2025 (3) TMI 482 - HC - GST

Appeal Disposed, Challenge to Rule 31A(3) CGST/WBGST Kept Open, Liberty Given for Fresh Application per SC order

HC disposed of the appeal without adjudicating the challenge to Rule 31A(3) of the CGST/WBGST Rules and the related circular, noting that a corrigendum to ... Seeking to declare Rule 31A(3) of the Central Goods and Services Tax Rules, 2017 and West Bengal Goods and Services Tax Rules, 2017 along with Circular No.27/01/2018-GST dated January 4, 2018 to be ultra vires Article 14 of the Constitution of India and Section 2 (52), Section 7 and Section 15 of the C.G.S.T. Act, 2017 and W.B.G.S.T. Act, 2017 - HELD THAT:- The respondents submitted that after the show-cause notice was issued, a Corrigendum dated 10th December, 2024 was issued whereby the appropriate portions of the show-cause notice dated 24th July, 2024 was amended and the showcause notice was made answerable to the Additional/Joint Commissioner of CGST & CX, Bengaluru East Central Tax Commissionerate, Bengaluru and the appellants/writ petitioners had also participated in the adjudication process and the adjudicating authority has passed orders. This issue need not be adjudicated at this juncture and the same is kept open and left to be decided when the writ petition is taken up for hearing. Appeal disposed off giving liberty to the appellants/writ petitioners to file a separate application before the learned Single Bench and seeking for appropriate orders in the light of the order passed by the Hon’ble Supreme Court dated 22nd January, 2025 and if such application is filed, the Hon’ble Single Bench is at liberty to decide the matter on merits and in accordance with law. ISSUES PRESENTED AND CONSIDERED 1. Whether Rule 31A(3) of the Central Goods and Services Tax Rules, 2017, the corresponding State rule and Circular No.27/01/2018-GST are constitutionally invalid under Article 14 and contrary to Sections 2(52), 7 and 15 of the C.G.S.T. Act, 2017 (and corresponding State Act). 2. Whether the show-cause notice issued under Section 74 of the C.G.S.T. Act is illegal, bad in law, without jurisdiction, arbitrary and unreasonable. 3. Whether an intra-Court appeal against a limited interim order may be entertained on the basis of a subsequent order of the Supreme Court (filed/issued after the interim order), and what reliefs are appropriate where a higher court subsequently stays show-cause notices. 4. Whether the adjudicating authority named in the show-cause notice had territorial/subject-matter jurisdiction to adjudicate, given alleged change of the registered place of business across States, and the effect of a subsequent corrigendum altering the adjudicating authority. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of Rule 31A(3) / Circular vis-à-vis Article 14 and statutory provisions Legal framework: Constitutional guarantee of equality under Article 14 and the statutory regime governing levy, determination and adjudication of GST as set out in the C.G.S.T. Act and Rules; administrative circulars interpret/operationalise rules. Precedent treatment: The Single Bench had admitted petitions with identical challenges and granted limited interim relief in a coordinate decision; no final adjudication on constitutional validity was undertaken in the impugned order before this Court. Interpretation and reasoning: The Court did not adjudicate the constitutional challenge on its merits. The impugned intra-Court appeal sought to overturn a limited interim order; the Court declined to decide the substantive constitutional question at this stage because the appellants relied primarily on a subsequent Supreme Court order issued after the interim order. Ratio vs. Obiter: It is obiter that the constitutional challenge remains open for adjudication before the Single Bench - the Court expressly refrained from any ruling on the validity of Rule 31A(3) or the Circular and left the matter to be decided on merits. Conclusions: No determination on constitutional validity; plaintiffs permitted to seek modification of the interim order before the Single Bench and to press the constitutional challenge there. Final decision on this issue must await full hearing and merits adjudication. Issue 2 - Legality of the show-cause notice under Section 74 Legal framework: Section 74 confers power to issue show-cause notices for tax-related demand, interest, penalty arising from suppression, fraud or similar allegations; natural justice and adjudicatory jurisdiction principles apply. Precedent treatment: A coordinate Single Bench's limited interim order in like matters and a later Supreme Court order staying show-cause notices were noted by the Court; no precedential overruling occurred. Interpretation and reasoning: The Court evaluated only the propriety of entertaining the intra-Court appeal in light of the subsequent Supreme Court order and did not decide the legal validity of the impugned show-cause notice. The Court observed that the Single Bench had permitted response to the show-cause notice and restrained the respondents from uploading/communicating final orders without leave. Ratio vs. Obiter: The statement that the validity of the show-cause notice is not adjudicated is ratio to the disposition (the Court refused to decide the issue); any remarks on the notice's legality are obiter. Conclusions: The legality of the show-cause notice remains undecided; the appellants may pursue appropriate modification of interim relief before the Single Bench in light of the Supreme Court's stay. Issue 3 - Entertaining intra-Court appeal based on subsequent Supreme Court order: scope and permissible relief Legal framework: Appellate/comparative-review principles - an appellate court examines the correctness of the impugned order on the record before it; subsequent developments in higher courts may bear on relief but do not automatically vitiate earlier interlocutory orders. Precedent treatment: The Court referred to a coordinate Single Bench order that had granted similar interim protection and to the Supreme Court order that post-dated the impugned interim order and stayed show-cause notices in related matters. Interpretation and reasoning: The Court held that it would not be justified in entertaining an intra-Court appeal to test the correctness of an interim order solely on the basis of a Supreme Court order that was rendered after the interim order was passed. The Court reasoned that subsequent higher-court orders, while relevant to relief, do not permit collateral attack on an interlocutory order rendered earlier in time; instead, the correct course is to seek modification of the existing interim order before the Single Bench so that it may be aligned with the subsequent Supreme Court direction. Ratio vs. Obiter: Ratio - an appellate bench will decline to entertain an appeal that seeks to re-open an interlocutory order based exclusively on a later higher-court order; relief should be sought before the original court by way of modification. Obiter - procedural suggestions regarding filing of fresh application and the discretion of the Single Bench. Conclusions: The appeal was dismissed without adjudicating merits; appellants granted liberty to apply to the Single Bench for modification of the interim order to make it consistent with the Supreme Court's stay. The proper remedy for reliance on a subsequent higher-court order is to seek modification before the forum that passed the original order. Issue 4 - Jurisdiction of the adjudicating authority and effect of corrigendum altering the authority Legal framework: Territorial jurisdiction of GST adjudicating authorities is determined by rules and statutory provisions governing registration and place of business; corrigenda can alter designated authorities where appropriate procedural steps are taken. Precedent treatment: The respondents produced a corrigendum amending the show-cause notice to make it answerable to a different Commissionerate; the Single Bench's interim directions permitted participation in adjudication while restraining communication/uploading of final orders without leave. Interpretation and reasoning: The Court observed competing contentions - appellants contended lack of territorial jurisdiction because of prior registration in a different State and later shift of place of business; respondents pointed to corrigendum and participation in adjudication. The Court declined to decide jurisdictional questions at this interlocutory stage and left the issue open for determination on merits by the Single Bench when the writ petition is heard. Ratio vs. Obiter: Ratio - jurisdictional objections not resolved in interlocutory proceedings where corrigendum and participation complicate the position; such factual and legal disputes must be decided on merits by the original forum. Obiter - guidance that the Single Bench is at liberty to decide the jurisdictional issue on merits. Conclusions: Jurisdictional challenge remains open. The appellants may raise the corrigendum and jurisdictional objections before the Single Bench, which is empowered to adjudicate them on merits in accordance with law. Disposition and Procedural Directions (Court's Conclusions on Relief and Process) The appeal was disposed of without adjudication of merits or determination of the substantive legal submissions. Liberty was granted to the appellants to file an application before the Single Bench to seek modification of the interim order in light of the subsequent Supreme Court stay; the Single Bench may decide such applications and the pending writ petition on merits and in accordance with law. No costs were awarded.