Calcutta HC: Writ Petitions Cannot Undermine GST Department’s Adjudication Process

Repeating that it will not interrupt the cases that need the fact-finding and adjudication that come in the domain, the Calcutta High Court instructed the manufacturer/ supplier to exhaust the statutory remedies given under the CGST Act, 2017 along with submitting a detailed response to the SCN.

“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”, a Single Judge Bench of Justice Rajarshi Bharadwaj noted.

It was outlined that the ease of alleging that the impugned SNC is without jurisdiction because the applicant’s opinion is that the exemption encircles them, or the nil tax rate notification, is insufficient for asking writ remedy.

The normal procedure of adjudicatory in which the case can be adjudicated upon could not be stirred via forcing the writ court and having the stays on the process of adjudicatory, as per the bench.

Case Facts of Britannia Industries Limited

The Petitioner/ Assessee is in the manufacture and supply of bakery & dairy products, which are allocated to customers and dealers through the multiple units of the petitioner located across India. The respondent (DGST officer) at the end of the year 2021, searched the petitioner’s premises, consequence in the 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 charges the petitioner of prohibiting availing of the benefit of an exemption on the supply of “Kulcha” by misclassifying it as “bread”. Also, the SCN rejects the reduction of the petitioner’s outward tax liability established on credit notes issued for poor services and destroyed goods. On the claim that the related ITC was not reversed by the suppliers or receivers of such goods, this refusal has arrived as mandated under section 34 of the CGST Act. Additionally, the SCN alleges non-reversal of ineligible ITC via the petitioner.

Consequently the recovery of the Show cause notice of Rs 1,05,11,99,662 in GST including with interest under section 50 and an equivalent penalty under section 74(1) of the CGST Act, which came to be contested to the High Court, arguing that the SCN is without jurisdiction and has been allocated in gross breach of the principles of natural justice.

High Court Decision

From adjudicating or delving into the merits of the case the bench abstained since the problems emerged in the current petition related to complex questions of the fact and statutes that are within the jurisdiction of the adjudicating authority under the CGST Act 2017.

The grievances of the applicant are pertinent to the invocation of the extended duration of limitation, misclassification of goods, and refusal of ITC allegations which requires a detailed factual inquiry and is not under the purview of the writ jurisdiction, as per the bench.

It was said by the bench that the Supreme Court’s decision in the matter of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others [(1998) 8 SCC 1], that the writ petitions might be entertained against the SCN in which the applicant asked for the enforcement of any fundamental rights, where there is a breach of the principles of natural justice or where the order or proceedings are wholly without jurisdiction or where the vires of the Act is itself contested.

As per the bench, the writ courts do not interrupt in matters where the legal remedies are available till there is a breach of fundamental rights, absence of jurisdiction, or procedural perversity directing to manifest unfairness.

The petitioner does not show any exceptional situation warranting the intervention of the writ court, the bench mentioned.

Rather than that, the Bench noted 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”.

Therefore the petition of the taxpayer has been dismissed by the taxpayer without specifying any view on the merits and asked the adjudicating authority to independently and impartially determine the case, on the grounds of evidence.