Dismissed

M/S Rkec Projects Limited v. Additional Commissioner

Andhra Pradesh HC3 Jan 2024WP/32046/2023

Case brief

AI extract

What is this about?

A taxpayer sought prohibition of a GST assessment for tax period 2017-18 initiated by show-cause notice under Section 74 of the CGST Act, contending absence of suppression averments and bar of limitation. The High Court held writ petitions against show-cause notices are ordinarily not entertainable, the notice contained adequate grounds, and dismissed the petition leaving the petitioner free to re

What the court decided

AI extract

M/S Rkec Projects Limited Vs Additional… — GST and Indirect Tax | Andhra Pradesh HC (2024)

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IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI

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(Special Original Jurisdiction)

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THURSDAY, THE FOURTH DAY OF JANUARY TWOTHOUSAND AND TWENTY FOUR

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j
^

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PRESENT

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THE HONOURABLE SRI JUSTICE RAVI NATH TILHARI

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AND

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THE HONOURABLE SRI JUSTICE HARINATH.N

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WRIT PETITION NO: 32046 OF 2023

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Between:

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M/S RKEC Projects Limited, rep. by its Managing Director, Mr. R. Jayachandran, 10-12-1, 3rd Floor, Rednam Aleazar, Rednam Gardens, Visakhapatnam, Andhra Pradesh-530 002.

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...PETITIONER

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AND

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Additional Commissioner, Visakhapatnam Central GST Commissionerate, GST Bhavan, Port Area, Visakhapatnam.

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Assistant Commissioner (ST), Suryabagh Circle, Visakhapatnam.

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Superintendent of Central Tax, CGST Siripuram Range,^CGSTNorth Division, Visakhapatnam.

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Union of India, rep. by its Principal Secretary to Government, Ministry of Finance, Department of Revenue, Udyog Bhavan, North^Block, New Delhi-110 001

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State of Andhra Pradesh, rep. by its Principal Secretary^{toGovernment,} Revenue (CT-II) Department, Secretariat, Velagapudi,^Amaravati, :ur District.

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...RESPONDENTS

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Petition under Article 226 of the Constitution of India^{prayingthatin} the circumstances stated in the affidavit filed therewith,^{theHighCourtmay} be pleased to issue a Writ of Prohibition or any other^{appropriatewritor} order or direction restraining the 1st Respondent from^{proceedingwiththe} assessment for the tax period 2017-18 initiated vide^showcause notice dated 21.9.2023 as being barred by limitation, without jurisdiction, inconsistent to admitted facts and contrary to Section^{140(3)oftheCentral} Goods and Services Tax Act, 2017. lA NO: 1 OF 2023 Petition under Section 151 CPC praying that in the^{circumstances} stated in the affidavit filed in support of the petition,^{theHighCourtmaybe} pleased to grant stay of all further proceedings pursuant to the notice dated 21.9.2023 issued by the 1st Respondent for the^{taxperiod2017-18} under the Central Goods and Services Tax Act, 2017,^{pendingdisposalof} the Writ Petition, as otherwise the Petitioner will^{beputtoseverelossand} hardship.

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Counsel for the Petitioner{s): SRI S. DWARAKANATH,^SR.COUNSEL ASSISTED BY SRI S. VIJAY ADITHYA FOR SRI. KARTHIK RAMANA PUTTAMREDDY

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Counsel for the Respondents 1 & 3 ; Ms. SANTHI CHANDRA^(Jr. Standing Counsel for CBIC)

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Counsel for the Respondent No.2 : GP FOR COMMERCIAL^TAX

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Counsel for the Respondent No.4 : SRI B. NARASIMHA^SARMA(A/C),

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ADDITIONAL SOLICITOR GENERAL OF INDIA

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Counsel for the Respondent No.5 : GP FOR REVENUE

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The Court made the following: ORDER

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HON’BLE SRI JUSTICE RAVI NATH TILHARI & HONOURABLE SRI JUSTICE HARINATH.N

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WRIT PETITION NO.32046 of 2023

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ORDER:

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Heard Sri S.Dwarakanath, learned senior counsel assisted by Sri S. Vijay Adithya, learned counsel appearing for the petitioner and Ms. Santhi Chandra, learned Standing Counsel for respondent Nos.l and 3. 2. By means of this writ petition under Article 226 of Constitution of India, the petitioner is challenging the proceedings for the assessment of tax for the tax period 2017-18 initiated vide show-cause notice dated 21.09.2023. The prayer is reproduced as under;-

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“the Hon’ble Court mau be pleased to issue a Writ of Prohibition or anp other appropriate writ or order or direction restraining^the Respondent from proceeding with the assessment for the tax period 2017-18 initiated vide show cause notice dated 21.9.2023 as being barred bg limitation without jurisdiction inconsistent to admitted facts and contrarg to Section 140(3) of the Central Goods and Services Tax Act 2017 and pass”

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The challenge is on the ground that the notice has been issued under Section 74 of the Central Goods and Services Tax Act, 2017 (for short 'COST Act’), though^the ingredients for initiation of the proceedings i.e. suppression is not made out. The notice does not contain the reasons and particulars of any suppression. He places

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reliance in the case of Uniworth Textiles Limited v. Commissioner of Central Excise and Venkata Durga Oil

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Traders v. Commercial Tax Officer.

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Learned Senior Counsel however submits that the notice could have been under Section 73 but not under Section 74 of COST Act.

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Learned counsel for the respondents has raised objection that the challenge to the show-cause notice on the ground of challenge is not sustainable at this stage under Article 226 of Constitution of India. The petitioner^is granted opportunity of hearing and to the show-cause notice, he may submit the reply. She placed reliance^inthe judgment dated 09.11.2023 in W.P.No.28743 of 2023.

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We have considered the submissions advanced and perused the material on record.

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The submission is that the show-cause notice does not mention any ‘suppression’.

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Section 74(1) of the COST Act reads as under:

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Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression offacts (1) Where it appears to the proper ofifcer that any^taxhasnot been paid or short paid or erroneously refunded or^where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which^has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input^tax credit, requiring him to show cause as to why he should^not pay the amount speciifed in the notice along with interest payable thereon under section 50 and a penalty equivalent^to the tax specified in the notice. ”

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Learned senior counsel placed much reliance on Explanation 2 of Section 74 of COST Act which reads as

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under:-

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Explanation 2: For the purposes of this Act, the expression suppression shall mean non-declaration of facts or information which a taxable person is required to declare^inthe return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper ofifcer. ”

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We have perused the show cause notice (Ex.Pl). It contains the grounds for its issuance, such as in^Paras

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5, 7, 8 86 9, which reads as under;-

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"5. From the statutory provisions mentioned above, it appears that the taxpayer is not eligible to transition the credit of duty paid on inputs lying in stock as on 30.06.201 7, vide Table-7a of the TRAN1 filed by the taxpayer (RUD-3), for the following^reasons:

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(i) In the earlier Service Tax regime, the taxpayer^{isregisteredwith} Service Tax Registration Certificate No. AACCR9682AST001^Tobe eligible to transition the credit, the taxpayer was^not liable for registration under the existing law [Service Tax Law],

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(ii) The taxpayer was providing works contract service and it appears that they were not availing of the benefit^{ofnotification} No.26/2012- Service Tax, dated the 2CLh June, 2012, which is a conditional exemption notiifcation, (in) The taxpayer was availing the benefit of exemption^intermsof Sl.No.12A (a), 13(a) & 14 of Notification No.25/2012-ST^dated 20.06.2012 and abatement vide Sl.No.l of Notification No.24/2012-ST dated 06.06.2012, as reflected in the ST-3s filed for the Half-Year Ending 30.09.2016, 31.03.201 7 &^{30.06.2017,in} respect of Works Contract Service, which appears to^beoutsidethe scope of the provisions of Section 140(3) of the COST^Act,2017

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7. CONTRAVENTIONS:

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7.1. Section 59 of the COST Act provides:

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Every registered person shall self-assess the taxes^payableunder this Act and furnish a return for each tax period as^{specifiedunder} section 39.

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Section 59 - Self-assessment

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In the age of liberalisation, huge amount of trust^andfaith have been posed on the taxpayers. Revenue department^allowsthe tax payer to determine his tax liability by himsel.f^{Sincetaxliability} is determined by the tax payer himsel,f therefore, the term is labelled as self-assessment. Section 59 of COST Act covers^self- assessment under GST regime. In the course of day to day business, a tax payer will do self-assessment and determine^tax liability according to each and every sale invoice. The selfassessment is to be completed, except in the case of "provisional assessment", with regard to value and rate of tax etc.,^atthetime and place of supply so that correct tax liability is^{ascertainedand} discharged. The other aspect of self-assessment is^thatattheend of tax period, the assessee is required to furnish a return electronically specified under Section 39 also certifying^correctness of the data furnished and tax paid for each tax period to the taxation department so that departmental officials are able to scrutinise correctness of payment of taxes. Self-assessment is applicable to all the taxable persons under GST.

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It appears that the taxpayer contravened the provisions of Section 59 of the CGST Act, 2017 and rendered themselves^liable

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to penalty under Section 125 of the COST Act, 2017. Section 125 reads:

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Section 125: General penalty (Relevant Rule 142)

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Any person, who contravenes any of the provisions of^thisAct or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to twenty five thousand rupees. 8. It appears that since the taxpayer is registered^{undertheService} Tax Law, they are not eligible to transit the cenvat credit pertaining to the existing law, under the provisions of Section 140(3) of COST/APGST Act, 2017. However, they have carried forward^the credit to GST as a dealer. Further, the carrying forward of credit under Section 140(3) is a conditional one, viz., the taxpayer shall be availing Notification No. 26/2012-ST which the taxpayer^hasnot fuliflled. The acts of the taxpayer attract the provisions of Explanation (ii) to Section 74 of the CGST Act, 2017, viz., (i) non declaration of facts and (i) non-declaration of information,^with an intention to avail transition credit fraudulently unless noticed by the audit. Therefore, it appears that the irregularly availed transitional input tax credit is recoverable by invoking^extended period of limitation and penalty can be imposed under the provisions of Section 74 (1) of the CGST Act. 2017.

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In terms of the above statutory and recovery provisions, it appears that the taxpayer wrongly carried forward the^transition credit of Rs.1,75,30,798/vide Table 7a of the Transitional Credit/ Stock Statement filed by the taxpayer and the^saidamount is recoverable along with interest and penalty. ”

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In view of the above, we are not convinced with the submission that the show cause notice does not contain the reasons for its issuance.

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As per the Explanation 2, suppression shall mean non-declaration of facts or information, which a taxable person is required to declare in the return, statement. report or any other document furnished under the Act or the rules made thereunder, or failure to furnish any

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information on being asked for, in writing, by the proper officer. The question if there is suppression or not^canbe determined by the authority, considering the reply, if so filed. ‘Suppression’ is a question of fact. In view of the explanation, whether the facts upon which show cause notice has been issued, constitute suppression or not cannot be determined at this stage in the exercise^ofwrit jurisdiction. Use of word ‘suppression’ is not conclusive. Similarly, if this expression is not used in the show^cause notice it cannot be said conclusively that there is no suppression. The petitioner by filing reply to the showcause notice can demonstrate before the authority that there was no suppression. Besides, ‘suppression’ alone is not the ground under Section 74(1) of COST Act. Fraud or/and willful misstatement are also the grounds for issuance of show cause notice in evading tax etc.

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The impugned show cause notice was issued on 21.09.2023. In the prayer clause, as reproduced above,^the impugned notice was said to be barred by limitation. However, the learned senior counsel during arguments,^on the same being pointed out by learned standing counsel

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that the notice is not barred by limitation, also submitted that the notice was within the period of limitation^ofthree years for the notice even under Section 73.

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So, the impugned show cause notice issued mentioning under Section 74 but on the grounds it has been issued, even if not mentioning ‘suppression’,^would be within the period of limitation under Section 73 as well, as it is submitted by the learned counsels for the parties that the limitation was upto 30.09.2019 under Section^73.

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So, even if the submission of learned counsel for the petitioners be acceptable, though we are not expressing any view on that aspect, no fault can be found in the notice and it cannot be said to be without jurisdiction or barred by limitation, under Section 73 and therefore having been issued under Section 74 to overcome the bar of limitation.

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In Uniworth Textiles Limited v. Commissioner of Central Excise^, the Hon’ble Apex Court held that the show cause notice must fulfill the requirement of the proviso to Section 28 of the Customs Act, 1962 (as^wasm (2013) 9 see 753

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that case) which finds application only when speeific^and explicit averments challenging the fides of the conduct of the assessee are made in the show-cause notice, which requirement in that the show-cause notice in that case failed to meet.

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In Uniworth Textiles Limited (supra), there was challenge to the order. From the evidence adduced by^the appellant therein, it was observed that one will draw an inference of bonafide eonduct in fact of the appellant therein. In the said case, it was held that the burden of proving malafide conduct under the proviso to Section²⁸ of Customs Act lies with the Revenue, that in furtherance of the same, no specific averments were mentioned in^the show cause notice which was the mandatory requirement for commencement of action under the proviso to Section 28. There was also nothing on record to display a willful default on the part of the appellant therein. Consequently, it was held that the extended period of limitation^under proviso of Section 28 could not be invoked against the appellant.

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‘ft,

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In the present case, in view of the submissions advanced as also the admitted position that the limitation period for notice under Section 73 did not expire on^the date the impugned notice was issued, the question of extended period of limitation for issuance of notice under Section 74 is not involved. Had it been, the contention^of the learned counsel for the petitioner that the period of limitation for issuance of notice under Section 73 had expired but any such notice was not issued and consequently to overcome the bar of limitation, the^notice was issued under Section 74 even without satisfying^the requirements of Section 74 the consideration might^have been different.

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In Vijaya Venkata Durga Oil Traders v. Commercial Tax Officer^, the Division Bench of High Court of Judicature at Hyderabad considered the judgment in Uniworth Textiles Limited (supra). It was held that^if the allegations in the show cause notice accepted as true show that the dealer had committed willful evasion of tax and the finding recorded in the assessment order establish that the assessee had willfully evaded tax, it would^suffice ^2014 see QnLine Hyd 775

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to extended period of limitation in terms of Section^21(5)of APVAT Act, 2005 notwithstanding that the show-cause notice did not refer to Section 21(5) and did not specifically use the words Svilful evasion of tax’. It was further^held that it was, therefore, necessary to refer to the contents^of show cause notice.

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The aforesaid judgment cited by learned counsel for the petitioner, does not support his contentions. On^the contrary from the said judgment, the relevant part^being reproduced shortly, what follows is that the contents^ofthe show cause notice determine the true nature of the^notice

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as to under which provision it has been issued. notwithstanding that it does not refer a particular provision or it does not specifically use the words as mentioned in the Section.

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“ If the allegations in the show-cause notice, accepted as true, show that the dealer had committed willful evasion of tax, and the ifnding recorded in the assessment order establish^that the assessee had willfully evaded tax, it would suffice^toextend the period of limitation in terms of Section 21(5) of the Act notwithstanding the show-cause notice does not refer^toSection 21(5) and does not speciifcally use the words wilful^evasionof tax. It is, therefore, necessary for us to refer to^{thecontentsof} show cause notice. ”

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In the present case we find that the show cause notice mentioned the grounds for its issuance. Even if it be taken that the ‘suppression’ is not mentioned, to meet the requirement of Section 74 to issue the notice. It is not the submission of the learned counsel for the petitioner^thatit does not meet the requirements of Section 73. Further the submission is that the notice should be under Section 73 but it mentions under Section 74. We are of the view that mere mention of a provision would not be determinative of the notice under that section. It dependents upon the contents.

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In W.P.No.28743 of 2023 decided on 09.11.2023, the Coordinate Bench of this Court held in paras 26 to^30as follows; on the point of entertainability of the writ petition against the show cause notice.

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In special Director v. Mohd. Ghulam Ghouse^ the Hon’ble Apex Court deprecated the practice of High Courts entertaining writ petitions questioning the legality of show cause notices stalling enquiries as proposed and retarding investigative process. The Hon’ble Apex Court held that unless the High Court is satisfied

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’ (2004) 3 see 440

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that the show cause notice was totally non est in the eye of the law for absolute want of Jurisdiction of the authority to even investigate into facts, the 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 highlightedⁱⁿ the writ petition.

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It is apt to refer paragraph-5 ofMohd. Ghulam Ghouse^(supra) as under:

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“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 the law for absolute want of jurisdiction of the authority to even^{investigateinto} facts, writ petitions should not be entertained for^the mere asking and as a matter of routine, and the writ petitioner should^invariablybe 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^{issuewhichcaneven} be urged by the recipient of the notice and such issues also can be adjudicated by the authority issuing the very notice^{initially,beforethe} aggrieved could approach the court. Further, when the^{courtpassesan} 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 not accorded to the writ petitioner even at the threshold by the interim protection granted. ”

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In CCE V. Krishna Wax (P) Ltd.* the Hon’ble Apex^Court reiterated that it is well settled that writ petition should

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\2020) 12 see 572

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normally not be entertained against mere issuance of^show cause notice. The said matter pertained to the Central Excise Act. It was held that excise law is a complete code in itself^and it would normally not be appropriate to writ court to entertain writ petition under Article 226 of the Constitution of India and that the person concerned must first raise all the objections before the authority who had issued the show cause notice and the redressal in terms of the existing provisions of the law could be taken resort to if an adverse order is passed against such person.

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It is apt to refer paragraphs-14 and 15 of Krishna Wax (P) Ltd. (supra) as under:

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“14. It has been laid down by this Court that the excise^lawisa complete code in itself and it would normally not be appropriate for a writ court to entertain a petition under Article 226 of the Constitution and that the person concerned must first raise all the objections before the authority who had issued a show-cause notice and the redressal in terms of the existing provisions of the law could be taken resort to if an adverse order was passed against such person. For example^inUnion of India v. Guwahati Carbon Ltd. [Union of India v.^Guwahati Carbon Ltd., (2012) 11 see 651] , it was concluded; “The Excise Law is a complete code in order to seek redress in excise matters and hence may not be appropriate for the writ court to entertain a petition under Article 226 of the Constitution”, while in Malladi Drugs &^PharmaLtd. v. Union of India [Malladi Drugs & Pharma Ltd. v. Union of India, (2020) 12 SCC 808], it was observed: "... The High Court, has, by the impugned judgment^heldthatthe appellant should first raise all the objections before the Authority who have issued the show-cause notice and in case any adverse^orderis passed against the appellant, then liberty has been granted to approach the High Court ... ... in our view, the High Court was absolutely right in dismissing the writ petition against a mere show-cause notice. ”

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It is thus well settled that writ petition should normally not be entertained against mere issuance of show-cause notice. In the present case no show-cause notice was even issued when the High Court had initially entertained the petition and directed the Department to prima facie consider whether there was material to proceed with the matter. ”

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In the present case, APGST Act is also a complete^codeand consequently, we are of the considered view that the petitioner should respond to the show cause notice raising all such objections, as may be raised before the authority issuing the show cause notice and in case any adverse order is passed and the petitioner feels aggrieved, the petitioner may then have recourse to the appropriate proceedings. ”

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For all the aforesaid reasons we are of the considered view that the present writ petition against the impugned show cause notice is not liable to be entertained.

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The Writ Petition is dismissed, however, leaving it open to the petitioner to approach the competent authority by filing reply and raising such objections as may be open under law and as may be advised.

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