Petition against CGST proceedings termed non-maintainable; issues of natural justice and constitutional validity rejected.
In a significant ruling, the Delhi High Court, presided over by Justices Anil Kshetarpal and Bharat Parashar, dismissed a writ petition filed by Star Traders challenging a show cause notice and an order-in-original issued under the Central Goods and Services Tax Act, 2017 (CGST Act). The petition, which sought to quash proceedings initiated by the Commissioner of Central Goods and Service Tax, was deemed non-maintainable due to the availability of an alternative appellate remedy.
The case revolves around allegations that Star Traders, through its proprietor Mr. Atimukt Jain, engaged in fraudulent activities by issuing invoices without corresponding goods supply and wrongfully availing Input Tax Credit (ITC) amounting to significant sums. The proceedings by the CGST authority were based on intelligence inputs and a search operation, distinguishing them from parallel state-level proceedings related to turnover reconciliation.
The court clarified that the statutory bar under Section 6(2)(b) of the CGST Act, which prevents parallel proceedings on the same subject matter, was not applicable in this case. The subject matter of the CGST proceedings, which included allegations of fake invoices and non-existent suppliers, differed from the state proceedings focused on turnover reconciliation.
Addressing concerns of natural justice, the court noted that Star Traders was given multiple opportunities to respond to notices but failed to appear or provide a detailed reply, undermining their claim of being unheard. Additionally, the court upheld the constitutional validity of Section 16(2)(c) of the CGST Act, which was previously affirmed by the Gujarat High Court and the Supreme Court, rejecting the petitioner’s challenge.
Concluding the judgment, the Delhi High Court advised Star Traders to pursue the statutory appellate remedy, allowing them to raise all objections before the Appellate Authority. The court also mentioned that if an application under Section 14 of the Limitation Act is filed for excluding the time spent in writ proceedings, it would be considered according to the law.
This judgment reinforces the judicial precedent of exhausting alternative remedies before approaching the high court, especially in tax-related disputes, emphasizing the structured appellate framework under the CGST Act.
Bottom Line :
Goods and Services Tax - Writ petition challenging show cause notice and order-in-original under Section 74 of CGST/DGST Act - Petition not maintainable when efficacious alternative appellate remedy available - Bar under Section 6(2)(b) CGST Act applies only when earlier State proceedings are on same subject matter - Proceedings based on turnover reconciliation and proceedings based on search, fake invoices and wrongful passing on of ITC held to be different - No violation of natural justice when repeated opportunities were granted and assessee failed to appear - Challenge to constitutional validity of Section 16(2)(c) CGST Act rejected in view of Gujarat High Court judgment affirmed by Supreme Court.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Sections 6(2)(b), 16(2)(c), 74; Constitution of India, 1950 Article 226; Limitation Act, 1963 Section 14
