2024 (10) TMI 1030 - HC - GST

Road Construction Companies Get Extended Time to Respond to GST Show Cause Notice Under Section 74(1)

M/s Mapex Infrastructure Pvt. Ltd. & Anr. Versus The Additional Director, Directorate General of Goods & Service Tax Intelligence, Kolkata Zonal Unit, Kolkata & Ors.

HC ruled on a GST dispute involving road construction annuity payments. The court extended response time for petitioners challenging a show cause notice ... Challenge to SCN u/s 74(1) of the WBGST/CGST Act, 2017 - validity of circular related to GST exemption on annuity payments for road construction - invocation of Section 74 of the Act - HELD THAT:- Ordinarily, in relation to a challenge to the show cause notice, no interference is called for. However, taking note of the fact that a jurisdictional issue has been raised, the matter may require further consideration. However, since, the parties submit that time to respond to the show cause notice has already expired, at this stage it would be prudent to permit the petitioners to respond to the show cause notice. Accordingly, time to respond to the show cause notice is extended till 4th November 2024. List this matter under the same heading for further consideration on 12th November 2024. Issues:Challenging a show cause notice under Section 74(1) of the WBGST/CGST Act, 2017 and validity of circular related to GST exemption on annuity payments for road construction.Analysis:1. The petitioners filed a writ petition challenging a show cause notice dated 2nd August 2024 under Section 74(1) of the WBGST/CGST Act, 2017, regarding tax period from July 2017 onwards. They also contested the validity of circular 150/06/2021-GST dated 17th June 2021, which was deemed contrary to the said Act. The petitioners argued against the imposition of a demand amounting to Rs.33,30,00,000, claiming exemption based on previous GST regulations exempting annuity payments for road services.2. The petitioners were involved in a project for four-laning NH 2 in West Bengal, where a Special Purpose Vehicle was incorporated for project execution. They received annuity payments totaling Rs.277.50 crore between July 2017 and December 2019. The petitioners contended that toll charge payments for road access were always GST exempt. However, a circular dated 17th June 2021, post the 43rd GST Council meeting, introduced changes stating that annuity payments for road construction were not exempt from GST. This change led to the issuance of the impugned show cause notice alleging non-exemption eligibility, triggering the demand.3. The petitioners' counsel argued against the invocation of Section 74 of the said Act, emphasizing the lack of grounds for its application. They sought a stay on the show cause notice based on various challenges raised in the petition. On the other hand, the respondent no. 1's counsel contended that as the petitioners had not yet responded to the notice, there was no basis for a stay. The court considered the jurisdictional issue raised and extended the time for the petitioners to respond until 4th November 2024, allowing for further consideration.4. The court acknowledged that interference in a challenge to a show cause notice is not usual but noted the jurisdictional concern raised by the petitioners. It decided to permit the petitioners to respond to the notice due to the expired response time. The proper officer was granted the authority to proceed with adjudication after providing a hearing opportunity to the petitioners. Any determination made during adjudication was to be subject to the outcome of the writ petition, with the matter scheduled for further consideration on 12th November 2024. Additionally, the parties were given liberty to apply for further interim orders on the returnable date.