GST Department's Effective Adjudication Of Matter Cannot Be Scuttled By Seeking Writ Remedy: Calcutta High Court

“The statutory framework under the CGST Act provides adequate mechanisms for addressing the petitioner's concerns, including responding to the SCN, participating in adjudication proceedings and availing appellate remedies if dissatisfied with the outcome”, observed a Single Judge Bench of Justice Rajarshi Bharadwaj.

The Bench emphasized that simply alleging that the impugned SNC are without jurisdiction because, according to the petitioners' perception, the exemption covers them, or the nil tax rate notification, is insufficient for seeking writ remedy.

The usual adjudicatory process, where such a matter can be effectively adjudicated upon, cannot be scuttled by rushing to the writ court and securing stays on the adjudicatory process, added the Bench.

Facts of the case:

The Petitioner/ Assessee is engaged in the manufacture and supply of bakery & dairy products, which are distributed to customers and dealers through petitioner's multiple units located across India. At the end of the year 2021, the respondent (DGST officer) conducted a search at petitioner's premises, resulting in issuance of a show cause (SCN) u/s 74(1) of the CGST Act, 2017, r/w Sec 20 of the IGST Act, 2017. The SCN accuses the petitioner of wrongful availing of benefit of an exemption on the supply of "Kulcha" by misclassifying it as “bread”. Additionally, the SCN denies the reduction of petitioner's outward tax liability based on credit notes issued for deficient services and destroyed goods. This denial is grounded on the claim that the corresponding ITC was not reversed by the suppliers or recipients of such goods, as required u/s 34 of the CGST Act. Further, the SCN alleges non-reversal of ineligible ITC by the petitioner.

Thus, the SCN sought recovery of INR 1,05,11,99,662 in GST, along with interest u/s 50 and an equivalent penalty u/s 74(1) of the CGST Act, which came to be challenged before the High Court, contending that the SCN is without jurisdiction and has been issued in gross violation of the principles of natural justice.

Observations of High Court:

The Bench refrained from adjudicating or delving into the merits of the case as the issues raised in the present petition pertain to complex questions of fact and law that are squarely within the jurisdiction of the adjudicating authority under the CGST Act, 2017.

The petitioner's grievances primarily relate to the invocation of the extended period of limitation, allegations of misclassification of goods and denial of ITC, which necessitates a detailed factual inquiry, and the same is outside the purview of writ jurisdiction, added the Bench.

Referring to the decision of Apex Court in case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others [(1998) 8 SCC 1], the Bench reiterated that writ petitions may be entertained against show cause notices where the petitioners seek enforcement of any fundamental rights, where there is a violation of principles of natural justice or where the order or proceedings are wholly without jurisdiction or where the vires of the Act is itself challenged.

The Bench went on to explain that writ courts do not interfere in cases where statutory remedies are available unless there is a clear violation of fundamental rights, lack of jurisdiction, or procedural perversity leading to manifest injustice.

The petitioner has not demonstrated any such exceptional circumstances warranting writ court's intervention, added the Bench.

Instead, the Bench observed that “the statutory framework under the CGST Act provides adequate mechanisms for addressing the petitioner's concerns, including responding to the SCN, participating in adjudication proceedings and availing appellate remedies if dissatisfied with the outcome”.

Hence, the High Court dismissed the assessee's petition without expressing any opinion on merits, and directed the adjudicating authority to independently and impartially decide the matter, based on the evidence.

Counsel for Petitioner/ Assessee: Senior Adv Abhratosh Majumder, along with Advocates Pratyush Jhunjhunwala, Rahul Tangri and Taniya Roy

Counsel for Respondent/ Revenue: Advocates Vipul Kundalia, Tapan Bhanja, Anindya Kanan, Dhirodatto Chaudhuri and Jasajeet Mukherjee

Case Title: Britannia Industries Limited vs. Union of India

Case Title: W.P.A 24534 of 2024

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