2022 (11) TMI 918 - HC - GST

Petition dismissed; contractor held taxable supplier, discrepancies triggered adjudication under Section 73; show-cause notices valid

HC dismissed the petition, holding that the contractor is a taxable supplier and that discrepancies between GSTR-3B returns and WAMIS data properly ... Entertainment of writ petition at show cause notice stage - alternative statutory remedy and self-imposed restriction on writ jurisdiction - determination of tax liability under Section 73 of the GST Act - power and role of the proper officer - WAMIS data vis-a -vis GSTR-3B discrepancy - revised guidelines dated 10.12.2018 for works contract and transitional computation - non-joinder and mis-joinder of necessary parties - contractual allocation of tax liability (change of law clause)Entertainment of writ petition at show cause notice stage - alternative statutory remedy and self-imposed restriction on writ jurisdiction - Whether the writ petition challenging Show Cause Notices dated 06.08.2022 is maintainable at the stage of notice. - HELD THAT: - The Court held that entertaining the writ at the stage of issuance of Show Cause Notices would be premature. Where a statutory remedy exists under the GST scheme for adjudication and appeal, the High Court should ordinarily refrain from exercising Article 226 jurisdiction unless exceptional circumstances (such as lack of jurisdiction, breach of natural justice, or vires of the statute) are shown. The judgment applies settled principles limiting writ interference at the notice stage and relies on authorities establishing the rule of self-imposed restraint in the presence of efficacious alternative remedies. Consequently, the Court declined to quash the show cause process at the notice stage and left the petitioner to avail the statutory adjudicatory process. [Paras 5, 6]Entitlement to writ relief at show cause notice stage denied; invocation of Article 226 is premature and the petition is dismissed.Non-joinder and mis-joinder of necessary parties - pending representation not a bar to tax adjudication - Whether pendency of representations before Executive Engineers (not impleaded) or mis-joinder/non-joinder precludes initiation of proceedings by the CT&GST Officer. - HELD THAT: - The Court found the writ petition incompetent on account of non-joinder and mis-joinder of proper and necessary parties and noted that pendency of representations before authorities who are not parties to the petition cannot be relied upon to oust the jurisdiction of the tax authority. The Executive Engineer is not the competent authority for adjudication of tax liability under the GST Act; hence pendency of such representations does not invalidate or impede the CT&GST Officer from initiating proceedings under Section 73. [Paras 4]Writ incompetent for non-joinder/mis-joinder; pendency of representations before non-impleaded authorities does not bar tax adjudication by the proper officer.Determination of tax liability under Section 73 of the GST Act - power and role of the proper officer - WAMIS data vis-a -vis GSTR-3B discrepancy - Whether the CT&GST Officer was justified in invoking Section 73 on the basis of discrepancy between WAMIS and GSTR-3B returns and in issuing Show Cause Notices for determination of tax not paid/short paid. - HELD THAT: - The Court observed that determination of tax liability is squarely within the remit of the 'proper officer' under the GST Act and that issuance of a show cause under Section 73 on the basis of a discrepancy between the departmental data (WAMIS) and returns (GSTR-3B) is a permissible exercise to initiate adjudication. The petitioner must justify the figures disclosed in Form GSTR-3B vis-a -vis the WAMIS data before the assessing authority; the existence of a pending representation to a non-tax authority does not preclude the assessing authority from proceeding. The Court emphasised that factual disputes as to amounts or entitlement are for the statutory adjudicatory process to resolve. [Paras 4, 5]Proper officer was competent to invoke Section 73 and issue Show Cause Notices based on WAMIS-GSTR-3B discrepancy; adjudication must proceed through statutory process.Revised guidelines dated 10.12.2018 for works contract and transitional computation - contractual allocation of tax liability (change of law clause) - Whether the Revised Guidelines dated 10.12.2018 are valid and address the petitioner's claim for reimbursement arising from the introduction of GST for contracts awarded prior to 01.07.2017. - HELD THAT: - The Court upheld the Revised Guidelines of 10.12.2018 as the relevant policy for computing transitional tax effects in works contracts spanning the introduction of GST. The guidelines prescribe bifurcation of work into pre- and post-GST components, derivation of tax-exclusive values, application of revised Schedule of Rates and addition of applicable GST rates to the balance work, and provide for supplementary agreements and recovery/reimbursement mechanisms. The petitioner's reliance on the earlier 07.12.2017 circular was treated as misplaced, and the Court noted that the Revised Guidelines rationally determine the methodology to ascertain GST-inclusive values for balance work. [Paras 4]Revised Guidelines dated 10.12.2018 are valid and constitute the proper basis for addressing transitional claims; petitioner cannot rely on the superseded circular to derail tax adjudication.Final Conclusion: The writ petition challenging the Show Cause Notices dated 06.08.2022 is dismissed as premature; the proper officer is entitled to proceed under Section 73 after affording the petitioner opportunity of hearing, the petitioner must avail statutory remedies and the Revised Guidelines dated 10.12.2018 govern transitional computation; parties to bear their own costs. Issues Involved:1. Validity of Demand-cum-Show Cause Notices under GST Act.2. Reimbursement of differential tax due to change from VAT to GST.3. Competence of the CT&GST Officer to initiate proceedings under Section 73 of the GST Act.4. Non-joinder and mis-joinder of necessary parties.5. Jurisdiction of the High Court under Article 226/227 of the Constitution of India.Issue-wise Detailed Analysis:1. Validity of Demand-cum-Show Cause Notices under GST Act:The petitioner sought to quash the Demand-cum-Show Cause Notices dated 06.08.2022 issued by the CT&GST Officer, Angul Circle, for the tax periods 2017-18 and 2018-19. The notices were issued under Section 73 of the GST Act due to discrepancies between the figures furnished in Form GSTR-3B and the data available in the WORKS AND ACCOUNTS MANAGEMENT INFORMATION SYSTEM (WAMIS). The petitioner argued that these notices were ultra vires, illegal, and unconstitutional. However, the court held that the proper officer is competent to initiate proceedings under Section 73 for determining tax liability and that the notices are not invalid or vague.2. Reimbursement of Differential Tax Due to Change from VAT to GST:The petitioner contended that the change in tax regime from VAT to GST, effective from 01.07.2017, necessitated reimbursement of the differential tax by the contractee. The petitioner referred to guidelines issued by the Government of Odisha, which provided a modality for reimbursement. The court noted that the Revised Guidelines dated 10.12.2018 addressed this issue and required the contractor to bear all taxes, including GST. The court found that the petitioner's reliance on earlier guidelines dated 07.12.2017 was an attempt to misguide the court.3. Competence of the CT&GST Officer to Initiate Proceedings under Section 73 of the GST Act:The court examined whether the CT&GST Officer of Angul Circle was competent to initiate proceedings under Section 73 of the GST Act. It was held that the officer, functioning as the 'proper officer,' was indeed competent to initiate such proceedings based on discrepancies between the tax liability disclosed in GSTR-3B and the WAMIS data. The court emphasized that the determination of tax liability is within the domain of the proper officer, as defined under Section 2(91) of the GST Act.4. Non-joinder and Mis-joinder of Necessary Parties:The court found that the writ petition was incompetent due to non-joinder and mis-joinder of necessary parties. The petitioner had not impleaded the Executive Engineer of Rengali Right Canal Division No.II, Dhenkanal, against whom no relief could be asserted. Therefore, the court held that the petition lacked merit on this ground.5. Jurisdiction of the High Court under Article 226/227 of the Constitution of India:The court reiterated the principle of self-imposed restriction on entertaining writ petitions at the stage of show cause notices. It emphasized that the petitioner should exhaust alternative remedies available under the statutory framework before invoking the extraordinary jurisdiction of the High Court. The court cited several precedents, including the Supreme Court's decisions in Star Paper Mills Ltd. v. State of U.P. and Commissioner of Income Tax v. Chhabil Dass Agarwal, to support this principle. The court concluded that meddling at the stage of show cause notices would be premature and contrary to settled principles.Conclusion:The writ petition was dismissed as the court found no merit in the contentions raised by the petitioner. The court held that the proper officer was competent to initiate proceedings under Section 73 of the GST Act and that the petitioner should exhaust alternative remedies before seeking relief under Article 226 of the Constitution of India.