2022 (8) TMI 463 - HC - GST

Challenge to CGST Act Section 16(2) Rejected: Taxpayers Must Follow Statutory Tax Assessment Procedures Without Judicial Interference

M/s SHIVANJALI FASHIONS Versus UNION OF INDIA

HC dismissed the challenge to CGST Act's Section 16(2) 2nd proviso. Court held that show cause notices initiating tax adjudication proceedings cannot be ... Constitutional Validity of 2nd proviso to Section 16(2) of the CGST Act, 2017 - Availabiltiy of ITC subject to payment to debtors within 180 days - whether the provision is ultra vires and dehors the provisions of the India Contract Act, 1872 Act? - violative of Articles, 14, 19(1)(g) and 300A of the Constitution or not? - Petitioner challenged SCN issued by the fourth and fifth respondents which is in the nature of intimation of tax payable under Section 73(5) / 74(5) of the Act read with Rule 142(1A) - HELD THAT:- There is no gain saying that by said show cause notice, the authorities have initiated the adjudicatory proceedings to ascertain the tax liability of the petitioner. It is trite that the court in exercise of its writ jurisdiction, would be disinclined to set aside, much less to stay the show cause notice, more particularly when the impugned show cause notice are adjudication bound. It will be open for the petitioner to raise all contentions in respect of the show cause notice. It is clarified, while issuing rule as above in respect of the first prayer, that the authority shall proceed with the adjudication proceedings pursuant to the show cause notice - Petition disposed off. Issues:Challenge to the vires of the 2nd proviso to Section 16(2) of the CGST Act, 2017 and related demands and show cause notices.Analysis:The petitioner sought to declare the 2nd proviso to Section 16(2) of the CGST Act, 2017 as ultra vires and in violation of the India Contract Act, 1872, as well as Articles 14, 19(1)(g), and 300A of the Constitution. The court acknowledged this challenge but did not grant any relief in this regard. The petitioner also requested the quashing of demand cum show cause notices issued by the respondents, refund of a specific amount paid, and a stay on coercive actions. The court noted that the show cause notices initiated adjudicatory proceedings to determine the petitioner's tax liability. It emphasized that the court, in its writ jurisdiction, is unlikely to set aside or stay such notices, especially when they are adjudication-bound. The petitioner was permitted to raise all contentions regarding the show cause notices during the adjudication proceedings. The court clarified that the challenge to the vires of the provisions would not affect the petitioner's ability to oppose the show cause notices or influence the authorities' decision during the proceedings.This judgment primarily addresses the challenge to the validity of the 2nd proviso to Section 16(2) of the CGST Act, 2017 and the consequential demands and show cause notices issued to the petitioner. The petitioner's contention regarding the ultra vires nature of the provision and its alleged violation of constitutional articles was duly noted by the court. However, the court did not provide any relief in this regard. The court emphasized the importance of allowing adjudicatory proceedings to determine tax liabilities, indicating that show cause notices serve as a crucial step in this process. The petitioner's requests for quashing the notices, refund of a specific amount, and a stay on coercive actions were not granted, with the court clarifying that such actions are typically not favored in writ jurisdiction. The judgment underscores the petitioner's right to present arguments and defenses during the adjudication proceedings, irrespective of the challenge to the vires of the provisions. Additionally, the court clarified that the challenge to the provisions' validity would not impact the authorities' assessment of the case or the petitioner's ability to participate in the proceedings.