The Punjab and Haryana High Court has held that once notice has been issued to the petitioner under Section 74(1) of the CGST Act by the State GST Officer of Punjab, no other officer from any other State would be authorized to initiate proceedings and the question regarding evading of tax or availing of wrongful input tax credit or other issues in terms of Section 74 will be examined by the same officer alone.
The bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth while ruling in favour of the department observed that the authority at Chandigarh would have the power to issue notice under Section 74 of the CGST Act even with regard to dealings of the company in other States, and therefore, there is no jurisdiction error.
Background
The petitioner/assessee has challenged the show cause notice issued to the petitioner under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act).
The show cause notice demands non-payment of tax in relation to supply of goods which have never been supplied in the State of Punjab and relates to goods of another States. The authority has closed itself with jurisdiction which was not available to it. The Court would examine the show cause notice at the stage as the authority cannot be said to be having any jurisdiction.
The supply has taken place not only in U.T. Chandigarh but also other registrations of the petitioner such as Assam, New Delhi, Gujarat, Haryana, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telengana, Uttar Pradesh and West Bengal and the petitioner has duly discharged tax therein.
However, the respondent-department has assumed jurisdiction and proceeded to raise the demand and also hold that there has been an attempt on the part of the petitioner by fraud to avail the benefit of ITC.
Arguments
The assessee contended that the tenor of the show cause notice itself reflects that the respondent-department have already taken a decision and virtually held the petitioner to be guilty of having evaded payment of tax, and therefore, the department have also proposed to impose penalty under Section 74 of the CGST Act and application of interest under Section 50 of the CGST Act.
The assessee argued that as per Section 22(1) of the CGST Act, the supplier is required to obtain registration in the State where he makes a taxable supply and Article 246A of the Constitution of India read with Section 9 of the CGST Act provides for levy of GST on intra-State supply of goods or services or both on the value determined under Section 15 of the CGST Act and at such rates as may be notified by the Government on the recommendations of the GST Council. The tax is to be calculated in such a manner as may be prescribed and would be payable by the taxable person.
The assessee contended that as per the audit memo dated 26.07.2024, the amounts have been indicated under three different heads, namely, customer belongs to Chandigarh and redeemed in other States, Customer belongs to other States and redeemed in other States and Customer belongs to other States and redeemed in Chandigarh.
The assessee argued that the entire demand has been raised on the petitioner at Chandigarh location irrespective of the place where the vouchers have been issued or utilized. The show cause notice has been issued by committing jurisdictional error.
Relevant Provisons
The powers of the officers who have been appointed under Sections 4, 5 of the CGST Act and those appointed under Section 6 of the CGST Act are the same. A person is appointed by the State is authorized to be a proper officer for the purpose of GST Act.
Section 74(1) of the CGST Act provides for initiating proceedings by a proper officer where it appears to him that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud, or for the purposes, as mentioned therein, such proper officer is authorized to issue the notice and proceed.
As per Section 6(2)(b) of the CGST Act once he issues such notice, no proceedings shall be initiated by any other proper officer on the same subject matter.
Conclusion
The Court noted that the petitioner has not submitted any reply to the notice issued under Section 74 of the CGST Act which is a show cause notice. The petitioner has directly approached this Court challenging the said show cause notice on the ground of jurisdiction.
The court dismissed the writ petition challenging the jurisdiction under Section 74 of the GST Act.
Case title: M/s Ethos Limited v/s The Additional Commissioner, CGST Audit and another
Citation: CWP No. 23062 of 2024 (O&M)
Date of Decision: 20.09.2024
Counsel for the Petitioner: Sujit Gosh
Counsel For Respondent: None
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