2024 (11) TMI 588 - HC - GST

Municipal corporations must exhaust statutory remedies before challenging GST show cause notices in writ jurisdiction

Oberoi Constructions Ltd., K. Raheja Private Ltd., M/s Bridgeview Real Estate Development LLP, Neepa Real Estates Private Limited, Roma Builders Private Limited, Glider Buildcon Realtors Private Limited Versus The Union of India, through the Revenue Secretary Ministry of Finance, New Delhi Versus The Joint Commissioner, circle - G CGST & CEx, (Audit-II), Mumbai, The Commissioner of CGST & CEx, Mumbai, The Additional Commissioner, CGST CX, Mumbai, The Joint Commissioner, CGST Mumbai, The State of Maharashtra, Municipal Commissioner, Municipal Corporation of Greater Mumbai., The Commissioner of State Tax Mumbai, The Assistant Commissioner of State Tax, Investigation - C, Mumbai, The Joint Commissioner, CGST & C Ex, (Audit – II), Mumbai, The Commissioner of CGST & Cex, Mumbai.

The Bombay HC dismissed writ petitions challenging show cause notices (SCNs) issued under CGST, IGST, and MGST Acts. Petitioners, including municipal ... Jurisdiction of SCN - Challenge is to the SCN issued by the respondent under the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act), Integrated Goods and Services Tax Act, 2017 (IGST Act) and Maharashtra Goods and Services Tax Act, 2017 (MGST Act) - HELD THAT:- In most of these petitions, the petitioners have questioned the impugned show cause notices cum tax demands without participating in the adjudication process in pursuance of the impugned show cause notices. In one of the petitions, leave is sought to amend by challenging the order made on the impugned show cause notice during the petition's pendency. In yet another petition, the challenge is to the order made after adjudication of the show cause notice, among other things, on the ground that the show cause notice was itself without jurisdiction. he main contention is that taxes have been demanded for services in relation to functions entrusted to the MCGM under Article 243W of the Constitution, even though the exemption notifications exempt or precisely impose only a nil tax rate on such services. No case is made out to establish that such a contention cannot be considered by the adjudicating authorities or the appellate authorities should the adjudication be complete and the adjudication orders affect any parties adversely. The contention that these petitions involve no disputed questions of fact cannot be accepted. The factual element regarding each of the demands will have to be examined and evaluated against the backdrop of the exemption or the nil tax rate notifications relied upon by the petitioners. The adjudicating authority will also have to determine whether the activities or services regarding which tax is demanded relate to any functions entrusted to the MCGM under Article 243W of the Constitution. In Whirlpool Corporation [1998 (10) TMI 510 - SUPREME COURT], the Hon’ble Supreme Court explained that Writ Petitions may be entertained against show cause notices where the petitioners seek enforcement of any fundamental rights, where there is a violation of principles of natural justice or where the order or proceedings are wholly without jurisdiction or where the vires of the Act is itself challenged. None of these circumstances are made out in the present batch of petitions. Simply alleging that the impugned show cause notices are without jurisdiction because, according to the petitioners’ perception, the exemption covers them, or the nil tax rate notification is insufficient. The usual adjudicatory process, where such a matter can be effectively adjudicated upon, cannot be scuttled by rushing to the writ court and securing stays on the adjudicatory process. In the present petitions, the issue of whether the petitioners’ cases are covered by the exemption notification or the nil tax rate notification is debatable. The petitioners themselves accept that some of the services in the SCN may attract exemption and others may not. Ordinarily, SCNs cannot be split or quashed, especially where there are arguable issues on either side. In any case, the resolution would require examination into several factual aspects. In such situations, the contention of the SCN being wholly without jurisdiction cannot be accepted. Thus, no case has been made by any of the petitioners to bypass the statutory alternate remedies and insist upon the entertainment of these petitions. No case is also made to grant the petitioner in Writ Petition No. 3624/2024 leave to amend the Writ Petition and challenge the order dated 30 April 2024 - petition dismissed. Issues Involved:1. Challenge to the show cause notices under the CGST Act, IGST Act, and MGST Act.2. Jurisdiction and validity of the show cause notices.3. Applicability of exemption notifications and nil tax rate.4. Exhaustion of alternate remedies and the role of writ jurisdiction under Article 226 of the Constitution.Detailed Analysis:1. Challenge to the Show Cause Notices:The petitions primarily challenge the show cause notices issued under the Central Goods and Services Tax Act, 2017 (CGST Act), Integrated Goods and Services Tax Act, 2017 (IGST Act), and Maharashtra Goods and Services Tax Act, 2017 (MGST Act). The petitioners argue that the notices demand taxes on services rendered by the Municipal Corporation of Greater Mumbai (MCGM) for functions entrusted under Article 243W of the Constitution, which are exempted or subject to a nil tax rate as per Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017.2. Jurisdiction and Validity of the Show Cause Notices:The petitioners contend that the show cause notices are without jurisdiction, as they demand service tax on activities exempted by the notification. They argue that the notices are arbitrary and issued in violation of principles of consistency and judicial discipline. The respondents counter that the petitioners should respond to the notices through the adjudication process, which includes statutory appeals, and that the notices are not without jurisdiction.3. Applicability of Exemption Notifications and Nil Tax Rate:The core argument from the petitioners is that services related to functions entrusted to MCGM under Article 243W are exempt from tax or subject to a nil tax rate. The respondents argue that not all services provided by MCGM fall under this exemption, and each activity must be scrutinized to determine its eligibility for exemption. The court notes that determining the applicability of the exemption requires a factual examination, which is best suited for the adjudicatory process rather than the writ jurisdiction.4. Exhaustion of Alternate Remedies and Role of Writ Jurisdiction:The court emphasizes the principle of exhausting alternate remedies before seeking relief under Article 226. The petitioners have statutory remedies available, including appeals against any adverse orders post-adjudication. The court cites precedents indicating that writ petitions should not be entertained merely to bypass statutory remedies, especially when factual determinations are involved. The court concludes that the petitioners have not made a case for bypassing these remedies, as the issues involve factual disputes that require adjudication.Conclusion:The court dismisses the petitions, granting the petitioners liberty to pursue alternate statutory remedies. The court underscores the importance of following the adjudicatory process to resolve the factual disputes involved in the applicability of exemption notifications. The petitions are dismissed with directions to the petitioners to respond to the show cause notices or file appeals within the stipulated time frame, ensuring compliance with statutory requirements, including pre-deposit conditions. The court vacates any interim orders and disposes of interim applications, reiterating that the petitioners have not justified bypassing the available alternate remedies.