The Kerala High Court has held that the Article 226 of the Constitution cannot be misused to delay GST disputes at preliminary stage.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Easwaran S. has observed that the power of the High Court under Article 226 of the Constitution of India cannot be invoked by the assessee, who is faced with a notice under Section 74 seeking a part adjudication of the lis, which is pending before the proper officer. Of course, in a given situation, when it is alleged that there is a total lack of jurisdiction in issuance of the show cause notice, the High Court may exercise its discretion in entertaining the writ petition. But, as a general rule, the writ petition against the issuance of a show cause notice under Section 74 of the CGST Act/SGST Act cannot be entertained.
“We thus hold that the jurisdiction of the High Court under Article 226 of the Constitution of India cannot be allowed to be exploited by those who can afford to wait to the detriment to those who cannot afford to wait by dragging the latter to the court for adjudication on peripheral issues, avoiding decision on the issues more vital to them. Article 226 of the Constitution of India is not meant to be used to break the resistance of the Revenue in this fashion. In exercise of such jurisdiction, the High Court is required to refrain from issuing directions to the authorities under the taxation statute to decide issues in stages or on a preliminary basis,” the bench stated.
The respondent/assessee approached the writ court by filing the writ petition challenging show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017/State Goods and Services Tax Act, 2017.
The assessee is engaged in the business of sale of gold, silver and diamond ornaments. On 25.5.2023, the appellant conducted a search in the premises of the writ petitioner and collected certain data from the software “Gold Mine”, which was used by the assessee for billing purposes.
Later, a notice was issued requiring the assessee to show cause as to why an amount of Rs.4,88,56,298 shall not be assessed as short paid on detection of suppression of outward supply for the periods 2017-18 to 2023-24 and a further amount of Rs.11,85,843/- shall not be imposed as flood cess.
TheSingle Judge who considered the writ petition ordered that the authorities under the SGST Act, 2017 will consider the preliminary issue raised by the petitioner against the invocation of Section 74 thereof, especially with regard to the contention of the petitioner/assessee that a part of the alleged suppressed turnover belongs to a separate entity belonging to her husband with a separate registration.
The department filed appeal contending primarily that the scheme of the CGST Act/SGST Act does not envisage separate orders being passed in the nature which has been directed by the Single Judge.
Section 74(1) of the CGST Act/SGST Act authorises the proper officer to issue a notice to show cause. Sub-Section (2) of Section 74 envisages that such notice shall be issued six months prior to the time limit specified under sub-Section (10) of Section 74.
It is also the mandate of the statute that the proper officer shall issue the order under sub-Section (9) of Section 74 within a period of five years from the due date of submission of the annual return.
When the statutory provisions under Section 74 of the CGST Act/SGST Act is read altogether, there is no provision enabling either the assessee to claim adjudication in stages nor has any power being conferred upon the proper officer to adjudicate the lis in stages.
The court while allowing the department’s appeal held that the assessee has already been put on notice to appear before the adjudicating authority/proper officer on 10.2.2025. We, therefore, direct the assessee to appear before the adjudicating officer on 10.2.2025 and issue a further direction to the proper officer under Section 74 of the CGST Act/SGST Act to complete the hearing on 10.2.2025 itself and pass a composite final order on or before 15.2.2025.
Case Details
Case Title: The Deputy Commissioner (Intelligence) Versus Minimol Sabu
Case No.: WA NO. 238 OF 2025
Date: 06/02/2025
Counsel For Appellant: Resmitha Ramachandran
Counsel For Respondent: Akhil Suresh
