'Premature For High Court To Opine On Tax Evasion' : Supreme Court Sets Aside HC Order Which Quashed Notice Under Section 130 CGST Act

Observing that it was "premature" on the part of the High Court to quash a show-cause notice issued under Section 130 of the Central Goods and Service Tax Act by invoking Article 226 jurisdiction, the Supreme Court recently set aside an order passed by the Punjab and Haryana High Court.

The Supreme Court noted that there were allegations about evasion of tax and hence it was premature on the part of the High Court to opine anything on whether there was any evasion of the tax or not. The same was to be considered in an appropriate proceeding for which the notice under Section 130 of the Act was issued. 

A Bench of Justices MR Shah and CT Ravi Kumar have set aside a judgment and order passed by the High Court of Punjab and Haryana at Chandigarh wherein the High Court had set aside the order of detention of goods/vehicle issued by the Assistant Commissioner State Tax, and also the notice issued under section 130 of the CGST Act, 2017.     

Factual Metric of the Civil Appeal

The Appeal was preferred by the state against the judgment dated 04-02-2022 of the High Court setting aside the order of detention of goods/vehicle issued by the Assistant Commissioner State Tax, and also the notice issued under section 130 of the CGST Act, 2017.

It was the state's stand that the original writ petitioner was called upon to show cause within 14 days from the receipt of the said notice, as to why the goods in question and the conveyance used to transport such goods shall not be confiscated under the provisions of Section 130 of the Punjab GST Act, 2017 and IGST Act, 2017 and CGST Act, 2017 and why the tax, penalty and other charges payable in respect of such goods and the conveyance shall not be payable.

It is to be noted that in the show cause notice, there was a specific allegation with respect to evasion of duty, which was yet to be considered by the appropriate authority on the original writ petitioner's appearing before the appropriate authority, who issued the notice.

However, in exercise of powers under Article 226 of the Constitution of India, the High Court entertained the writ petition against the show cause notice and set aside the show cause notice under section 130 of the Act. 

Supreme Court's Order  

Justice Shah in his judgment held, “…it was premature for the High Court to opine anything on whether there was any evasion of the tax or not. The same was to be considered in an appropriate proceeding for which the notice under section 130 of the Act was issued. Therefore, we are of the opinion that the High Court has materially erred in entertaining the writ petition against the show cause notice and quashing and setting aside the same.”

The judgment therefore set aside the impugned judgment and order passed by the High Court to the extent quashing and setting aside the notice dated 14-9-2021, issued under section 130 of the CGST Act and remanded the matter back to the appropriate authority, who had issued the notice. 

Case Title: State of Punjab Versus Shiv Enterprises Civil Appeal No. 359 of 2023

Citation : 2023 LiveLaw (SC) 56

For Petitioner(s) Ms. Nupur Kumar, AOR Mr. Divyansh Tiwari, Adv.

For Respondent(s) Mr. Sandeep Goyal, Adv. Mr. Pawanshree Agrawal, AOR Ms. Vidisha Swarup, Adv. Ms. Shubhangi Negi, Adv.

Central Goods and Services Tax 2017 - Section 130- Observing that it was "premature" on the part of the High Court to quash a show-cause notice issued under Section 130 of the Central Goods and Service Tax Act by invoking Article 226 jurisdiction, the Supreme Court set aside an order passed by the Punjab and Haryana High Court

Constitution of India - Article 226- It was premature for the High Court to opine anything on whether there was any evasion of the tax or not. The same was to be considered in an appropriate proceeding for which the notice under section 130 of the CGST Act was issued. Therefore, High Court has materially erred in entertaining the writ petition against the show cause notice and quashing and setting aside the same

Read the Order Here