It was therefore, prayed that no indulgence may be shown in the impugned show cause notices qua the petitioners considering the gravity of the cases and the disputed question of facts.

74. In support of her submissions, reliance was placed on the following decisions:

1) In case of Union of India and others v. Coastal Container Transporters Association and others reported in (2019) 20 Supreme Court Cases 446 wherein Hon’ble Apex Court has held that when there is no lack of jurisdiction or violation of principles of natural justice, High Court ought not to have entertained the writ petition at the stage of show cause notice, more so, against the final order as under:

“30. On the other hand, we find force in the contention of the learned senior counsel, Sri Radhakrishnan, appearing for the appellants that the High Court has committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show cause notices. Though there is no bar as such for entertaining the writ petitions at the stage of show cause notice, but it is settled by number of decisions of this Court, where writ petitions can be entertained at the show cause notice stage. Neither it is a case of lack of jurisdiction nor any violation of principles of natural justice is alleged so as to entertain the writ petition at the stage of notice. High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to this Court.

31. The judgment of this Court in the case of Union of India & Anr. v. Guwahati Carbon Ltd. (supra) relied on by the learned senior counsel for the appellants also supports their case. In the aforesaid judgment, arising out of Central Excise Act, 1944, this Court has held that excise law is a complete code in order to seek redress in excise matters and held that entertaining writ petition is not proper where alternative remedy under statute is available. When there is a serious dispute with regard to classification of service, the respondents ought to have responded to the show cause notices by placing material in support of their stand but at the same time, there is no reason to approach the High Court questioning the very show cause notices.

32. Further, as held by the High Court, it cannot be said that even from the contents of show cause notices there are no factual disputes. Further, the judgment of this Court in the case of Malladi Drugs & Pharma Ltd. v. Union of India, 2004 166 ELT 153 (SC) relied on by the learned senior counsel for the appellants also supports their case where this Court has upheld the judgment of the High Court which refused to interfere at show cause notice stage.

33. For the aforesaid reasons, we allow this appeal and set aside the judgment and order dated 18.12.2017 passed by the High Court of Gujarat in Special Civil Application No.6679 of 2016.

34. We, however, grant four weeks’ time, to file responses/further responses to the show cause notices dated 08.10.2015 and 30.09.2015, to the respondent nos.2 and 3. On receipt of such responses from the respondents or after expiry of the aforesaid time, it is open for the appellants to consider the same on their own merits and pass appropriate orders, uninfluenced by any of the observations made by this Court in this judgment.”

2) Decision of Hon’ble Allahabad High Court in case of Trimurti Fragrances and Flavours Pvt. Ltd and others v. Directorate General of Goods and Service Tax and others passed in Writ Tax no. 1286 of 2023 and in case of Trimurti Fragrances Pvt. Ltd and others v. Directorate General of Goods and Service Tax and others passed in Writ Tax no. 1280 of 2023 where challenge to same show cause notice was not entertained of other noticee/s.

3) Decision of coordinate Bench of this Court in case of Patel Inn and Travels Pvt. Ltd and another v. Union of India and others (order dated 19.07.2024 rendered in Special Civil Application No.9921 of 2024) wherein challenge to the show cause notice was rejected on plea of lack of jurisdiction keeping all the issues raised by the petitioner open to be adjudicated before the competent authority directing the adjudicating authority to take an independent decision.

75. Having heard the learned advocates for the respective parties and considering the facts of the case, the main grievance of the petitioners is regarding the jurisdiction of the adjudicating authority of the impugned show cause notices.

76. The impugned show cause notices are issued by the Additional Director, Directorate General of Goods and Service Tax Intelligence, Zonal Unit, Ahmedabad against three main noticee/s namely, M/s. Flora Naturale, M/s. Odochem Industries and M/s. Odosynth Inc. which are family firms situated at Kannauj, Uttar Pradesh. It is alleged in the show cause notices that the aforesaid three firms were involved in clandestinely supplying perfumery compounds without payment of GST as it is to M/s. Trimurti Fragrance Private Limited, Kanpur and M/s. Trimurti Fragrances and Flavours Private Limited, Kanpur for the unaccounted production and clandestine supplies/clearances of pan masala and scented tobacco/jarda.

77. It appears that on specific intelligence inputs received from source indicated movement of unaccounted goods and supplies without payment of GST from the factories of M/s. Trimurti Fragrances Private Limited and M/s. Trimurti Fragrances and Flavours Private Limited for illicit supply to various buyers by way of conniving with the transport firm namely M/s. Ganpati Road Carrier Private Limited, Kanpur and M/s. Arihant Cargo Movers which was also owned, controlled and operated by the Directors of M/s. Ganpati Road Carrier Private Limited.

78. As per the show cause notices, there is allegation of scam of clandestine supplies of unaccounted Pan Masala and scented Tobacco/Jarda by one Pravin Kumar Jain and Rajat Jain, Director of M/s. Ganpati Road Carrier Private Limited on behalf of the aforesaid firm. The petitioners are part of such modus operandi as alleged in the show cause notices as the petitioners are alleged to be major suppliers of raw materials to the three main noticee/s namely, M/s. Flora Naturale, M/s. Odochem Industries and M/s. Odosynth Inc. who are found to be involved in clandestine supplies of perfumery compounds to M/s. Trimurti Fragrances Private Limited and M/s. Trimurti Fragrances and Flavours Private Limited. Details given in panchnama, prima facie shows that the petitioners are also involved in such modus operandi of supply of raw materials to all the three firms through M/s Ganpati Road Carrier Private Limited and it was also found during the course of search and more particularly, answer to question no.14 of petitioner no.2 wherein he has fairly indicated and showed that freight charges were paid to M/s. Ganpati Road Carrier Private Limited in cash without accounting the same in their books of accounts in respect of freight charges incurred for transportation of unaccounted raw materials supplied by the petitioner.

79. In view of such circumstances, the petitioners are also joined as co-noticee/s being noticee/s nos.10 and 11 in all the three show cause notices under challenge. The notices are issued pursuant to the investigation carried out by the respondent no.1-Additional Director, Director General of Goods and Service Tax Intelligence, Zonal Unit, Ahmedabad under section 74(1) of the CGST Act,2017 read with section 74(1) of the Uttar Pradesh GST Act, 2017 and section 20 of the IGST Act,2017.

73. In view of facts stated in the show cause notices, the contention raised on behalf of the petitioners that the adjudication powers conferred upon the Commissionerate at Kanpur would not have jurisdiction in view of Notification No. 2 of 2017 dated 19.06.2017 read with Notification No.2 of 2022 dated 11.03.2022 which provides for jurisdiction of the adjudicating authority and contention that only the Principal Chief Commissioner Lucknow would have the jurisdiction over the Commissionerate, Kanpur and  Notification no.2 of 2017 only provides for powers to Additional Commissioner or Joint Commissioner of Central Tax for passing the order or decision in respect of notices issued by the officers of Directorate General of Goods and Services Tax Intelligence and as per Table V, Serial no.9, Principal Commissioner, Lucknow shall have the powers to adjudicate such notices is therefore required to be analysed.

81. The contention of the petitioners can be summarized as that Commissionerate, Kanpur and Commissionerate, Lucknow would have separate jurisdiction in view of Serial Nos.54 and 61 of Table II of Notification No. 2 of 2017 and therefore, it was contended that Circular No.31 of 2018 read with Circular No. 169 of 2022 provides for jurisdiction of Additional Commissioner/Joint Commissioner where principal place of main noticee at Kannauj falls under jurisdiction of Kanpur Commissionerate whereas Notification No. 2 of 2017 provides for territorial jurisdiction of Lucknow Commissionerate which is separate and independent than that of Kanpur Commissionerate and both Lucknow and Kanpur Commissionerate fall under Principal Chief Commissioner at Lucknow Central Tax Zone as per Serial No. 12 of Notification No.2 of 2017 and as per Serial no.9 of Table V of Notification No.2 of 2017, Additional/Joint Commissioner of Central Tax under Principal Commissioner of Lucknow are appointed as the proper officers for adjudicating the show cause notices issued by the DGGI. It was therefore, contended that in terms of Serial Nos.18 and 19 of the Table annexed to the Circular No. 169 of 2022 dated 12.03.2022 more particularly, in terms of para 7.1 thereof in cases where the principal place of business of the noticee having highest demand of tax involved would fall under Lucknow and Meerut Zones and therefore, Additional Commissioner or Joint Commissioner under Lucknow Central Tax Commissionerate shall have jurisdiction to adjudicate the show cause notices issued by DGGI whereas as per para no.49 read with para nos. 57 and 58 of the show cause notices, the petitioners are made answerable to Additional/Joint Commissioners of Kanpur Commissionerate who would not have any jurisdiction as proper officer to adjudicate the impugned show cause notices.

82. Such contentions of the petitioners are required to be considered in light of the three notifications (i) Notification No.2/2017 (ii) Notification No.31/2018 and (iii) Notification No.169/2022. Relevant extracts of the aforesaid notifications are as under:

“Notification No.2 of 2017

In exercise of the powers under section 3, read with section 5 of the Central Goods and Services Tax Act, 2017 (12 of 2017) and section 3 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), [the Government] hereby appoints—

(a) Principal Chief Commissioners of Central Tax and Principal Directors General of Central Tax,

(b) Chief Commissioners of Central Tax and Directors General of Central Tax,

(c) Principal Commissioners of Central Tax and Principal Additional Directors General of Central Tax,

(d) Commissioners of Central Tax and Additional Directors General of Central Tax,

(e) Additional Commissioners of Central Tax and Additional Directors of Central Tax,

(f) Joint Commissioners of Central Tax and Joint Directors of Central Tax,

(g) Deputy Commissioners of Central Tax and Deputy Directors of Central Tax,

(h) Assistant Commissioners of Central Tax and Assistant Directors of Central Tax,

(i) Commissioners of Central Tax (Audit),

(j) Commissioners of Central Tax (Appeals),

(k) Additional Commissioners of Central Tax (Appeals),

[(l) Joint Commissioner of Central Tax (Appeals),]

and the central tax officers subordinate to them as central tax officers and vests them with all the powers under both the said Acts and the rules made thereunder with respect to the jurisdiction specified in the Tables given below.

2. The Principal Chief Commissioners of Central Tax or the Chief Commissioners of Central Tax, as the case may be, specified in column (2) of Table I, are hereby vested with the territorial jurisdiction over the-

(a) Principal Commissioners of Central Tax and Commissioners of Central Tax, as the case may be, specified in the corresponding entry in column (3) of the said Table;

(b) Commissioners of Central Tax (Appeals) specified in the corresponding entry in column (4) of the said Table;

(c) Additional Commissioners 2[or Joint Commissioner] of Central Tax (Appeals) specified in the corresponding entry in column (4) of the said Table; and (l) Commissioners of Central Tax (Audit) specified in the corresponding entry in column (5) of the said Table.

3. The Principal Commissioners of Central Tax or the Commissioners of Central Tax, as the case may be, specified in column (2) of Table II and the central tax officers subordinate to them, are hereby vested with the territorial jurisdiction specified in the corresponding entry in column (3) of the said Table.

2a[ Notwithstanding anything contained in this notification, the central tax officer specified in column (3) of Table I and the officers subordinate to him shall exercise powers under sections 73, 74, 75 and 76 of Chapter XV of the said Act throughout the territorial jurisdiction of the corresponding central tax officer specified in column (2) of the said Table in respect of those cases as may be assigned by the Board.

3[3А. Notwithstanding anything contained in paragraph 3, the Additional Commissioners or the Joint Commissioners of Central tax, as the case may be, subordinate to the Principal Commissioners of Central Tax or the Commissioners of Central Tax, as specified in column (2) of Table V, are hereby vested with the powers as specified in the corresponding entry in Column (3) of the said Table.”

TABLE I

JURISDICTION OF PRINCIPAL CHIEF COMMISSIONER/CHIEF COMMISSIONER OF CENTRAL TAX IN TERMS OF PRINCIPAL COMMISSIONERS/COMMISSIONERS OF CENTRAL TAX, COMMISSIONERS OF CENTRAL TAX(APPEALS), ADDITIONAL COMMISSIONER [OR JOINT COMMISSIONER] OF CENTRAL TAX (APPEALS) AND COMMISSIONERS OF CENTRAL TAX (AUDIT)

Sl. No .	Principal Chief Commissio ner / Chief Commissio ner of Central Tax		Jurisdiction of Principal Chief Commissio ner/Chief Commissio ner of Centra Tax in terms of Principal Commissio ner/Commis sioner of Central Tax		Jurisdiction of Principal Chief Commissioner/Chief Commissioner of Central Tax in terms of Commissioner (Appeals) and [or Joint Commissioner] (Appeals)		Jurisdiction of Principal Chief Commissioner/ Chief Commissioner of Central Tax in terms of Commissioner (Audit)
12	Principal Chief Commissioner Lucknow	12.3.1	Principal Commissioner Lucknow	12.4.1	Commissioner (Appeals) Lucknow and Additional Commissioner [or Joint Commissioner] (Appeals) Lucknow	12.5.1	Commissioner (Audit) Lucknow
		12.3.2	Commissioner Agra
		12.3.3	Commissioner Kanpur	12.4.2	Commissioner (Appeals) Allahabad and Additional Commissioner [or Joint Commissioner] (Appeals) Allahabad	12.5.2	Commissioner (Audit) Kanpur
		12.3.4	Commissioner Allahabad
		12.3.5	Commissioner Varanasi

TABLE II

TERRITORIAL JURISDICTION OF PRINCIPAL COMMISSIONER/COMMISSIONER OF CENTRAL TAX

Sl. NO.	Principal Commissioner/ Commissioner Central Tax	Territorial Jurisdiction
54	Kanpur	Districts of Kanpur Nagar, Kanpur Dehat, Lalitpur, Jhansi, Mahoba, Hamirpur, Jalaun, Kannauj, Manipuri and Farrukhabad in the State of Uttar Pradesh

Notification No.31 of 2018

“6. The central tax officers of Audit Commissionerates and Directorate General of Goods and Services Tax Intelligence (hereinafter referred to as “DGGSTI”) shall exercise the powers only to issue show cause notices. A show cause notice issued by them shall be adjudicated by the competent central tax officer of the Executive Commissionerate in whose jurisdiction the noticee is registered. In case there are more than one noticees mentioned in the show cause notice having their principal places of business falling in multiple Commissionerates, the show cause notice shall be adjudicated by the competent central tax officer in whose jurisdiction, the principal place of business of the noticee from whom the highest demand of central tax and/or integrated tax (including cess) has been made falls.

7. Notwithstanding anything contained in para 6 above, a show cause notice issued by DGGSTI in which the principal places of business of the noticees fall in multiple Commissionerates and where the central tax and/or integrated tax (including cess) involved is more than Rs. 5 crores shall be adjudicated by an officer of the rank of Additional Director/Additional Commissioner (as assigned by the Board), who shall not be on the strength of DGGSTI and working there at the time of adjudication. Cases of similar nature may also be assigned to such an officer.

8. In case show cause notices have been issued on similar issues to a noticee(s) and made answerable to different levels of adjudicating authorities within a Commissionerate, such show cause notices should be adjudicated by the adjudicating authority competent to decide the case involving the highest amount of central tax and/or integrated tax including cess).”

Notification No.169 of 2022

“6. The Central Tax officers of Audit Commissionerates and Directorate General of Goods and Services Tax Intelligence (hereinafter referred to as “DGGI”) shall exercise the powers only to issue show cause notices. A show cause notice issued by them shall be adjudicated by the competent Central Tax officer of the executive Commissionerate in whose jurisdiction the noticee is registered when such cases pertain to jurisdiction of one executive Commissionerate of Central Tax only.

7.1 In respect of show cause notices issued by officers of DGGI, there may be cases where the principal place of business of noticees fall under the jurisdiction of multiple Central Tax Commissionerates or where multiple show cause notices are issued on the same issue to different noticees, including the persons having the same PAN but different GSTINs, having principal place of business falling under jurisdiction of multiple Central Tax Commissionerates. For the purpose of adjudication of such show cause notices, Additional/Joint Commissioners of Central Tax of specified Commissionerates have been empowered with All India jurisdiction vide Notification No. 2/2022-Central Tax, dated 11th March, 2022. Such show cause notices may be adjudicated, irrespective of the amount involved in the show cause notice(s), by one of the Additional/Joint Commissioners of Central Tax empowered with All India jurisdiction vide Notification No. 2/2022-Central Tax, dated 11th March, 2022. Principal Commissioners/Commissioners of the Central Tax Commissionerates specified in the said notification will allocate charge of Adjudication (DGGI cases) to one of the Additional Commissioners/Joint Commissioners posted in their Commissionerates. Where the location of principal place of business of the noticee, having the highest amount of demand of tax in the said show cause notice(s), falls under the jurisdiction of a Central Tax Zone mentioned in column 2 of the table below, the show cause notice(s) may be adjudicated by the Additional Commissioner/ Joint Commissioner of Central Tax, holding the charge of Adjudication (DGGI cases), of the Central Tax Commissionerate mentioned in column 3 of the said table corresponding to the said Central Tax Zone. Such show cause notice(s) may, accordingly, be made answerable by the officers of DGGI to the concerned Additional/Joint Commissioners of Central Tax.”

83. It appears that the petitioners have tried to raise the contentions with regard to the jurisdiction of adjudication of the show cause notices by Additional Commissioner, Kanpur heavily relying upon para no. 7.1 which is inserted by Circular No. 169 of 2022 in Circular No. 31 of 2018 which provides for powers of adjudication of the show cause notice issued by DGGI where the principal place of business of noticee/s fall under jurisdiction of multiple Central Tax Commissionerate or where multiple show cause notices are issued on the same issue on different noticee/s, such show cause notices may be adjudicated irrespective of amount involved in the show cause notices by one of the Additional/Joint Commissioners of Central Tax empowered with All India jurisdiction as per Notification No.2 of 2022. Therefore, reliance is placed on Notification No.2 of 2022 which refers to Principal Commissioners/ Commissioners of the Central Tax which includes the Principal Commissioner of Lucknow only. The petitioners have therefore, referred to Notification No.2 of 2017 which provides for notified officers having jurisdiction and as per Entry no.12, Principal Commissioner of Lucknow falls within the Principal Chief Commissioner, Lucknow whereas Commissioner, Kanpur also would be under the territorial jurisdiction of the Principal Chief Commissioner of Lucknow. It was therefore, contended that as per para no. 7.1 of the Circular no. 169/2022, Principal Commissioner, Kanpur would not have All India jurisdiction as per Notification No. 2 of 2022 and as such, Additional Commissioner, Kanpur shall not have any power to adjudicate the impugned show cause notices qua the petitioners.

84. It appears that petitioners have been swayed away by the territorial jurisdiction prescribed in Notification No. 2 of 2017 whereas the impugned show cause notices are issued by DGGI, Ahmedabad and as per Notification No. 31 of 2018, proper officer under sections 73 and 74 under the GST Act and IGST Act would be Additional or Joint Commissioner of Central Tax who is required to determine the liability of tax and interest in the hands of the main noticee/s.

85. Para no. 6 of the said circular provides that show cause notice issued by DGGI shall be adjudicated by the competent Central Tax Officer of the Executive Commissionerate in whose jurisdiction the noticee is registered. Therefore, it is necessary to refer to the main noticee/s who are situated at Kannauj and who would fall within the jurisdiction of Commissioner, Kanpur as per Entry No.54 of Table II of Notification No.2 of 2017 and Principal Commissioner, Kanpur would have the territorial jurisdiction of District of Kannauj. Therefore, the respondent authorities have rightly directed the petitioners and other noticee/s to file their respective replies before the Additional/Joint Commissioner at Kanpur for adjudication of the impugned show cause notices. Moreover, the petitioners are the co-noticee/s for the purpose of levy of penalty whereas tax and interest are to be determined in case of main noticee/s i.e three entities who are liable for levy of GST for clandestine supply of material to M/s. Trimurti Fragrance Private Limited, Kanpur and M/s. Trimurti Fragrances and Flavours Private Limited, Kamnpur.

86. In case of Trimurti Fragrances and Flavours Pvt. Ltd and others v. Directorate General of Goods and Service Tax and others passed in Writ Tax no. 1286 of 2023 and in case of Trimurti Fragrances Pvt. Ltd and others v. Directorate General of Goods and Service Tax and others passed in Writ Tax no. 1280 of 2023 the Hon’ble Allahabad High Court, by judgment and order dated 7.11.2023 has dismissed the writ petitions by observing as under:

“6. Having heard learned counsel for the parties and having perused the records particularly to the contents of the Show Cause Notice impugned, prima-facie we find that the allegations leveled against the petitioners have substance. We, however are not inclined to venture into the correctness. or otherwise of the allegations set out in the impugned Show Cause Notice as the same would involve fact appreciation and with respect to the same the petitioners have adequate statutory remedies available by filing appropriate objections to the Show Cause Notice and lead defence evidence controverting the allegations. Suffice is to note that there is no inherent lack of jurisdiction of the Competent Authority to issue the impugned Show Cause Notice. The argument raised by learned counsel for the petitioner that the Show Cause Notice has been issued with a premeditated mind does not merit consideration at this stage of the proceedings. We are of the view that once allegations of infraction of law arise the adjudication proceedings may not be interjected in exercise of extra ordinary jurisdiction conferred under Article 226 of the Constitution of India particularly in view of the fact that reference made to other facts narrated in the Show Cause Notice would also remain to be examined in the adjudication proceedings.

7. Accordingly, interference claimed is declined in the face of alternative statutory remedy available to the petitioner of filing objections/ reply to the Show Cause Notice. The case Law relied upon in our opinion has no application to the facts of the present case.”

87. Thus when the challenge to the show cause notices qua other entities involved in the same transactions have failed, more particularly, when Hon’ble Allahabad High Court has given a finding that there is no inherent lack of jurisdiction of competent authority, by not entertaining the writ petition, we are also of the opinion that these writ petitions are not required to be entertained on the ground of territorial jurisdiction of the adjudicating authority.

88. With regard to the contention raised on behalf of the petitioners of invocation of provisions of section 122 and section 122(1A) of the GST Act, the same pertains to the subject matter of show cause notices or adjudication of the show cause notices. The petitioners have also raised various disputed questions of fact regarding allegations made in the show cause notices. As observed here-in-above, prima-facie, it cannot be said that the petitioners are not at all involved in the clandestine supply of raw materials used by other co-noticee/s for clandestine supply of perfumery compounds being used by M/s. Trimurti Fragrance Private Limited, Kanpur and M/s. Trimurti Fragrances and Flavours Private Limited, Kanpur for the unaccounted production and clandestine supplies/clearances of Pan Masala and scented Tobacco/Jarda. It is pertinent to not that considering the magnitude of the evasion of GST described in the show cause notices which run into more than 400 pages levelling various allegations against the petitioners providing detailed reason for levy of tax, interest and penalty upon all the noticee/s, the respondent no.2 would have the jurisdiction to adjudicate all the show cause notices.

89. In such circumstances, it would not be proper to entertain the writ petitions while exercising extraordinary jurisdiction under Article 226 of the Constitution of India in view of the fact that allegations made in the show cause notices are required to be examined in the adjudication proceedings before one adjudicating authority only, we are of the opinion that no interference is called for in the impugned show cause notices at this stage and the petitioners may raise all the contentions which are raised in these petitions before the adjudicating authority including the issue of jurisdiction as all the questions raised by the petitioners herein are left open to be adjudicated by the adjudicating authority.

90. In case of Siemens Ltd. v. State of Maharashtra and others reported in 2006 (12) SCC 33, while considering the jurisdiction of the High Court in entertaining the writ petition questioning show cause notice Hon’ble Apex Court has held that ordinarily a writ court may not exercise its discretionary jurisdiction in entertaining a writ petition questioning a notice to show cause unless the same appears to be without jurisdiction. In the facts of the present case, the impugned show cause notices are not without jurisdiction as respondent no.2 would have jurisdiction to adjudicate the same as per the analysis of various notifications relied upon on behalf of the petitioners.

91. Similarly, in case of Special Director and another v. Mohd. Ghulam Ghouse and another reported in 2004 (3) SCC 440, the Hon’ble Supreme Court has held as under:

“5. This Court in a large number of cases has deprecated the practice of the High Courts entertaining writ petitions questioning legality of the show cause notices stalling enquiries as proposed and retarding investigative process to find actual facts with the participation and in the presence of the parties. Unless, the High Court is satisfied that the show cause notice was totally non est in the eye of law for absolute want of jurisdiction of the authority to even investigate into facts, writ petitions should not be entertained for the mere asking and as a matter of routine, and the writ petitioner should invariably be directed to respond to the show cause notice and take all stands highlighted in the writ petition. Whether the show cause notice was founded on any legal premises is a jurisdictional issue which can even be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice initially, before the aggrieved could approach the Court. Further, when the Court passes an interim order it should be careful to see that the statutory functionaries specially and specifically constituted for the purpose are not denuded of powers and authority to initially decide the matter and ensure that ultimate relief which may or may not be finally granted in the writ petition is accorded to the writ petitioner even at the threshold by the interim protection, granted.”

92. Exposition of law spelt out from above discussion is that ordinarily under Article 226 of the Constitution, the Court should not interfere with a show cause notice unless the same is without jurisdiction or barred by law or suffers from any patent illegality. In the facts of the case, none of the conditions exist so as to entertain this writ petition and no interference in writ jurisdiction at this stage is called for.

93. It is made clear that dismissal of these petitions will not come in way of the petitioners in any manner and independent decision on merits is to be taken by the adjudicating authority.

94. Subject to above observations, writ petitions stand dismissed. Ad interim relief granted, if any, stands vacated. Rule is discharged. No order as to costs.

(BHARGAV D. KARIA, J)

(D.N.RAY,J)

Further Order

After pronouncement of the above judgment, learned Senior Advocate Mr. Mihir Joshi submitted that the ad-interim relief granted during the pendency of this petition as per the order dated 21.11.2024 that the respondent-authorities may not pass the final order, may be continued for a period of four weeks.

Considering the reasons stated in the Judgement and Order passed, the request is rejected.