Petitioner challenges department's invocation of Section 74(1) CGST Act 2017 for disputed amounts in show cause notices

The HC issued notice in a petition challenging invocation of jurisdiction under Section 74(1) of the CGST Act, 2017 regarding amounts raised in show cause notices. The petitioner contended that the department should not invoke this provision against them for the disputed amounts. The court, after hearing counsel and reviewing materials, directed issuance of notice returnable in two weeks. Respondents were granted time to complete instructions and file counter affidavit if advised. The matter was listed for hearing on 09/12/2024. The case remains pending with no final determination on the merits of the petitioner's challenge to the department's jurisdictional invocation.

---

---

Issues:
Challenge to show cause notice under Section 74(1) of the CGST Act, 2017.

Analysis:
The writ petition challenges a show cause notice issued to the petitioner by the Joint Director, GST Intelligence, Guwahati Zonal Unit under Section 74(1) of the CGST Act, 2017. The petitioner argues that for the Department to invoke jurisdiction under this section, there must be prima facie evidence of wilful suppression, misstatement, or fraud leading to revenue loss. The petitioner asserts that the tax amounts paid are duly acknowledged in the department portal, reflecting compliance. Reference is made to a circular by the Central Board of Direct Taxes and Customs instructing authorities not to invoke Section 74(1) without clear instances of wilful acts. The petitioner contends that failure to pay appropriate GST alone is insufficient grounds for invoking the section.

The petitioner emphasizes that the circular issued by the competent authority binds departmental officers, and any assumption of jurisdiction must align with these guidelines. It is argued that the show cause notice does not indicate a consideration of the circular, suggesting a lack of authority in initiating action under Section 74 against the petitioner. The petitioner asserts that in cases where jurisdiction is assumed without proper authority, alternative statutory remedies may not be effective, necessitating intervention by the constitutional court under Article 226 of the Constitution.

Furthermore, the petitioner refers to a judgment of the Apex Court to support the argument that the petitioner should not be compelled to participate in proceedings initiated contrary to established legal principles and departmental instructions. The petitioner requests the issuance of appropriate orders and interim protection during the pendency of the case. The respondent, represented by standing counsel, seeks time to obtain instructions and acknowledges potential benefits from recent amendments to the GST Act based on GST Council recommendations.

After hearing arguments from both parties and reviewing the materials, the court decides to issue notice returnable in two weeks. The respondents are directed to complete their instructions and file a counter affidavit if necessary. Pending further proceedings, actions related to the show cause notice are stayed until the next listing date. The case is scheduled for the next hearing on a specified date, and extra copies of the writ petition are to be provided to the respondent's counsel promptly.

---