M/S Bhagya Kalita vs Union Of India And 6 Ors
- Court
- Gauhati High Court
GAHC010242052024
IN THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
PRINCIPAL SEAT
O
W.P(C) N . 6154/2024
M/S Bhagya Kalita
th
A proprietorship concern, having its office at 5 Floor,
BEE KEY Tower, R.P. Road, Ganeshguri, Dispur,
Kamrup (M), Assam, PIN 781006, represented by Sri.
Bhagya Kalita, aged about 74 years, residence of P.P
Road, Rehabari, Guwahati-781008
……..Petitioner
- Versus -
1. Union of India
Represented by its Secretary, Ministry of Finance,
Department of Revenue, New Delhi-110 001
2. The Principal Commissioner, Office of the
Principal Commissioner, CGST Commissionerate,
Guwahati, GST Bhawan, Kedar Road, Machkhowa,
Guwahati-781 001, Assam
3. Commissioner CGST, Central Tax
Commissionerate, GST Bhawan, Kedar Road,
Machkhowa, Guwahati-781001
4. The Director General, Central Ecenomic
Intelligence Bureau (CEIB), New Delhi.
5. The Joint Director, Directorate General of Goods
and Service Tax, Intelligence, Guwahati Zonal Unit,
House No. 77, Rupkonwar Jyoti Prasad Agarwalla
Road, Opposite Shankardev Kalakhetra, P.O.
Panjabari, Guwahati, Assam, PIN 781037
……..Respondents
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6. The Chief Engineer, Ministry of Road, Transport
and Highways, Govt. of India, Guwahati Regional
Office, Rajgarh Road, Chandmari, Guwahati-781003
7. The Chief Engineer, PWD, NH Works, Assam
Chandmari, Guwahati, PIN 7810036.
……..Performa Respondents
– B E F O R E –
HON’BLE MR. JUSTICE SOUMITRA SAIKIA
Advocate for the petitioner : Dr. Ashok Saraf, Sr. Advocate
Assisted by Mr. B Sarma, Advocate
Advocate for the respondents :
Mr. S.C Keyal, Standing Counsel, CGST
Assisted by Ms. N. Kakati, Advocate
Dates of hearing : 25.11.2025; 09.12.2024; 29.10.2025;
27.05.2026 & 11.06.2026
Date of Judgment & Order: : 09.09.2026
JUDGMENT AND ORDER (CAV)
This writ petition is filed by the petitioner which is a proprietorship
concern having its office at the address mentioned in the cause title
and represented by its proprietor. The petitioner is a Class 1(A)
contractor of the Assam PWD, NH Works and had successfully
executed and completed numerous projects concerning mainly the
construction of National Highways. The petitioner was awarded and
allotted the works namely “Realignment and Construction of 2-lane
Highway with paved shoulders between KM. 603 to 637 of NH-37 By
pass of Mohanbari, Chabua and other villages (Length= 34.85 Km)
under SARDP-NE Phase ‘A’ in the State of Assam” vide Chief
Engineers Agreement No. 22CE/NHRD/NCB/2010-11 dated
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08.12.2010. The said work is designated as Job No. SARDP-NE/NH-
37/AS/PWD/2010-11-164. It is submitted that the work pertains to
National Highways and comes under the Ministry of Road Transport
and Highways, Government of India which has to provide the
administrative approval, technical approval and financial sanction for
the said works. Upon such approval, the Assam PWD, NH Works
invites bid and successful bidder(s) execute the work. In the instant
case, the Chief Engineer, Assam PWD, NH invited bids/tender for the
aforesaid work pursuant to the approval by the Ministry and the
petitioner who had participated in the tender process was declared
successful as the bidder in the bid evaluation process and was
therefore considered eligible for issuance of award of work.
2. In the course of its business, the petitioner entered into the
agreement with the Assam PWD, NH works being Agreement No.
22CE/NHRD/NCB/2010-11 dated 08.12.2010 for execution of the
works by the petitioner. The price quoted by the petitioner is a
lumsum of Rs. 1,41,21,42,644.00 (Rupees One Hundred Forty One
Crore Twenty One Lakh Forty Two Thousand Six Hundred Forty Four
Only) which included the cost, profit as well as 5% of VAT which
was applicable at that point of time. Clause 47 of the Agreement
dated 08.12.2010 also provided for price escalation in case the
period for completion of the work was extended by the Assam PWD,
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NH Works to order to take into account the inflation and/or rising
cost of materials etc. The petitioner was given the work order on
08.12.2010. Ultimately the work was completed on 30.10.2020 and
the completion certificate dated 21.12.2020 was issued to the
petitioner by the Executive Engineer, PWD, NH Works, Assam. In the
course of the works being executed by the petitioner, running Bills
were prepared and raised by the respondent authorities i.e. Assam
PWD NH Works, from time to time. According to the petitioner, these
running Bills for the works executed were prepared and raised by the
respondent authorities and the representative of the petitioner was
only required to countersign such bills. These bills were never raised
by the petitioner concerned independently. These bills were prepared
by the Assam PWD, NH Works were then forwarded to Ministry of
Road Transport and Highways (in short “MoRTH”), Government of
India for their approval. Against, the bills prepared by the respondent
authorities and approved by the MoRTH for the portion of work
completed by the petitioner, the payments were made to the
petitioner by the respondent authorities. In respect of the bills raised
for execution of the work, all necessary taxes including GST have
been paid. The claims made by the petitioner for price adjustment
were also prepared by the respondent authorities i.e Assam PWD, NH
Work, for the period from December, 2010 to October, 2020. The
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price adjustments pertain to works being carried both prior and after
01.07.2017 namely the date on which the Central GST Act, 2017
came into force. It is contended on behalf of the petitioner that the
price adjustments for the period from April, 2018 to December, 2019,
January 2020 to June 2020 and July 2020 to October, 2020 were
paid vide bill No. RP/GHY/AS/22-23/191 dated 25.10.2022. The same
is also reflected in the Final Bill being Bill No. 87/NH/DIB/2020-
21/RA-XXI dated 11.03.2021. The total price adjustment amount in
bill dated 25.10.2022 was raised at Rs. 36,47,13,262/- (Rupees
Thirty Six Crore Forty Seven Thousand Thirteen Thousand Two
Hundred Sixty Two Only) and after deduction under various heads,
the amount paid to the petitioner was Rs. 34,39,21,768/- (Rupees
Thirty Four Crore Thirty Nine Lakh Twenty One Thousand Seven
Hundred Sixty Eight Only). It is contended on behalf of the petitioner
that the said bill dated 25.10.2022 was prepared by the Assam PWD,
NH Works, countersigned by the petitioner/ his representative and
duly approved by the Ministry. The said bill does not reflect that any
further Goods and Sales Tax is required to be paid by the petitioner
as any such amount under appropriate head was never included by
the Assam PWD, NH Works or the Ministry while computing or
approving the said bill.
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3. It is further contended that in the audited balance sheet for the
assessment year 2023-24 (i.e. Financial Year 2022-23), the receipt of
the said amount as price adjustment was duly reflected. The said
audited balance sheet was duly filed before the Income Tax
Authorities on 29.09.2023. Although, the said amount was disclosed
in the audited balance sheet but there was lack of clarity regarding
it’s taxability as the same was received as price adjustments in
respect of works for which the contract was entered prior to 2017.
Both the Assam PWD, NH and the petitioner informed the price
adjustment payment in their filings before the GST authorities and
the deduction of taxes in the name of the petitioner. The petitioner
affirmed and declared before the GST authorities that the amount
has been received in its declaration dated 12.12.2022. Subsequently,
some confusion arose as regards the liability of the GST on the
amount received as price adjustment in respect of the works
executed by the petitioner for which the agreement was entered into
on 08.12.2010. The quoted price in the Agreement had taken into
consideration only 5% VAT as it was then prevalent, however under
the GST Act, 2017 the tax payable under the GST for Works Contract
is 18%. There was no clarity under the GST Act, 2017 in respect of
taxability of any amount received as price adjustment in respect of
Works for which the Agreement was entered prior to 2017 and which
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was continued to be performed till after 2017. This confusion arose
because of the fact that the Bill dated 25.10.2022 did not include 9%
CGST and 9% SGST on the billed amount, apart from deducting 1%
CGST and 1% SGST. In view thereof, while submitting the annual
GST return, the petitioner indicated the price adjustment amount as
exempted under the bonafide and genuine belief that the amount
received as price adjustment were shown to be “exempted” while
filing the annual GST returns for the financial year 2022-23 and had
disclosed the said amount. Therefore, there was no willful
suppression or mis-statement or lack of intention on the part of the
petitioner not to pay the renevue.
4. The Respondent Authorities namely, Joint Director, Directorate
General of Goods & Service Tax Intelligence, Guwahati Zonal Unit
carried out an investigation on the basis that the Petitioner did not
discharge his GST liabilities after receiving an amount of Rs. 36.47
Crore during the period 2022-23. Investigation was carried out under
Section 67(1) of the CGST Act, 2017 in its principal place of business
of the Petitioner. The respondent authorities sought for various
information such as bills in respect of the work for the period April,
2018 to March 2023 from the Chief Engineer, Ministry of Road,
Transport and Highways, Guwahati Regional Division. The petitioner
was also summoned under Section 70 of the CGST Act, 2017 vide
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summons dated 12.02.2024 for tendering his statements. Ultimately
on 04.04.2024, the authorized representative of the Petitioner
appeared before the Respondent Authorities and tendered his
statement. It was their bonafide belief that the GST payable by the
Petitioner is Rs. 82,07,714/- (Rupees Eighty Two Lakh Seven
Thousand Seven Hundred Fourteen Only) and the Petitioner has
already paid an amount of Rs. 30,00,000/- (Rupees Thirty Lakh only)
on 30.03.2024. It was asserted before the authorities concerned that
there is no intention to evade or suppress GST liability and pleaded
for closure of the proceedings.
5. On such materials being furnished by the petitioner and the
statements being tendered, the GST authorities requested for the
Ministry to provide the dates of the bills and the period of
accomplishment of work to which the price adjustment has been
claimed by the petitioner. These information were duly submitted by
the Ministry pursuant to which the petitioner was again summoned
before the authorities concerned. The representative of the Petitioner
in response to the summons issued appeared on 08.07.2024 and
furnished his statements. It was asserted on behalf of the petitioner
that as a matter of general practice in all engineering departments
including the Assam P.W.D., the bills were all prepared by the
department countersigned by the Contractor and finally approved by
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the Union Ministry and it is only thereafter that the bills are released
for payments. Therefore the bill and invoice dates for the purposes of
GST taxability under the GST Act, 2017 are different.
6. The respondent authorities again sought to clarify the matter
and requested the Ministry to provide for the completion of works in
respect of the 11 bills raised as the completion dates in respect of
the works for these 11 bills are crucial for deciding the tax liability.
However, without awaiting for the response from the Ministry, the
Joint Director, Directorate General of Good and Service Tax,
Intelligence, Guwahati Zonal Unit has issued the impugned Show
cause Notice dated 04.08.2024 bearing No. ZD1808240017683 and
Case ID No. AD180824000459Y calling upon the petitioner to show
cause as to why the GST amounting to Rs. 4,37,73,372/- for the
period from July 2017 to March 2023 should not be demanded and
recovered in terms of Sub-section 1 of Section 74 of the CGST Act,
2017. By the said show cause notice, the GST already paid by the
petitioner amounting to Rs. 30,00,000/- (Rupees Thirty Lakh Only)
should not be appropriated with the confirmed demand as mentioned
in the Show cause notice. The show cause notice further called upon
the petitioner to show cause as to why interest at appropriate rate
should not be demanded and recovered and also as to why penalty
not be imposed under Section 74 and Section 122(2)(b) under CGST
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Act, 2017 read with similar provisions of the AGST Act, 2017. Being
aggrieved, the present writ petition has been filed.
7. The learned Senior counsel submits on behalf of the petitioner
that Section 74(1) is applicable in respect of recovery of any tax
which is not paid, short paid or erroneously refunded or where input
tax has been wrongly availed or utilized by reason of fraud, willful
mis-statement or suppression of facts to evade tax. He therefore
submits that the very basis for invocation of powers under Section 74
requires certain conditions to be fulfilled prior to issuance of the
powers under Section 74(1). Dr Saraf, learned senior counsel submits
that there are three pre-conditions which are necessary to be present
before the authorities can invoke its powers under Section 74(1).
These conditions are:
(i) fraud,
(ii) willful mis-statement and
(iii) suppression of facts.
8. The learned senior counsel for the petitioner submits that fraud
has not been defined under the CGST Act, 2017. It is submitted that
to invoke fraud the intention to evade tax on the part of the assesse
must be shown as the intent to evade tax is inbuilt ingredient of
fraud. In-fact, under the Bharatiya Nyaya Sanhita, 2023 “fraudulent
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means doing anything with the intention to fraud but not otherwise”.
It is submitted that the impugned show cause does not allege any
fraud against the petitioner, but in any event, there is no element of
fraud or intention to evade tax on the part of the Petitioner. It is
further submitted on behalf of the petitioner that the show cause
notice issued under Section 74(1) of the CGST Act, 2017 proceeded
on the basis that the Petitioner has failed to self-assess and pay GST
liabilities correctly for the period from July 2017 to March 2023
thereby suppressing GST liability amounting to Rs. 4,37,73,372/-
(Rupees Four Crore Thirty Seven Lakh Seven Three Thousand Three
Hundred Seventy Two Only). Such conclusion arrived at by the
respondents is on the basis that the Petitioner failed to self-assess its
tax liability and pay the GST liabilities correctly. In view thereof, the
Joint Director, GST concluded that the Petitioner being a Government
Contractor who maintains books of accounts was supposed to know
the legal provision of taxation matters and thus was under a legal
obligation to declare and tax liability. But, the Petitioner by not
interpreting Section 13(2)(b) of the CGST Act, 2017 as required and
discharging its GST liability have contravened the CGST Act 2017 and
AGST Act, 2017 which appears to have been committed deliberately
by not declaring material facts and also willful mis-statements. The
Respondent Authorities have therefore, wrongly alleged non-
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declaration of material facts and willful misstatements for invocation
of Section 74(1) of the CGST Act, 2017.
9. It is further submitted by Dr. Saraf that the provisions of
Section 74 of the Act can be invoked only for recovery of tax not paid
or short paid by reasons of fraud or collusion or wilful mis-statement
or suppression of facts or contravention of any of the provisions of
the Act or Rules with intent to evade payment of tax. Further, as per
Explanation 2 of Section 74 of the Act, the term 'suppression' has
been explained as non-declaration of facts or information in returns.
Thus, the provisions of Section 74 are applicable only if any of the
ingredients specified above exist.
10. It is submitted by Dr. Saraf, learned Senior counsel for the
petitioner that the term ‘wilful’ and ‘suppression’ signifies conscious
withholding of information with mala fide intention and not an
unintentional failure due to inadvertence. Thus, in order to invoke
the extended period of limitation, it is necessary to prove an act or
omission on the part of the tax payer equivalent to collusion or wilful
misrepresentation or suppression of facts.
11. It is submitted by Dr. Saraf, learned senior counsel that it is a
settled law that extended period cannot be invoked when the tax
department is aware of the facts. "Suppression of facts" can have
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only one meaning that the correct information was not disclosed
deliberately to evade payment of duty. When facts were known to
both the parties, the omission by one to do what he might have done
not that he must have done would not render it suppression. It is
settled law that mere failure to declare/disclose does not amount to
wilful suppression. There must be some positive act from the side of
the assessee to find wilful suppression.
12. Referring to the law laid down by the Apex Court, the learned
Senior counsel for the petitioner submits that the Apex Court held
that in taxation the term ‘suppression of facts’ can have only one
meaning that the correct information was not disclosed deliberately
to escape payment of duty. He refers to the Judgment of Pushpam
Pharmaceuticals Co. Vs. CCE, reported in 1995 Supp (3) SCC 462 in
support of his contentions. He submits that although the said
Judgment was in the context of Section 11-A of the erstwhile Central
Excise and Salt Act, 1944 but the ratio laid down in the said
Judgment will equally apply in respect of the pre-conditions to be
satisfied for invocation of Section 74(1) of the CGST Act, 2017.
Referring to the said Judgment, it is submitted that omission does
not mean any omission. The act must be deliberate. In taxation, it
can have only one meaning that the correct information was not
disclosed deliberately to escape from payment of duty which is not
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the case in the present proceedings. Where facts are known to both
the parties the omission by one to do what he might have done and
not that he must have done, does not render it suppression.
13. Dr. Saraf, learned senior counsel also refers to the Judgment
of Anand Nishikawa Co. Ltd. Vs. CCE, reported in (2005) 7 SCC 749
to submit that mere failure to declare does not amount to wilful
suppression and there must be some positive act from the side of the
assessee to find wilful suppression.
14. Reference is also made to the Continental Foundation Joint
Venture Holding Vs. CCE, reported in (2007) 10 SCC 337 to submit
that suppression has to be accompanied by fraud and collusion and
therefore it has to be strictly construed. Mere omission to give
correct information is not suppression unless it is deliberately done to
evade payment of duty. It is submitted that this suppression must
mean a failure to disclose information with the intent to evade
payment of duty. When the facts are known to both the parties,
omission by one party with regard to certain information would not
render it to be a suppression with there being any finding that it was
with the intention to evade duty. When the revenue invokes its
power under Section 74(1), the burden is cast upon the revenue to
prove it suppression of facts by assessee. Reliance is also placed
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upon CCE Vs. Ballarpur Industries Ltd., reported in (2007) 8 SCC 89
wherein the Apex Court had reiterated the ratio laid down in
Continental Foundation Joint Venture Holding Vs. CCE, reported
(2007) 10 SCC 337.
15. Reliance is also placed Uniworth Textiles Ltd. Vs. CCE, reported
in (2013) 9 SCC 753 to submit that the conclusion that mere non-
payment of duties will amount to collusion, wilful, mis-statement or
suppression of facts in untenable.
16. The learned senior counsel for the petitioner referring to the
Judgment of the Apex Court rendered in CCE Vs. H.M.M Ltd, reported
in (1995) Supp (3) SCC 322 submits that in the context of Section
11(A) of the Central Excise Act, 1944 that mere non-declaration of
waste/bye-product in their classification list cannot establish any
wilful withholding of vital information for the purpose of evasion of
excise duty due on the said product.
17. Referring to the Judgment of Associated Cement Companies
Ltd. Vs. Commr. Of Customs, reported in (2001) 4 SCC 593, the
learned Senior counsel for the petitioner submits that so far as fraud
and collusion are concerned, it is evident that the requisite intent i.e
intent to evade duty to built into these very words. So far as mis-
statement or suppression of facts are concerned, they are clearly
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qualified by the word “wilful” preceding the words “mis-statement or
suppression of facts” which means with intent to evade duty.
18. The learned Senior counsel submits that although these
principles are essentially with regard to Section 11-A of the Central
Excise Act, 1944, since the provision of Section 74(A) are
parameteria to Section 11-A of the Central Excise Act, 1944, the law
laid down by the Apex Court in this regard are equally applicable in
respect of invocation of powers under Section 74(1) of the CGST Act
of 2017.
19. The learned Senior counsel for the petitioner further refers to
the Judgment of the apex Court in CCE Vs. Chemphar Drugs and
Liniments, reported in (1989) 2 SCC 127 to submit that something
positive other than mere inaction or failure on the part of the
manufacture or producer or there must be conscious or deliberate
withholding of information when the manufacturer knew otherwise,
is required before the revenue the extended period limitation.
20. It is submitted that the extended period of limitation under
Section 74 is only available when the pre-conditions are satisfied and
it is the bounden duty of the authorities to satisfy itself that any or all
these pre-conditions are available prior to invoking Section 74 of the
GST Act, whereby the limitation stood extended. The learned senior
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counsel for the petitioner presses the Judgment of the Apex court
rendered in Cosmic Dye Chemical Vs. CCE, reported in (1995) 6 SCC
117 in support of his contention.
21. The learned Senior counsel for the petitioner by referring to the
Judgments strenuously submits that where the particulars are known
to both the parties and where admittedly the bills have been
prepared by the Assam PWD, NH Works and duly approved by the
Union Ministry in the MoRTH, all the facts and figures were available
before the respondent authorities and duly disclosed by the
petitioner, there was no omission by the petitioner to disclose the
receipts pursuant to the contract executed and the amount paid the
tax , the revenue cannot proceed to invoke it’s powers under Section
74 of the Act of 2017. Even assuming though not admitting that
there was some shortfall, that by itself will not satisfy the three pre-
conditions necessary for invocation of Section 74 namely Fraud,
willful mis-statement and/or suppression of facts. The respondent
authorities without proper examination of the materials available
cannot invoke their powers under Section 74 and thereby extend the
limitation prescribed. The invocation of jurisdiction under Section 74
by issuance of a show cause notice under Section 74(1) by the
respondent authorities in the absence of any of these pre-conditions
is invocation of the jurisdiction by the respondent authorities not
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vested on it by the statute and therefore the same is a clear case of
unauthorized and excessive jurisdiction which is an arbitrary exercise
of power which calls for interference by this Court by issuance of a
proper writ. The learned senior counsel for the petitioner submits
that the petitioner had claimed exemption from payment of tax
liability under GST on a bonafide belief that the amounts were
received in respect of price adjustments and therefore, not liable for
payment of GST. There was no malafide intention as the petitioner
has been paying GST in respect of other receivables. Therefore,
under these facts and circumstances, invocation of jurisdiction under
Section 74(1) of the GST Act, 2017 by the respondent authorities
was not available and the same was assumed and invoked only for
the purposes of extension of the limitation period by alleging fraud,
collusion and/or suppression of material facts which on a clear
appreciation of the facts will reveal that none of these ingredients
were available to the respondent authorities for invocation of the
jurisdiction under Section 74(1). The learned Senior counsel for the
petitioner submits that the respondents therefore committed serious
jurisdictional error in invoking its powers under Section 74(1) without
there being any enquiry and conclusion arrived at to satisfy
themselves that the pre-conditions for invoking the jurisdiction under
Section 74 was available.
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22. Mr. S. C Keyal, learned senior counsel and Standing counsel,
CGST on the other hand submits strenuously disputes the
contentions raised by the counsel for the petitioner. The respondents
have contested the matter by filing their affidavit in opposition. There
is a clear averment in the affidavit that the writ petitioner filed NIL
monthly return and did not make necessary payment of tax with the
intention to evade tax although the petitioner disclosed receipt of
revenue in respect of price adjustment bills as exempted in GSTR-9
return for the financial year 2022-23 on 28.12.2024 although the said
amount is taxable under GST. It is submitted that upon proper
enquiry and investigation by the respondent authority it was found
that an amount of Rs. 32.78 crores and 3.687 Crores were withheld
which were paid in the financial year 2022-23. The learned senior
counsel submits that this act of the petitioner would have remained
suppressed and came to light only after investigation was carried out
against them. According the respondent, the petitioner willfully
suppressed the material facts with the intention to evade tax and
therefore, the show cause notice under Section 74(1) of the CGST
Act, 2017 is legal and liable to be upheld. The learned senior counsel
refers to and relies upon the Judgment rendered by the Andhra
Pradesh High Court in M/S Sriba Nirman Company Vs. Commissioner
(Appeal) and Ors [W.P(C) No. 25826/2023]. Referring to the said
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Judgment, it is submitted that the Andhra Pradesh High Court in a
similar matter had rejected the contentions of the petitioner therein
and which Judgment was also not interfered with by the Apex Court.
It is submitted that this revenue is payable to the Government and
which has been short paid by mis-statement and suppression on
material facts and therefore the proceedings initiated by the
respondent authorities are correctly initiated and there is no
infraction of the law and the same should not be interfered with and
the writ petition should be accordingly dismissed.
23. In rejoinder, the learned senior counsel for the petitioner
reiterated on the submissions made. He reiterates that provisions
under Section 74 can only be invoked upon satisfaction of the three
pre-conditions prescribed. The burden is on the revenue to satisfy
itself that the pre-conditions existed prior to initiating the power
under Section 74. He therefore submits that in view of the
submissions made and the Judgments rendered, the writ petition be
allowed and the show cause notice be interfered with, set aside and
quashed.
24. The learned counsel for the parties have been heard. Pleadings
available on record have been carefully perused.
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25. The core issue which has been urged before the Court are the
necessary concomitants before invocation of the powers under
Section 74(1) by the GST Authorities. 74(1) of the CGST Act reads as
under:
“Section 74(1) : Where it appears to the proper officer
that any tax has not 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 specified in the notice along with interest
payable thereon under section 50 and a penalty
equivalent to the tax specified in the notice.
2. The proper officer shall issue the notice under Sub-
section (1) at least six months prior to the time limit
specified in sub-section (10) for issuance of order.
3. Where a notice has been issued for any period under
sub-section (1), the proper officer may serve a
statement, containing the details of tax not paid or short
paid or erroneously refunded or input tax credit wrong
availed or utilized for such periods other than those
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covered under sub-section (1), on the person chargeable
with tax.
… .
….
Explanation 2 omitted by Finance (No.2) Act, 2024 (15 of
2024), dt. 16-8-2024. Effective date yet to be notified.
Prior to omission, Explanation 2 reads as under:
“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 in the 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 officer.”
26. It is clear from the bare reading of Section 74(1) that this
section empowers the revenue for determination of tax not paid or
short paid or erroneously refunded or input tax credit wrongly availed
or utilized by reason of fraud or willful mis-statement or suppression
of facts to evade tax. Therefore, this section contained two parts
prior to amendments. The first part is for determination of tax and
recovery which according to the revenue was not paid or short paid
by reason of fraud or any willful mis-statement to evade tax.
Therefore, the mandate of the Section is very clear that it can be
invoked only where the taxes are not paid or short paid by reason of
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fraud or willful mis-statement or suppression of facts for the purpose
of evasion of taxes and suppression of facts shall mean non-
declaration of facts and information which a taxable person is
required to declare in the return/statement or report filed. The
second part relates to the explanation -2 provided that “suppression”
will mean non-declaration of facts/information which a taxable
person is required to declare in the return/statement and 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 officer.
(Emphasis Supplied)
27 At this juncture, the relevant extract of the show cause notice
is also reproduced:
7. Suppression of facts by the Noticee
7.1 Section 74 of the CGST Act, 2017 and the Assam Goods & Services
Tax Act, 2017 as amended- Determination of tax not paid or short paid or
erroneously refunded or input tax credit wrongly availed or utilized by
reasons or fraud or any willful mis-statement or suppression of facts reads
as:
74(1) Where it appears to the proper officer that any tax has not 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 specified in the notice along with
interest payable thereon under section 50 and a penalty equivalent to the
tax specified in the notice.
Page 23 of 66
74(2). The proper officer shall issue the notice under Sub-section (1) at
least six months prior to the time limit specified in sub-section (10) for
issuance of order.
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 in the return, statement, report or any other documents
furnished under this Act or the rules made hereunder, or failure to furnish
any information on being asked for, in writing by the proper officer.”
7.2. In this context, it is submitted that the noticee is a Government
Contractor and maintenance of Books and Accounts, Filing of GST and
Income Tax Returns etc. are basic responsibilities of the notice. From their
submission, it is clear that the noticee is well aware with the legal provisions
of taxation matters, including the provisions related to applicability of GST,
applicability of Circular and Notification issued from time to time and
payment of GST. GST is levied on the supply of goods and services under
the provisions of the CGST Act, 2017 and the Rules made thereunder as
well as similar provisions of the respective Assam. GST Act, 2017 and also
IGST Act, 20L7 including Rules made thereunder wherein a system of self-
assessment and self-disclosure through periodical returns is prescribed. In
other words, it is the legal responsibility of the noticee to obtain
registration, assess and discharge the tax liability as per the provisions of
the Act and also declare the same through the prescribed periodical returns.
7.3 It has also been noticed during scrutiny of records/documents.
submitted by the noticee in course of investigation that the noticee has
failed to self-assess and pay their GST Liabilities correctly for the period
from July 2017 to March 2023 thereby suppressing GST liability amounting
to Rs. 4,37,73,372/- (CGST Rs. 2,18,86,686/-. SGST Rs. 2,18,86,686/-)
resulting in evasion of GST in contravention of the provisions of Section
9(1) Section 49, Section 59, Section 37 and Section 39 of the CGST Act,
2017 read with relevant provisions of Assam GST Act, 2017.
7.4. The said contravention. on the part of noticee as discussed in pare 7:1
to 7.3 above appeared to have been committed deliberately by way of not
declaring material facts to the department and willfully mis-stating ‘or
suppressing outward tax liability and this act of intentional commission or
omission shows mens rea on the part of the notices, The amount of tax so
evaded by the notice is required to be demanded/recovered from them by
invoking the extended period of limitation in terms of the Proviso to Section
74(1) of the CGST Act, 2017.
7.5 It also appears that the tax-payer had willfully suppressed these
material facts from the department and thus they contravened the
provisions of Section 37, Section 39 and Section 49 of the GST Act, 2017
read with Rule-59 and Rule 61 of the CGST Rules, 2017 and the similar
Sections and Rules under the. Assam GST Act, 2017, with intent to evade
payment of GST and has also failed to make a true and comprehensive
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disclosure of the GST liability in the prescribed returns. Hence, it is a clear
violation of the aforementioned provisions of the CGST Act, 2017 and the
similar sections of Assam GST Act, 2017, which would attract the extended
period and the penal provisions under the Act as per the provisions of
Section 74(1) of the GST Act, 2017 and similar provisions of the Assam GST
Act, 2017. Hence, it appears that the noticee by not disclosing all the
material facts, have wilfully suppressed the facts of providing taxable
service and have also contravened the provisions of CGST Act, 2017, the
Assam GST Act, 2017 and Rules made thereunder with intent to evade
payment of GST.
28. What is fraud or willful mis-statement or suppression of facts is
not defined in the statute. Therefore recourse will have to be had to
the various authoritative findings of the Courts in India. It is also
necessary to note the averments made in the affidavit filed by the
respondents that in Paragraph-9 that the date of provision of
services is not known precisely but it is surely prior to the dates of
the respective original departmental bills in respect of price
adjustment. There is also an averment in the affidavit that the
petitioner had filed NIL monthly returns and not made the necessary
payment of tax with intention to evade tax and that the petitioner
had also disclosed the money received in respect of price adjustment
bills in the GSTR-9 return for the Financial Year 2022-23 on
28.12.2023 though the said amount is taxable under GST. Averments
are also made in paragraph-22 of the affidavit filed by the
respondents that although a request was made to the Ministry of
Road Transport in respect of the dates of completion of works in
respect of 11 number of bills of price adjustments and the amount
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paid to the petitioner individually for each bill, no reply was received
from the said authority. Although, there was a statement by the
petitioner that they will try to provide evidence showing date of
completion of the work in respect of the said 11 number of bills of
price adjustment and the same was not furnished and therefore to
avoid the limitation period for the period 2017-18 as provided in the
statute and also to save guard government revenue show cause
notices under Section 74(1) of the CGST has been issued. There is
also an avernment made in the affidavit that the limitation for
issuance of a show cause notice in respect of Assam under Section
th
74 CGST, 2017 is 7 of August 2024 whereas the show cause notice
was issued on 03.08.2024.
29 In Pushpam Pharmaceutical Co (Supra), although the
Judgment pertains to interpretation of Section 11A of the Central
Excise and Salt Act, 1944, the ratio in the judgment in respect of
suppression of facts, fraud, collision or willful mi-statement would be
applicable in the facts of the case. In the said Judgment, the Apex
Court held as under:
“Section 11-A empowers the Department to reopen
proceedings if the levy has been short-levied or not levied
within six months from the relevant date. But the proviso
carves out an exception and permits the authority to exercise
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this power within five years from the relevant date in the
circumstances mentioned in the proviso, one of it being
suppression of facts. The meaning of the word both in law and
even otherwise is well known. In normal understanding it is not
different that what is explained in various dictionaries unless of
course the context in which it has been used indicates
otherwise. A perusal of the proviso indicates that it has been
used in company of such strong words as fraud, collusion or
wilful default. In fact it is the mildest expression used in the
proviso. Yet the surroundings in which it has been used it has
to be construed strictly. It does not mean any omission. The
act must be deliberate. In taxation, it can have only one
meaning that the correct information was not disclosed
deliberately to escape from payment of duty. Where facts are
known to both the parties the omission by one to do what he
might have done and not that he must have done, does not
render it suppression.”
30. In Anand Nishikawa Co. Ltd (Supra), the apex court held that
after referring to the earlier precedents that “suppression of facts”
can have only one meaning that the correct information was not
disclosed deliberately to evade payment of duty. When facts were
known to both the parties, the omission by one to do what he might
have done and not that he must have done, would not render it
suppression. It is settled law that mere failure to declare does not
amount to wilful suppression. There must be some positive act from
the side of the assessee to find wilful suppression. Therefore, in view
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of our findings made hereinabove that there was no deliberate
intention on the part of the appellant not to disclose the correct
information or to evade payment of duty, it was not open to the
Central Excise Officer to proceed to recover duties in the manner
indicated in the proviso to Section 11-A of the Act.
31. In Continental Foundation Joint Venture Holding (Supra), the
Apex Court held that the expression “suppression” has been used in
the proviso to Section 11A of the Act is accompanied by very strong
words as “fraud” or “collusion” and, therefore, has to be construed
strictly. Therefore, mere omission to give correct information is not
suppression of facts unless it was deliberate attempt to evade the
payment of duty. Suppression means failure to disclose full
information with the intent to evade payment of duty. When the
Revenue invokes the extended period of limitation under Section 11-
A the burden is cast upon it to prove suppression of fact with the
intention to evade payment of duty. An incorrect statement cannot
be equated with a wilful misstatement. The latter implies making of
an incorrect statement with the knowledge that the statement was
not correct.
32. In CCE Vs. Chemphar Drugs and Liniments (Supra), the Apex
court held that in order to make the demand for duty sustainable
Page 28 of 66
beyond a period of six months and up to a period of 5 years, in view
of the proviso to sub-s. 11A of the Act, it has to be established that
the duty of excise had not been levied or paid or short-levied or
short-paid, or erroneously refunded by reasons of either fraud or
collusion or wilful mis-statement or suppression of facts or
contravention of any provision of the Act or Rules made thereunder,
with intent to evade payment of duty. Something positive other than
mere inaction or failure on the part of the manufacturer or producer
or conscious or deliberate withholding of information when the
manufacturer knew otherwise, is required before it is saddled with
any liability, beyond the period of six months. Whether in a particular
set of facts and circumstances there was any fraud or collusion or
wilful mis-statement or suppression or contravention of any Provision
of any Act, is question of fact which will depend upon the facts and
circumstances of a particular case.
33. In Cosmic Dye Chemical (Supra), the Apex Court again in the
context of Section 11-A of the Central Excise and Salt Act, 1944 held
that the main limb of Section 11-A provides limitation of six months.
In cases, where the duty is not levied or paid or short-levied or
short-paid or erroneously refunded, it can be recovered by the
appropriate officer within six months from the relevant date. (The
expression “relevant date” is defined in the section itself.) But the
Page 29 of 66
said period of six months gets extended to five years where such
non-levy, short levy, etc. is “by reason of fraud, collusion or any
wilful misstatement or suppression of facts or contravention of any of
the provisions of this Act or of the rules with intent to evade payment
of duty”. In so far as fraud and collusion are concerned, it is evident
that the requisite intent, i.e., intent to evade duty is built into these
very words. So far as misstatement or suppression of facts are
concerned, they are clearly qualified by the word ‘wilful’ preceding
the words “misstatement or suppression of facts” which means with
intent to evade duty. The next set of words “contravention of any of
the provisions of this Act or rules” are again qualified by the
immediately following words “with intent to evade payment of duty”.
It is, therefore, not correct to say that there can be a suppression or
misstatement of fact which was not wilful but yet constitutes a
permissible ground for the purpose of the proviso to Section 11-A.
Misstatement or suppression of fact must be wilful.
34. In CCE Vs. Ballarpur Industries Ltd (Supra), the law laid down
in Continental Foundation Joint Venture Holding Vs. CCE, reported in
(2007) 10 SCC 337 was reiterated and it was held by the Apex Court
that the suppression would mean failure to disclose full and true
information with the intent to evade payment of duty. When the
facts are known to both the parties, omission by one party would not
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constitute suppression. Further an incorrect statement cannot be
equated with a wilful misstatement. The latter implies making of an
incorrect statement deliberately with the knowledge that the
statement made was not correct.
35. In Uniworth Textiles Ltd. Vs. CCE, reported in (2013) 9 SCC
753, the Apex Court held that the conclusion that mere non-payment
of duties is equivalent to collusion or wilful misstatement or
suppression of facts is, in our opinion, untenable. It was held that if
that were to be true, one would fail to understand which form of
non-payment would amount to ordinary default? Construing mere
non-payment as any of the three categories contemplated by the
proviso would leave no situation for which a limitation period of six
months may apply. The Apex Court held that the main body of the
section, in fact, contemplates ordinary default in payment of duties
and leaves cases of collusion or wilful misstatement or suppression of
facts, a smaller, specific and more serious niche, to the proviso.
Therefore, something more must be shown to construe the acts of
the appellant as fit for the applicability of the proviso. Therefore, if
non-disclosure of certain items assessable to duty does not invite the
wrath of the proviso, we fail to understand how the non-payment of
duty on disclosed items, after inquiry from the department concerned
meets with that fate. The Apex Court further held that in fact, the
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Act contemplates a positive action which betrays a negative intention
of wilful default. The Apex Court held that it is a settled law that for
invoking the extended period of limitation, duty should not only have
been not paid, short-levied or short-paid or erroneously refunded but
such not paid, short paid, short levied or erroneously refunded must
be due to either fraud, collusion, wilful misstatement, suppression of
facts or contravention of any provisions of the Act. These ingredients
postulate a positive act and, therefore, mere failure to pay duty
and/or take out a licence which is not due to any fraud, collusion or
wilful misstatement or suppression of fact or contravention of any
provision is not sufficient to attract the extended period of limitation
36. Again in CCE. Vs. H.M.M Ltd (Supra), the Apex Court held that
that mere non-disclosure of certain items assessable to duty does not
tantamount to the mala fides elucidated in the proviso to Section 11A
of the Central Excise Act, 1944. It was held that mere non-
declaration of the waste/by-product in their classification list cannot
establish any wilful withholding of vital information for the purpose of
evasion of excise duty due on the said product. There could be bona
fide belief on the part of the assessee that the said waste or bye-
product did not attract excise duty and hence it may not have been
included in their classification list. But that per se cannot go to prove
that there was any intention to evade payment of duty or that the
Page 32 of 66
assessee was guilty of fraud, collusion, misconduct or suppression to
attract the proviso to Section 11A(1) of the Act.
37. In Associated Cements Companies Ltd (Supra), the Apex Court
held that so far as fraud and collusion are concerned, it is evident
that the requisite intent i.e. intent to evade duty is built into these
very words. So far as misstatement or suppression of facts are
concerned, they are clearly qualified by the word “wilful” preceding
the words “misstatement or suppression of facts” which means with
intent to evade duty. The next set of words “contravention of any of
the provisions of this Act or Rules” are again qualified by the
immediately following words “with intent to evade payment of duty”.
It is, therefore, not correct to say that there can be a suppression or
misstatement of fact, which is not wilful and yet constitutes a
permissible ground for the purpose of the proviso to Section 11A.
Misstatement or suppression of fact must be wilful.
38. A careful analysis of these Judgments reveal that the consistent
view of the Apex Court in that besides the presence of the conditions
precedent for issuance of show cause notice under section 74(1) of
the Act of 2017. There must be a clear intention to evade payment of
taxes. In the absence of the conditions precedent showing clear
Page 33 of 66
intention to evade payment of taxes, the Revenue cannot invoke the
provision of Section 74(1) by issuing show causes notices.
39. From the pleadings, it is seen that the petitioner had disclosed
the amount received in its balance sheets filed with ITR filings as
well as in its annual return filings for GST. The Petitioner as per Rule
66 of the CGST Act, 2017 affirmed and declared before the GST
Authorities that the amount has been received by them in its
declaration dated 12.12.2022.
40. As discussed, to confer jurisdiction to issue notices under
section 74(1) of the GST Act, 2017 either of the three conditions
stipulated therein will have to be satisfied. The proper officer has to
come to a conclusion that tax/duty has not been paid by reason of
fraud or there has been willful-misstatement or suppression of facts
in order to evade payment of tax. From the impugned show cause
notice, it is seen that there is no allegation of fraud, rather the
impugned show cause notice is proceeds an allegation of suppression
of facts. Thus, the question to be decided is the basis of the Revenue
is to come to the conclusion that there has been suppression of facts
by the Petitioner to evade tax. In order to decide that it is necessary
to examine whether the assessee i.e. the Petitioner had disclosed all
materials facts for his assessment. From the pleadings, it is seen that
Page 34 of 66
the petitioner had filed the audited balance sheet for the assessment
year 2023-24 (i.e. Financial Yeat 2022-23) before the Income Tax
Authorities on 29.09.2023 recording the receipt of price adjustment
and thereafter the Petitioner on the belief that the amounts which
were received as Price-Adjustment in respect of the Works for which
Agreement was entered prior to 2017 were not taxable under GST
Act, had shown the amounts received as price adjustment as
“exempted” while filing GST returns for the financial year 2022-23 in
December 2022. The Income Tax Return as well as the GST returns
are public documents and when the receipt of the price adjustment
money stands reflected in such public documents it cannot be said
that there was any suppression or mis-statements on the part of the
Petitioner so as to invoke section 74(1) of the GST Act, 2017.
According to the petitioner that every detail was maintained by the
Petitioner in usual course of business and as such suppression or
mis-statements cannot be held to be present for the Respondent
Authorities to invoke Section 74(1) of the GST Act, 2017.
41. From the various Judgments discussed above, it clear that for
an act to qualify as mis-statement or suppression of facts, the act
has to be willful not mere omission as the words mis-statement or
suppression are qualified by the word “willful”. Thus, any omission on
the part of the assessee unless it can be shown that it is deliberate
Page 35 of 66
willful attempt to escape from payment of duty, it will not amount to
mis-statement or suppression of facts. When the Petitioner has
disclosed the receipt of price adjustment money in respect of the 11
bills in its audited balance sheet and filed the same before Income
Tax Authorities then the act of the Petitioner in not paying GST in
respect of the price adjustment money cannot be regarded as willful
suppression of facts or mis-statement by the Petitioner as the fact of
receiving the amount for price adjustment has been disclosed by the
Petitioner and mere failure to pay GST on a bonafide belief as
aforesaid is an omission and cannot be equated with deliberate non-
payment.
42. From the materials before the Court, there appears to be no
suppression or mis-statement made by the Petitioner to escape
payment of duty. Any such omission by itself does not amount to
willful suppression of facts or mis-statements by the Petitioner. It is
also seen from the pleadings that the Petitioner has disclosed the
information regarding the receipt of the price adjustment money in
its audited balance sheet, ITR filling as well as GST Annual filing. The
Petitioner as per Rule 66 of the CGST Act, 2017 affirmed and
declared before the GST Authorities that the amount has been
received by them in its declaration dated 12.12.2022 and thereby
there was due intimation of the same to the Department.
Page 36 of 66
Accordingly, the fact of receiving money has been disclosed by the
Petitioner to the revenue authorities and therefore no suppression of
facts can be said to have been resorted to by the petitioner to evade
payment of taxes. Suppression of facts means non-declaration of
facts or information which a taxable person is required to declare in
the return, statements, report or other documents. In the instant
case, the Petitioner had declared all material facts in its audited
balance sheet, ITR filings and annual GST filings. The Petitioner as
per Rule 66 of the CGST Act, 2017 affirmed and declared before the
GST Authorities that the amount has been received by them in its
declaration dated 12.12.2022 and thereby there was due intimation
of the same to the Department.
43. From the pleadings it is seen that the Petitioner had disclosed
the fact of receiving the price escalation amount in the audited
balance sheet of the petitioner, while filing returns for income tax
(which is accessible by the GST authorities too) and also while filing
returns for Annual GST. The Petitioner on the basis of their
understanding and bonafide belief had shown the amount as
exempted from payment of GST while filing its returns for annual
GST i.e. Form GSTR-9. Such bonafide belief has been further
strengthened by the fact that neither the Assam P.W.D nor the
Ministry has included/reflected GST charges in the bills against the
Page 37 of 66
price adjustment amounts released to the Petitioner during
preparation and/or confirmation of the said bills by the Assam,
P.W.D. or Ministry. Therefore, the conclusion that mens rea could be
deduced from the intentional erroneous self-assessment is not borne
out from the record.
44. It appears to the Court that the petitioner claimed exemption
from paying tax liability under GST on the bonafide belief that as the
amounts were received in respect of price adjustment the same are
not liable for payment of GST. No malafide intention is made out as
the petitioner has been paying GST in respect of other receivables.
Therefore, the issuance of show cause notice under section 74(1) is
manifestly erroneous and arbitrary and error apparent on the face of
the record as the conditions precedent for issuance of the show
cause notice under section 74(1) are not present for which the same
is without jurisdiction. In the absence of any element of fraud or
willful misstatement or suppression of material fact, notices could not
have been issued under section 74(1) and thereby extending the
period of limitation prescribed and hence the impugned show cause
notice is time barred. Further, it appears to the Court that though all
details were already disclosed by the Petitioner, the GST Authorities
instead of conducting enquiry as per the mandate of the GST Act,
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2017 proceeded to issue notices under section 74(1) for the purpose
of overcoming the period of limitation prescribed under the statute.
45. The conclusion arrived at by the Respondent Authorities that
the petitioner by failing to self-assess have deliberately contravened
the provisions of Act of 2017 and also by way of not declaring
material facts to the department and by suppressing outward tax the
petitioner have intentionally committed acts which show mens rea on
the part of the petitioner is not based on the records of the case.
Such conclusions on the part of the Respondent Authorities especially
Joint Director is an error apparent on the face of the record and
without any basis and not consistent with the records of the case
and, as such, the impugned notices are manifestly erroneous and
without jurisdiction.
46. It is also seen that the petitioner had also paid income tax in
respect of the amount so received. Further, the petitioner also
disclosed the amounts in respect of the 11 bills in its GST filing.
However, as the amount so received pertains to price adjustments,
the petitioner has stated that he was on the bonafide and genuine
belief that GST is not required to be paid in respect of the said
amount for which it had recorded in its GST filing/returns that GST is
“exempted”. The Revenue failed to take into consideration the fact
Page 39 of 66
that the amount received as price adjustment were duly recorded in
its balance sheets.
47. Having discussed the pre-conditions under Section 74, it is now
necessary for the Court to refer to the question of assumption of
jurisdiction by the authorities which is also one of the grounds
pressed by the petitioner.
48. Where a subordinate Tribunal and an authority is found to have
assumed jurisdiction not vested on it a superior Court may invoke its
extraordinary jurisdiction to correct such errors which were exercises
by the authorities. The powers of a superior Court to examine the
authority assumed by a Tribunal was the issue in Anisminic Ltd Vs.
Foreign Compensation Commission and Anr. reported in (1969) 2
WLR 163. It was held therein that the jurisdiction of the superior
Court is to see that the inferior court has not exceeded its own, and
for that very reason it is bound not to interfere in what has been
done within that jurisdiction, for in so doing it would itself, in turn,
transgress the limits within which its own jurisdiction of supervision,
not of review, is confined. That supervision goes to two points: one
is the area of the inferior jurisdiction and the qualification and
conditions of its exercise; the other is the observance of the law in
the course of its exercise. If, therefore, a tribunal while within the
Page 40 of 66
area of its jurisdiction committed some error of law and if such error
was made apparent in the determination itself (or, as it is often
expressed, on the face of the record) then the superior court would
certainly be competent correct that error unless it was otherwise
forbidden to do so under the statute. It would be so forbidden if the
determination was “not to be called in question in any court of law”.
If so forbidden it could not then even hear argument which
suggested that error of law had been made. It could, however, still
consider whether the determination was within “the area of the
inferior jurisdiction.
49. By referring to Reg. Vs. Cotham, reported in (1898) 1 Q.B. 802,
808, it was noted that the distinction between, on the one hand,
disregarding the provisions of a statute and considering matters
which ought not to be considered and, on the other hand, what is
called “a mere misconstruction of an Act of Parliament”. This perhaps
illustrates the clear distinction which exists between an error when in
the exercise of jurisdiction and an error in deciding whether
jurisdiction can be assumed: in the latter case an error may have the
consequence that jurisdiction was lacking and was wrongly assumed
and the result would be that any purported decision would have no
validity.
Page 41 of 66
50. The Court held that lack of jurisdiction may arise in various
ways. There may be an absence of those formalities or things which
are conditions precedent to the tribunal having any jurisdiction to
embark on an inquiry. Or the tribunal may at the end make an order
that it has no jurisdiction to make. Or in the intervening stage, while
engaged on a proper inquiry, the tribunal may depart from the rules
of natural justice; or it may ask itself the wrong questions; or it may
take into account matters which it was not directed to take into
account. Thereby it would step outside its jurisdiction. It would turn
its inquiry into something not directed by Parliament and fail to make
the inquiry which Parliament did direct. Any of these things would
cause its purported decision to be a nullity.
51. Again in Bunbury Vs. Fuller, reported in (1853) 9 Exch 111, 140
on the question of excessive jurisdiction of a Court of limited
jurisdiction, it was held that no court of limited jurisdiction can give
itself jurisdiction by a wrong decision on a point collateral to the
merits of the case upon which the limit to its jurisdiction depends;
and however its decision may be final on all particulars, making up
together the subject matter which, if true, Is within its jurisdiction,
and however necessary in many cases it may be for it to make a
preliminary inquiry, whether some collateral matter be or be not
Page 42 of 66
within the limits, yet upon this preliminary question, its decision must
always be open to inquiry in the superior court.
52. In Rex Vs. Shoreditch Assessment Committee, Ex parte
Morgan, reported in (1910) 2 K.B. 859, it was held that no tribunal of
inferior jurisdiction can by its own decision finally decide on the
question of the existence or extent of such Jurisdiction: such
question is always subject to review by the High Court, which does
not permit the inferior tribunal either to usurp a jurisdiction which it
does not possess, whether at all or to the extent claimed, or to
refuse to exercise a jurisdiction which it has and ought to exercise.
Subjection in this respect to the High Court is a necessary and
inseparable incident to all tribunals of limited jurisdiction; for the
existence of the limit necessitates an authority to determine and
enforce it: it is a contradiction in terms to create a tribunal with
limited Jurisdiction and unlimited power to determine such limit at its
own will and pleasure — such a tribunal would be autocratic,not
limited — and it is immaterial whether the decision of the inferior
tribunal on the question of the existence or nonexistence of its own
jurisdiction is founded on law or fact.
(Emphasis Supplied)
Page 43 of 66
53. In Pilling Vs. Abergele Urban District Council, reported in
(1950) 1KB 636, it was held that where a duty to determine a
question is conferred on a authority which state their reason for the
decision and the reasons which they state show that they have taken
into account matters which they ought not to have taken into
account or that they have failed to take matters into account which
they ought to have taken into account, the court to which an appeal
lies can and ought to adjudicate on the matter.
54. Similar views have been expressed by Courts in India and
followed in several cases in the context of examination of jurisdiction
vested on Tribunals and Court of limited jurisdiction. In Dhirajlal
Girdharilal Vs. CIT, Bombay, reported in AIR 1955 SC 271, the Apex
Court held that when a Court of fact acts on materials partly relevant
and partly irrelevant, it is impossible to say to what extent the mind
of the Court was affected by the irrelevant materials used by it in
arriving at its finding and such a finding is vitiated because of use of
inadmissible material and thereby a question of law arises.
55. In Ram Avtar Sharma Vs. State of Haryana, reported in AIR
1985 SC 915, the Apex Court held that discretionary power must be
exercised on relevant and not on irrelevant or extraneous
considerations. It means that power must be exercised taking into
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account the considerations mentioned in the statute. If the statute
mentions no such considerations, then the power is to be exercised
on considerations relevant to the purpose of which it is conferred. On
the other hand, if the authority concerned pays attention to, or takes
into account, wholly irrelevant or extraneous circumstances, events
or matters or considerations then the action taken by it is invalid and
will be quashed.
56. In Indian Railway Construction Co. Ltd. Vs. Ajay Kumar,
reported in AIR 2003 SC 1843, the Apex Court held that in the
purported exercise of its discretion, the authority conferred with
discretion must not do what it has been forbidden to do, nor must it
do what it has not been authorized to do. It must act in good faith,
must have regard to all relevant considerations, must not be
influenced by irrelevant considerations, must not seek to promote
purposes alien to the letter and to the spirit of the legislation that
gives it power to act, and must not act arbitrarily or capriciously.
57. Again in Shalini Soni Vs. Union of India, reported in (1980) 4
SCC 544, it was held by the Apex Court that it is an unwritten rule of
law, constitutional and administrative, that whenever a decision-
making function is entrusted to the subjective satisfaction of a
statutory functionary, there is an implicit obligation to apply his mind
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to pertinent and proximate matters only, eschewing the irrelevant
and the remote. Applying this principle in CIT Vs Mahindra &
Mahindra, reported in (1983) 4 SCC 392, the Supreme Court quashed
a decision under Section 72-A of the Income Tax Act, as the
government was “clearly influenced by irrelevant and extraneous
materials vitiating the impugned conclusion.
58. In S.R Venkataraman Vs. Union of India, reported in AIR 1979
SC 49, the Apex Court held that an administrative order which is
based on reasons of facts which do not exist is infested with an
abuse of power. There will be an error of fact when a public body is
promoted by a mistaken belief in the existence of a non-existing fact
or circumstance.
59. From a detailed evaluation of the judicial pronouncements as
discussed above, it is clear that if an authority while making the
inquiry rejects a consideration which is relevant and/or takes into
consideration/ materials and other information which are not
relevant, the said decision must be held to be a decision in excess or
without jurisdiction.
60. Coming to the facts of the present case, since the adjudicating
authority did not take into consideration those relevant materials
which it was bound to take into consideration and on the other hand
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it had taken into consideration factors and materials, which if not
irrelevant and not germane for deciding the liability of the service
tax, cannot establish the liability of the assessee, then the said
actions of the adjudicating authority in issuing the impugned show
cause notice is certainly without jurisdiction and/or is in excess of
jurisdiction and thereby the impugned actions, orders and notices
issued by the adjudicating authority are liable to interfered with by
this Court in exercise of its extra ordinary jurisdiction under Article
226 of the Constitution of India.
61. Coming to the question of maintainability of the writ petition in
view of the facts that the matter is still at the stage of issuance of
show cause notice and the petitioner has asserted the show cause
notice without filing it’s reply and that the Revenue is yet to take any
decision, therefore, the question of issuance of any prerogative writs
by this court is not called for at this stage and the writ petition
should be dismissed and the petitioners should be relegated to it’s
reply to the show cause notice.
62. Time and again the question of issuance of prerogative writs
even where statutory alternative remedies are available and/or are
not availed of by the assessee, has come up before this Court as well
as the Apex Court in a Catena judgments. The Assam High Court in
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Hardeodas Jagannath Vs. Income Tax Officer, reported in (1961) 47
ITR 56 had clearly held that there is no inflexible rule that the
existence of an alternative remedy is a bar to the issue of writ of
certiorari. The issuance of prerogative writs or directions is always to
the discretion of the Court and the Court while exercising its
discretion may take into consideration the existence of an alternative
remedy as a matter of policy, but the existence of an alternative
remedy is not per se a bar to the issue of writ of certiorari.
The High Court at Paragraph 42 held as under:
”42 No Tribunal and no Officer can confer jurisdiction or authority
or competence upon itself or himself by misconstruing a section. An
authority cannot claim to exercise jurisdiction by construing a section
erroneously and thereby contending that the section so wrongly
construed gives him the necessary power. In such a case, if the section
has been wrongly construed, it would be a clear case of absence of
jurisdiction apparent on the face of the record because the Court has got
to look at the section and to decide whether the officer construing the
section was in the right or in the wrong.”
63. The Apex Court in TELCO Vs. Assistant Commissioner, reported
in AIR 1967 SC 1 401 held that though ordinarily High Court leaves
an aggrieved party to take recourse to the remedies available under
the ordinary law, if they are equally efficacious, yet there are certain
exceptions and one of such exceptions pointed out is where action is
being taken arbitrarily and without the sanction of law.
64. In State of U.P Vs. Mohd. Nooh, reported in 1958 SCR 595, the
Apex Court held that the rule requiring the exhaustion of statutory
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remedies before the writ is granted is a rule of policy, convenience
and discretion rather than rule of law and instances are numerous
where a writ of certiorari has been issued in spite of the fact that the
aggrieved party had other adequate legal remedies.
65. In Bhopal Sugar Industries Vs. D.P Dubey, reported in AIR
1967 SC 549, the Apex Court held that the High Court has undoubted
jurisdiction to decide the writ application whether the taxing
authority has arrogated to itself, powers which it does not posses or
has committed serious errors of procedure which has affected the
validity of the decision or where the taxing authority threatens to
recover tax on an interpretation of the statute which is erroneous.
66. In Altafur Rahman Vs. Union of India, reported in (1986) 1 GLR
14, this Court held that when the challenges of the petitioner go to
the root of the jurisdiction of the Controller and therefore the writ
petition cannot be dismissed without disposing the contentions of the
petitioner on merits.
67. In Whirlpool Corporation Vs. Registration of Trade Mark,
reported in (1998) 8 SCC 1, the Apex Court on the question of
alternative remedy held that exception on the existence whereof a
Writ Court would be justified in entertaining a writ petition despite
the party approaching it not having availed the alternative remedy
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provided by the statute were laid document was the exceptional land
document by the Apex Court were as under :
(i) where the writ petition seeks enforcement of any of the
fundamental rights.
(ii) where there is violation of principles of natural justice;
(iii) Where the order or the proceedings are wholly without
jurisdiction; or
(iv) Where the vires of an Act is challenged
68 The ratio laid down in Whirlpool Corporation (Supra) by the
Apex Court was reiterated again in Popcorn Entertainment v. City
Industrial Development Corpn., reported in (2007) 9 SCC 593
wherein in the context of maintainability of the writ petition where
alternative remedy is available or where the remedies under the
statute have not been exhaustive by the assessee, it was held that
availability of alternative remedy or non-exhaustion of remedies is
not a bar for issuance of the writ where (i) the action of the
respondent was illegal; (ii) where there are violation of the principles
of natural justice (iii) where the petitioner’s fundamental rights have
been violated.
69. In Kaikhosrou (Chick) Kavasji Framji v. Union of India, reported
in (2019) 20 SCC 705, in the context of the provision of the Public
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Premises (Eviction of Unauthorised Occupants) Act, 1971 and the
remedies provided thereunder. The Apex Court again reiterated that
availability of alternative remedy of non-exhaustion of remedy under
the statute are no grounds. It was held that notices issued under the
statute in a appropriate case can be maintainable on the facts and
circumstances of the case an appropriate writ also may be issued by
the Court.
70. In Popatrao Vyankatrao Patil v. State of Maharashtra, reported
in (2020) 19 SCC 241, the Apex Court held that the State should act
as a model litigant and Governments and Statutory authorities should
be model or ideal litigants and should not put forth false, frivolous,
vexatious, technical (but unjust) contention to obstruct to path of
justice. Even if there are disputed questions of fact but if they do not
require elaborate evidence to be adduced, High Court is not
precluded from entertaining a petition under Article 226 of the
Constitution and such power would be justified in exercising even to
the exclusion of other available remedies provided it finds of the
action of the State or its instrumentality is arbitrary, unreasonable
and therefore violative of Article 14.
71. In Magadh Sugar & Energy Ltd. v. State of Bihar, reported in
(2022) 16 SCC 428 on the question of maintainability of the writ
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petition without delaying the alternative remedy/the exhaustion of
remedies under the Bihar Electricity Duty Act, 1948. It was held that
where under a statute, there is allegation of infringement of
fundamental rights or when on the undisputed facts the Taxing
Authorities are shown to have assumed jurisdiction which they do not
possess can be the grounds on which the writ petitions can be
entertained. But normally, the High Court should not entertain writ
petitions unless it is shown that there is something more in a case,
something going to the root of the jurisdiction of the officer,
something which would show that it would be a case of palpable
injustice to the writ petitioner to force him to adopt the remedies
provided by the statute.
72. In Godrej Sara Lee Ltd Vs. Com. Assessing Officer, reported in
2023 SCCOnline SC 9695, the Apex Court held that mere availability
of an alternative remedy of appeal or revision, which the party
invoking the jurisdiction of the High Court under Article 226 has not
pursued, would not oust the jurisdiction of the High Court and render
a writ petition “not maintainable”. The Court made it clear that
availability of an alternative remedy does not operate as an absolute
bar to the “maintainability” of a writ petition and that the rule, which
requires a party to pursue the alternative remedy provided by a
statute, is a rule of policy, convenience and discretion rather than a
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rule of law. The Apex Court in further held that dismissal of a writ
petition by a high court on the ground that the petitioner has not
availed the alternative remedy without, however, examining whether
an exceptional case has been made out for such entertainment
would not be proper. The Apex Court further held that where the
controversy is a purely legal one and it does not involve disputed
questions of fact but only questions of law, then it should be decided
by the high court instead of dismissing the writ petition on the
ground of an alternative remedy being available. The relevant
paragraph is extracted below:
“9. Now, reverting to the facts of this appeal, we find that the appellant
had claimed before the High Court that the suo motu revisional power
could not have been exercised by the Revisional Authority in view of the
existing facts and circumstances leading to the only conclusion that the
assessment orders were legally correct and that the final orders impugned
in the writ petition were passed upon assuming a jurisdiction which the
Revisional Authority did not possess. In fine, the orders impugned were
passed wholly without jurisdiction. Since a jurisdictional issue was raised
by the appellant in the writ petition questioning the very competence of
the Revisional Authority to exercise suo motu power, being a pure
question of law, we are of the considered view that the plea raised in the
writ petition did deserve a consideration on merits and the appellants writ
petiton ought not to have been thrown out at the threshold.”
73. Again in Union of India Vs. Parashtom Dass, reported in 2023
SCCOnline SC 314, the Apex Court held that the provision of Article
226 of the Constitution forming part of the basic structure of the
Constitution and that the self-restraint of the High Court under Article
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226 of the Constitution is distinct from putting an embargo on the
High Court in exercising this jurisdiction under Article 226 of the
Constitution while judicially reviewing a decision arising from an
order of the Tribunal. The relevant Paragraphs are extracted below:
“A High Court Judge has immense experience. In any exercise of
jurisdiction under Article 226, the High Courts are quite conscious of the
scope and nature of jurisdiction, which in turn would depend on the
nature of the matter.
We believe that there is no necessity to carve out certain case from
the scope of judicial review under Article 226 of the Constitution, as was
suggested by the learned Additional Solicitor General. It was enunciated in
the Constitution Bench Judgment in S.N. Mukherjee case that even in
respect of courts-martial, the High Court could grant appropriate relief in
a certain scenario as envisaged therein, i.e., “if the said proceedings have
resulted in denial of the fundamental rights guaranteed under Part III of
the Constitution or if the said proceedings suffer from a jurisdictional error
or any error of law apparent on the face of the record.”
There appears to be a misconception that the High Court would re-
appreciate the evidence, thereby making it into a second appeal, etc. WE
believe that the High Courts are quite conscious of the parameters within
which the jurisdiction is to be exercised, and those principles, in turn, are
also already enunciated by this Court.”
74. From a careful analysis of the judgments discussed above, it is
clear that the writ Court can interfere any arbitrary action
notwithstanding the availability of alternative remedy and even at the
stage of issuance of a show cause notice when the authorities act
without jurisdiction or in excess of their jurisdiction vested under the
statute or where there is a procedural irregularity or where the
authority exercises it’s jurisdiction based on extraneous materials it
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ought not to have acted upon or excludes any relevant materials it
ought to have taken into consideration and thereby the action of the
authorities is high handed and it results in a palpably illegal order in
as much the same would amount to violation of Article 14 of the
Constitution of India.
75. The Judgment referred to by the learned counsel for the
respondent namely M/s Sriba Nirman Company Vs. the Commissioner
of Appeals [W.P No. 25826/2023] was rendered by Division bench of
the Andhra Pradesh High Court wherein the petitioner had assailed
the appellate orders passed by the appellate authority upholding the
penalty imposed under Section 74 of the GST Act along with other
penalties imposed in the original order. The respondents have
pressed into service this Judgment to apply the ratio in the Judgment
that in view of Explanation-2 of Section 74 non-declaration of facts or
information and non-filing of monthly returns would amount to
suppression of facts. However, in M/s Sriba Nirman Company (Supra)
are entirely different from the present proceedings. In the present
proceedings, it is not the contention of the respondent that the
returns are not filed. However, the contention of the respondents is
that the information sought for has not been give. As have been
discussed above, the various Judgments with regard to the finding of
the Apex Court as to what would constitute suppression of fact, the
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Judgment referred to by the respondents in the facts of the present
proceedings cannot be said to be applicable and come to their aid. In
the facts of that case, the Apex Court declined to interfere with the
appeal which is preferred by the appellants before the Apex Court.
76. Again in M/S Brahmaputra Television Network Vs. The Union of
India, reported in 2024 0 Supreme (Gau) 855 which is relied upon by
the respondents. Although a Co-ordinate Bench rejected the petition
filed by the petitioner therein challenging the order in appeal filed by
the first appellate authority, the Co-ordinate Bench dismissed the writ
petition on the ground of alternative remedy being available for filing
an appeal before the appellate authority prescribed under the
statute. In that view of the matter, the writ petition filed by the
petitioner therein came to be dismissed. The said Judgment on the
present facts would not be applicable as the Court has held that the
very issuance of the impugned show cause notice by the respondent
authority was done in excessive jurisdiction not conferred by the
statute under Section 74 and under such circumstances, the apex
Court by various Judgments have held that not alternative remedy
being available, writ petitions are maintainable. Respectively, it is the
view of this Court that the Judgment relied upon of the Co-ordinate
Bench would not lend support to the petitioner in the facts and
circumstances in the present proceedings.
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77. The other Judgments relied upon by the respondents rendered
in Union of India Vs. Hindustan Development Corporation, reported
in 1998 Legal Eagle (SC) 73; Union of India and Anr. Vs. Guwahati
Carbon Ltd, reported in 2012 Legal Eagle (SC) 12380; Union of India
& Ors Vs Coastal Container Transporters Association & Ors, reported
in 2019 Legal Eagle (SC) 237; Embassy Property Developments Pvt.
Ltd. Vs. State of Karnataka & Ors, reported in 2019 Legal Eagle (SC)
1284 and Special Director Vs. Mohd. Ghulam Ghouse, reported in
2004 Legal Eagle (SC) 29 are Judgments which are rendered by the
Apex Court where the statutory alternative remedy is prescribed and
therefore the Court declined to allow the claims of the assessee
therein. However, in view of the elaborate discussions the Judgments
above and in view of the conclusions of this Court that the Revenue
did not have the jurisdiction its ought to confer on itself under
Section 74 of the GST Act, 2017, in view of the authoritative findings
by the Apex Court regarding the exception in which the writ petition
is maintainable notwithstanding alternative remedy, this Court
respectfully holds that these Judgments relied upon by the
respondents would not be applicable in the facts and circumstances
of the present proceedings.
78. From a perusal of the show cause notice, it is seen that there is
no clear findings by the respondent authorities or any material to
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that effect placed prior to issuance of the show cause notice before
this Court by the Revenue which reveal that a proper enquiry was
made by the authorities to arrive at least prima facie at a finding that
the petitioner resorted to fraud or mis-statement with the intention
to evade payment of tax. Although the Revenue alleges in the show
cause notice that there was suppression of facts, from the pleadings,
it is seen that the petitioner assessee had submitted the details of
the receipt of the price adjustments in the returns filed before
Income Tax and GST. Those particulars have also been submitted by
the Government of Assam and PWD, NH as also the MoRTH,
Government of India before the Revenue authorities. Therefore,
there was no suppression of facts as per Explanation 2 to Section
74(1) as alleged by the Revenue. The law laid down by the Apex
Court authoratively holds that these pre-conditions must be satisfied
before invocation of the powers under Section 74 of the CGST Act,
2017. On the contrary there are clear averments made in the
affidavit of the respondents that the date of provision of services is
not known precisely but it is surely prior to the dates of the
respective original bills in respect of the price adjustment. The
respondents have also made an averment in his affidavit that the
request made to the Ministry of Road Transport and Highways with
regard to the dates of the completion of the works in respect of 11
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number of bills or price adjustment and the amounts paid to the
petitioner individually for each bill was never received and since there
was an urgency in the matter as investigation in respect of financial
year 2017-18 was involved which was going to be time barred on
2024. It is clear that the complete materials with regard to the
queries raised by the respondent authorities were never within their
possession to arrive at a conclusion that the impugned show cause
under Section 74(1) satisfied the pre-conditions in the facts and
circumstances of the present proceedings and was therefore required
to be issued. It is clear from the averments that the show cause
notice was issued in undue haste as the period of limitation was first
approaching.
79. It is therefore clear that the adjudicating authority has invoked
the extended period of limitation without having arrived at a
conclusion that there was any suppression or misstatement or fraud
or collusion and/or contravention of any of the provisions of the Act
and Rules with the intent to evade payment of any tax and thereby
the issuance of the show cause notice itself after the period the
limitation was absolutely without jurisdiction.
80. Although ordinarily it is the law enunciated by this court as well
as by the Apex Court that an aggrieved assessee ought to avail of
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statutory remedies ascribed or prescribed under the statute, there is
no quarrel with this principle of law. The GST is a complete code in
itself providing for filing of returns, assessments, recovery as well as
for appeals before the appropriate appellate authority. It is equally
not in dispute that at the stage of issuance of a show cause notice,
no rights of the petitioner are violated. However, this is subject to
the requirement that the Revenue has issued the show cause notice
in strict compliance of the statute. Where the statute mandates that
show cause notice under Section 74(1) of the CGST Act, 2017 can be
issued only upon satisfaction of the essential pre-conditions then the
Revenue must necessarily place materials to show that the pre-
conditions are indeed satisfied and therefore it necessitated the
issuance of the show cause notice under Section 74(1) of the CGST
Act, 2017
81. The facts involved in the present proceedings are however
peculiar in essence that this show cause notice was issued by the
respondent authority after invoking the extended period of limitation
under Section 74(1). Therefore, ordinarily in respect of proceedings
seeking recovery of tax demanded, the normal course would be to
relegate the assessee to avail of the statutory remedies prescribed.
However, before the authorities invoke their jurisdiction under
section 74(1), it is the mandate of the statute read with the law
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enunciated by the Apex Court that the authorities must come to a
specific conclusion before the jurisdiction conferred on the revenue
authorities under Section 74 (1) can be invoked in the facts and
circumstances of the present case. As have been elaborately
discussed in the preceeding paragraphs that for invocation of
jurisdiction under section 74(1), the respondent authorities must
come to a conclusion that the invocation of the powers under section
74(1) is necessary as the petitioner’s case falls under any of the pre-
conditions mentioned in section 74(1) of the CGST Act. However,
from the impugned show cause notice, it is seen that the primary
reason for invoking the jurisdiction under section 74(1) is non
furnishing of the required documents/information by the petitioner
assessee to be full satisfaction of the respondent authorities and the
period of limitations. These grounds in itself cannot be construed to
have given rise to a situation that any or all of these pre-conditions
under section 74(1) were satisfied in order to levy service tax by
extending limitation by the revenue authorities
82. Under such circumstances, ordinarily the revenue authorities
could not have issued the impugned show cause notice as it would
have been hit by limitation. The revenue authorities have erroneously
assumed jurisdiction for issuance of the impugned show cause notice
under Section 74. The pre-conditions prescribed under the proviso to
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section 74 (1) are to be scrupulously and diligently followed by the
revenue authorities. It does not depend on the ipse dixit of the
revenue authorities. They must certainly arrive at a specific
conclusion that any or all the pre-conditions exist leading to non-
payment of GST and that it is a deliberate and willful attempt by the
petitioner assessee to evade from payment of the taxes due. The
revenue authorities were within their rights to issue appropriate
notices and carry out proceedings within the ordinary period of
limitation prescribed, if it was their conclusion that on due
examination of the materials before them there was any shortfall in
the payment of GST and the same was required to be recovered.
However, this process for demand and recovery was not initiated
within the period of limitation ordinarily prescribed under the
provisions of the Act for reasons best known. The revenue authorities
instead invoked the provisions under Section 74(1) to issue the show
cause notice for recovery of the demand and imposition of penalty
and interest. It is the considered view of this Court that while
demand and recovery of taxes as ordinarily prescribed under the
provisions of the Act requires careful consideration of the facts and
circumstances and satisfaction of all the parameters prescribed upon,
the demand and recovery under section 74(1) being an exception to
the General Rule, requires a higher degree of responsibility and
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diligence on the part of the revenue authorities before they can
proceed to invoke the powers conferred under section 74 (1).
83. It is a trite law that greater the power prescribed under the
statute, greater will be the responsibility on the authorities on whom
it has been bestowed to ensure that no infraction of the provisions of
the Act and the Rules are made and no injustice is caused to the
assessee during the process of demand and recovery. This Court
while examining the facts and circumstances in minute detail and the
exposition of the law laid down by various Courts including this Court
as well as the Apex court of the country has held that for the
Revenue authorities to invoke the powers under section 74(1), there
must be a conclusive finding by the Revenue authorities that the
petitioner assessee under the facts and circumstances, had willfully
and deliberately evaded or neglected to pay the GST. This conclusion
by the Revenue authorities is not apparent and discernible from a
plain reading of the impugned show cause notice. It is not a case
that the petitioner assessee never responded to the notices issued by
the respondent. It is not a case that the documents which were
called for required to be submitted were not furnished. The Returns
filed by the petitioner assessee were available in the records of the
revenue authorities and which would have given a complete picture
of the services rendered by petitioner assessee and/or whether such
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services come within the ambit of service taxes or are excluded by
any circular or notification issue. However, there is no finding by the
revenue authorities as to why this aspect was not examined. There is
no conclusion of the revenue authorities in this aspect of the matter
as is evident from the impugned order in original. It has been held by
the Apex Court in a recent Judgment rendered in M/s G.R Infra
Limited Ratlam [Civil Appeal No. 11277/2026 (SLP(C) No.
33594/2025] that for extending the period of limitation by invoking
Section 74, the inference of a fraud or concealment resulting in
suppression of facts should emanate from the notice itself.
84 . This being a position, it is a clear case of assumption of
excessive jurisdiction by the Revenue authorities which the statute
did not confer on them such jurisdiction by default. A Writ Court
while exercising its powers under Article 226 can certainly examine
whether the Tribunal or the quasi-judicial authority by exercising its
jurisdiction mandated under the statute has fulfilled the necessary
pre-conditions prescribed by the statute itself. Therefore, under such
circumstances the impugned show cause notice issued under section
74(1) will have to be held by this Court to be invalid and contrary to
the prescriptions mandated by law.
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85 . In the facts and circumstances of the case, it is the conclusion
arrived at by this Court that such preconditions mandated by law
under section 74(1) having not been fulfilled by the Revenue
authorities, their assumption of jurisdiction under section 74(1) of
the GST Act was completely unwarranted and revenue authorities
could not have assumed the jurisdiction under section 74(1) unless
these pre-conditions mandated and a conclusion thereto has been
arrived at by the Revenue authorities before assumption of such
jurisdiction. The very basis of issuance of the show cause notice
under Section 74(1) under the CGST Act, 2017 being unwarranted,
action of the Revenue being arbitrary and unjust, this is a case
where the Court must invoke it’s extra-ordinary jurisdiction to invoke
a prerogative writ as prayed for.
86. It is under these circumstances that notwithstanding that the
proceedings initiated are at the stage of issuance of show cause
notice, this Court considers it an appropriate case to invoke its
jurisdiction under Article 226 to interfere with the impugned show
cause notice and to set aside and quash. Since this Court has held
that the issuance of the impugned show cause notice under Section
74(1) is contrary to the provisions of law, the natural corollary that
would follow is that the levy of all penalty, surcharge and interest are
also not leviable on the petitioner, this Court therefore issues a writ
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of certiorari setting aside the impugned show cause notice and it is
ordered accordingly.
87. Therefore the writ petition stands accordingly allowed.
However no order as to cost. Pending I.A.s are also dismissed and
the interim order if any stands merged.
JUDGE
Sandipon
Comparing Assistant
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