Writ Petition Against Show Cause Notice Maintainable Despite Alternative Appeal Remedy Under Malladi Drugs Rule

The HC held that a writ petition challenging a show cause notice (SCN) on grounds of jurisdictional error, arbitrariness, and illegality is maintainable despite the availability of an alternative remedy of appeal. Relying on the SC precedent in Malladi Drugs, the Court affirmed that dismissal of a writ petition solely because an SCN was issued is improper. The Court recognized that maintainability and entertainability of writ petitions are distinct issues and that self-imposed limitations should not bar the exercise of writ jurisdiction. Consequently, the HC issued a Rule, indicating the petition would be heard on merits rather than dismissed on procedural grounds.

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Issues Involved:
1. Jurisdiction of the show cause notice under Section 74 of the GST Act.
2. Whether the road restoration work by AMC constitutes a taxable supply under GST.
3. Availability of alternative remedy and maintainability of the writ petition.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Show Cause Notice under Section 74 of the GST Act:
The petitioner challenged the show cause notice dated 30.11.2022 issued under Section 74 of the GST Act, claiming it was without jurisdiction, arbitrary, and illegal. The petitioner, engaged in the business of electricity transmission and distribution, argued that the road reinstatement charges paid to AMC were not subject to GST as the AMC's restoration work was part of its sovereign function under Article 243W of the Constitution of India. The petitioner contended that there was no element of supply involved in the transaction, and thus, no GST was applicable.

2. Whether the Road Restoration Work by AMC Constitutes a Taxable Supply under GST:
The respondent argued that the petitioner was liable to pay GST on a reverse charge basis for the road restoration services provided by AMC. According to the respondent, the road restoration work was not part of AMC's sovereign function and thus did not qualify for exemption under Entry 4 of Notification No.12/2017 of the Central Tax (Rate) dated 28.06.2017. The respondent emphasized that the petitioner, as a recipient of services, should pay GST on the road restoration charges. The petitioner countered this by stating that the road restoration work was a statutory obligation of AMC and not a service requested by the petitioner.

3. Availability of Alternative Remedy and Maintainability of the Writ Petition:
The respondent argued that the petitioner should exhaust alternative legal remedies before approaching the High Court. They cited several decisions, including the case of Malladi Drugs and Pharma Limited vs. Union of India, where the Supreme Court held that the availability of an alternative remedy does not bar the maintainability of a writ petition. The Court noted that while the writ jurisdiction should not be invoked routinely when an alternative remedy exists, the High Courts have discretion to entertain writ petitions based on the facts of each case. The Court decided to issue the Rule, acknowledging that the issue raised required consideration and that the mere availability of an alternative remedy would not preclude the Court from entertaining the petition.

Conclusion:
The Court recognized the distinct concepts of "entertainability" and "maintainability" of a writ petition, emphasizing that the availability of an alternative remedy does not automatically render a writ petition non-maintainable. The Court issued the Rule but did not grant an interim stay on the proceedings pursuant to the impugned show cause notice. The petitioner was advised to approach the Court if any adjudication affected its rights.

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