2021 (9) TMI 480 - SC - GST

Alternative remedy under Section 107 must be exhausted before challenging tax collection through writ petition

SC dismissed writ petition filed under Article 226 challenging tax and penalty collection in inter-State sale case. Court held that respondent had ... Maintainability of writ under Article 226 - alternative statutory remedy under Section 107 of the CGST Act - exceptions permitting writ despite alternative remedy: breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, challenge to vires - scope for judicial interference where factual assessment requiredMaintainability of writ under Article 226 - alternative statutory remedy under Section 107 of the CGST Act - exceptions permitting writ despite alternative remedy: breach of fundamental rights, violation of principles of natural justice, excess of jurisdiction, challenge to vires - Whether the High Court ought to have entertained the writ petition under Article 226 instead of relegating the respondent to the remedy under Section 107 of the CGST Act. - HELD THAT: - The Supreme Court held that the respondent had a statutory remedy under Section 107 and, having not invoked it, the High Court should not have entertained the writ petition. While the existence of an alternative remedy is not an absolute bar to a writ under Article 226, such jurisdiction is permissible only in exceptional circumstances - namely a breach of fundamental rights, violation of natural justice, excess of jurisdiction, or a challenge to the vires of the statute or delegated legislation. The Court found that none of these exceptions was established on the record: a notice was served on the person in charge of the conveyance and there was no demonstrated infringement of natural justice or other exceptional circumstance. Further, the Court observed that the High Court had engaged in an assessment of facts and proceeded on surmises, a task more appropriately performed by the appellate authority under the statutory scheme. Consequently, the High Court's exercise of writ jurisdiction was inappropriate and the matter should be pursued through the appellate mechanism provided by Section 107. [Paras 11, 12, 13]The High Court order was set aside; the writ petition is dismissed and the respondent is relegated to pursue remedies under Section 107 of the CGST Act.Final Conclusion: Appeal allowed. The High Court's order setting aside the collection of tax and penalty is set aside and the writ petition dismissed; respondent may pursue statutory remedies under Section 107 of the CGST Act. Issues:Appeal from High Court judgment setting aside tax and penalty collection under CGST and SGST Acts, direction for refund with interest, and disciplinary action against Assistant Commissioner.Analysis:1. High Court Judgment: The High Court, under Article 226, set aside tax and penalty collection by the appellants, directing a refund with interest and ordering disciplinary proceedings against the Assistant Commissioner. The case involved a business concern engaged in iron and steel trade, intercepted while transporting goods from Karnataka to Telangana, leading to a dispute over tax evasion.2. Grounds for High Court Decision: The High Court found no evidence of an attempt to evade CGST and SGST, emphasizing the possibility of the driver getting lost, justifying the interception. The Court highlighted that mere suspicion of local sale does not warrant such actions, leading to the refund order and disciplinary directions.3. Challenges to High Court Judgment: The appellant contended that the High Court erred in entertaining the writ petition under Article 226, emphasizing the availability of statutory remedy under Section 107 of the CGST Act. The appellant argued that the High Court based its decision on assumptions rather than facts.4. Statutory Remedy Under Section 107: Section 107 provides for appeals against decisions under the CGST Act within three months, requiring payment of admitted tax amounts and a percentage of disputed tax for filing an appeal. The respondent failed to avail this statutory remedy, opting for a writ petition instead.5. Court's Decision: The Supreme Court allowed the appeal, setting aside the High Court's order and dismissing the respondent's writ petition. The Court emphasized the importance of exhausting statutory remedies before seeking judicial intervention under Article 226, refraining from commenting on the merits of the case.6. Final Verdict: The respondent was directed to pursue remedies under Section 107 of the CGST Act for addressing grievances against the state's actions. The Court's decision highlighted the significance of following statutory procedures before resorting to writ petitions, ensuring proper adjudication and assessment of facts by the appellate authority.