Writ petition challenging GST classification of Kulcha as bread dismissed for being non-maintainable

The Calcutta HC dismissed a writ petition challenging a show cause notice regarding misclassification of Kulcha as bread under GST exemption and denial of input tax credit. The court held the petition non-maintainable as it involved complex questions of fact and law within the adjudicating authority's jurisdiction under CGST Act, 2017. The court emphasized that writ jurisdiction is limited to cases involving fundamental rights violations, natural justice breaches, or jurisdictional issues, none of which were established. The petitioner was directed to exhaust statutory remedies including responding to the SCN and participating in adjudication proceedings rather than bypassing the statutory framework.

---

---

Issues Involved:

1. Jurisdiction and validity of the Show Cause Notice (SCN) under the CGST Act.
2. Invocation of the extended period of limitation under Section 74 of the CGST Act.
3. Allegations of misclassification of goods and denial of exemption.
4. Denial of reduction in tax liability based on credit notes and non-reversal of Input Tax Credit (ITC).
5. Procedural defects in the issuance of SCN, including absence of pre-SCN intimation.
6. The applicability of restrictions on ITC for goods used in internal testing.
7. Bunching of demands for multiple financial years.
8. Maintainability of the writ petition and the jurisdiction of the High Court.

Detailed Analysis:

1. Jurisdiction and Validity of the SCN:
The petitioner challenged the jurisdiction and validity of the SCN, arguing it was issued in violation of the principles of natural justice. The SCN was alleged to lack evidence of fraud, suppression, or wilful misstatement, which are prerequisites for invoking the extended period of limitation under Section 74 of the CGST Act. The court, however, refrained from adjudicating these issues, stating that they involve complex questions of fact and law best addressed by the adjudicating authority under the CGST Act.

2. Extended Period of Limitation:
The petitioner contended that the extended period of limitation was invoked without jurisdiction, as the SCN failed to establish fraud or wilful misstatement. The court noted that the invocation of the extended limitation period is a mixed question of law and fact, falling under the jurisdiction of the adjudicating authority. The respondents argued that the extended period was validly invoked due to the petitioner's wilful misclassification of goods and availing of ineligible ITC with the intent to evade tax.

3. Misclassification of Goods and Denial of Exemption:
The SCN accused the petitioner of misclassifying "Kulcha" as "bread" to wrongfully avail of tax exemption. The petitioner argued that this classification issue did not demonstrate a deliberate intention to evade tax. The court emphasized that determining whether a product falls within a tariff entry is a factual matter requiring adjudication by the appropriate authority.

4. Denial of Reduction in Tax Liability:
The SCN denied the reduction of the petitioner's tax liability based on credit notes, arguing non-compliance with a circular imposing additional requirements. The petitioner contended that such requirements were beyond statutory provisions and that the department's insistence on verifying ITC reversals was untenable. The court did not delve into these issues, as they require factual inquiry by the adjudicating authority.

5. Procedural Defects in SCN Issuance:
The petitioner highlighted procedural defects, such as the absence of pre-SCN intimation in Form GST DRC-01A, rendering the proceedings defective. The court did not address these procedural issues, as they are part of the factual and legal questions to be decided by the adjudicating authority.

6. Applicability of ITC Restrictions:
The SCN categorized goods used for internal testing as free samples, thereby restricting ITC. The petitioner argued that these goods were not distributed as free samples, making Section 17 (5) (h) inapplicable. The court did not adjudicate this issue, leaving it to the appropriate authority to determine.

7. Bunching of Demands:
The SCN combined demands for multiple financial years, which the petitioner argued violated the CGST Act's requirement for year-wise determination. The court did not address this issue, as it involves factual determinations best suited for the adjudicating authority.

8. Maintainability of the Writ Petition:
The court dismissed the writ petition, stating that it is not maintainable as the issues involve complex factual and legal questions within the jurisdiction of the adjudicating authority. The court reiterated that writ courts do not interfere where statutory remedies are available unless there is a clear violation of fundamental rights, lack of jurisdiction, or procedural perversity leading to manifest injustice. The petitioner was advised to exhaust statutory remedies under the CGST Act, including responding to the SCN and participating in adjudication proceedings.

In conclusion, the court dismissed the writ petition, emphasizing the need for the petitioner to address the issues through the statutory framework under the CGST Act. The court refrained from expressing any opinion on the merits of the petitioner's claims, directing the adjudicating authority to independently decide the matter based on evidence and submissions.

---