2024 (9) TMI 1848 - HC - GST

Writ challenges extended limitation under Section 74(1) CGST for TRAN-1 credit; affidavits ordered on jurisdictional issue

HC entertained the writ petition challenging invocation of the extended limitation period under Section 74(1) of the CGST Act for alleged wrongful ... Invocation of the extended period on the basis of a claim that the petitioners did not produce the desired documents - availment of transitional credit - wilful misstatement of facts or not - HELD THAT:- From the perusal of the notice issued under Section 74(1) of the said Act dated 24th July, 2024, it would appear that the only ground for invocation of the extended period appears to be the allegations that the petitioners did not produce the desired documents/records in connection with the verification of their claim for availment of transitional credit u/s 140 of the said Act (TRAN1). It would, however, appear that in the SCN, the proper officer has also recorded that the petitioners have made wilful misstatement. It is found that in the instant case, the extended period of limitation has been invoked. Although, the respondents contend that the petitioners did not produce the desired documents, which is the foundation for invoking the extended period, there is no other ground on which the extended period has been invoked. Since, the jurisdictional issue as regards the invocation of the extended period has been raised, the matter should be heard upon exchange of affidavits. Accordingly, let affidavit-in-opposition to the present writ petition be filed within a period of six weeks from date. Reply thereto, if any be file within three weeks after the annual vacation - Liberty to mention after expiry of the period for exchange of affidavits. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the allegations in the show cause notice under Section 74 of the CGST/WBGST Act, 2017, based solely on non-production of desired documents/records regarding TRAN-1 transitional credit under Section 140, are sufficient to invoke the extended period of limitation on the ground of 'wilful misstatement'. 1.2 Whether, at the show cause notice stage, the Court should interfere on the jurisdictional ground relating to invocation of the extended period of limitation and regulate further proceedings before the proper officer. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Sufficiency of grounds in the show cause notice to invoke extended period under Section 74 Interpretation and reasoning: 2.1 The Court noted from the show cause notice under Section 74(1) that the only ground cited for invoking the extended period of limitation was the allegation that the petitioners did not produce the desired documents/records in connection with verification of their claim for transitional credit under Section 140 (TRAN-1). 2.2 The show cause notice simultaneously recorded that the petitioners had made 'wilful misstatement', yet no ground beyond non-production of documents was set out as the foundation for invoking the extended period. 2.3 The Court treated this as raising a jurisdictional issue concerning the legality of invoking the extended period of limitation under Section 74 on such a basis. Conclusions: 2.4 The Court found that a prima facie case had been made out by the petitioners regarding the challenge to the invocation of the extended period, warranting examination upon exchange of affidavits. 2.5 The question of validity of invoking the extended period of limitation on the stated grounds was not finally decided and was kept open for consideration after affidavits. Issue 2: Scope of judicial interference at show cause stage and directions regulating further proceedings Interpretation and reasoning: 2.6 The Court accepted that the matter was at the show cause notice stage and that ordinarily the assessee should respond to the notice and the proper officer should adjudicate in accordance with law. 2.7 However, in view of the jurisdictional issue regarding invocation of the extended period and the prima facie case found in favour of the petitioners, the Court considered it appropriate to retain supervisory control over the outcome of the adjudication under the impugned notice. Conclusions: 2.8 The petitioners were permitted to file their response to the show cause notice without prejudice to their rights and contentions in the writ petition, with an extended time of two weeks granted for filing such response. 2.9 The proper officer was permitted to proceed with adjudication of the show cause notice after giving an opportunity of personal hearing to the petitioners, but was restrained from communicating or uploading the final order on the portal without leave of the Court. 2.10 Directions were issued for filing affidavit-in-opposition within six weeks and reply, if any, within three weeks thereafter, with liberty to mention the matter after completion of affidavit exchange and liberty to apply as necessary.