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of <h1>Judicial Intervention Halts GST Penalty, Suspends Revenue Order Challenging Discount Practices Under Section 15(3)(a)</h1> <h3>Hindustan Coca-Cola Beverages Pvt. Ltd. Versus Union of India & Ors.</h3> HC granted interim relief, staying the Revenue's order and show cause notice challenging GST discount practices. The court found prima facie merit in the ... Challenge to SCN on the ground of being time barred and beyond the mandate of Section 74 of the CGST Act - constitutional validity of Section 15 (3) (a) of the CGST Act - HELD THAT:- According to the Revenue Authorities, the procedure adopted for offering a discount on the basis of past transactions is to circumvent, the provisions of the Act GST, thereby under valuing the current supplies and evading the payment of GST - Prima facie, this reasoning is not found to be correct. Be that as it may, the learned Advocate appearing on behalf of the Respondent No.3 sought time to file an Affidavit-in-Reply to the above Writ Petition. Acceding to her request, it is directed the Affidavit-in-Reply shall be filed on or before 15th April, 2025 and a copy of the same shall be served on the Advocates for the Petitioners. If the Petitioner wants to file any Affidavit-in-Rejoinder, they may do so on or before 22nd April, 2025 and serve a copy of the same on the Advocate for Respondent No. 3. A strong prima facie case is made out for staying the effect and implementation of the impugned order - Stand over to 29th April, 2025 for admission. ISSUES PRESENTED and CONSIDEREDThe Court considered several core legal questions in this judgment:1. Whether the Show Cause Notice dated 4th August 2024 and the subsequent Order-in-Original dated 23rd January 2025, read with the corrigendum dated 30th January 2025, were issued in violation of the statutory time limits prescribed under Section 74 of the CGST Act.2. The constitutional validity of Section 15(3)(a) of the CGST Act, particularly in light of its alleged conflict with Section 15(1) of the same Act.3. Whether the Revenue's interpretation of Section 15(3)(a) of the CGST Act was correct, especially concerning the valuation of supply and the application of discounts.4. The legality and correctness of the Revenue's conclusion that the Petitioner's method of offering discounts constituted an evasion of GST.ISSUE-WISE DETAILED ANALYSIS1. Time-barred Show Cause Notice- Legal Framework and Precedents: Section 74 of the CGST Act prescribes the time limits within which a Show Cause Notice must be issued. The Petitioner argued that the notice was time-barred and therefore invalid.- Court's Interpretation and Reasoning: The Court did not provide a definitive ruling on this issue at this stage but acknowledged it as a significant point of contention requiring further examination.- Application of Law to Facts: The Petitioner contended that the notice was issued beyond the permissible period, rendering it invalid. The Court noted this argument but deferred a detailed analysis pending further submissions.2. Constitutional Validity of Section 15(3)(a)- Relevant Legal Framework: Section 15(3)(a) of the CGST Act relates to the determination of the value of supply, while Section 15(1) stipulates that the value should be the transaction value.- Court's Interpretation and Reasoning: The Petitioner challenged the constitutional validity of Section 15(3)(a) if interpreted in a manner inconsistent with Section 15(1). The Court recognized this issue but did not make a conclusive determination, indicating the need for further arguments and evidence.3. Interpretation of Section 15(3)(a) and Discount Application- Key Evidence and Findings: The Petitioner argued that the Revenue misinterpreted Section 15(3)(a) by concluding that the discount mechanism used was intended to undervalue supplies and evade GST. The Petitioner maintained that the discounts were recorded in the Distributor Management System and were legitimate.- Court's Interpretation and Reasoning: The Court expressed skepticism about the Revenue's reasoning, suggesting that the interpretation of Section 15(3)(a) by the Revenue was flawed. The Court indicated that the Petitioner's method might not constitute an evasion of GST.- Application of Law to Facts: The Court found a prima facie case supporting the Petitioner's interpretation of the discount application, warranting interim relief.4. Alleged GST Evasion- Treatment of Competing Arguments: The Revenue contended that the Petitioner's discount method circumvented GST provisions, while the Petitioner argued that it was a legitimate business practice.- Court's Interpretation and Reasoning: The Court did not find the Revenue's reasoning convincing at this stage, granting interim relief to the Petitioner.SIGNIFICANT HOLDINGS- Interim Relief: The Court granted interim relief, staying the effect and implementation of the impugned order and Show Cause Notice until further orders. This decision was based on the prima facie assessment that the Revenue's reasoning might be incorrect.- Core Principles Established: The judgment underscores the importance of adhering to statutory time limits for issuing notices and the necessity of a coherent interpretation of statutory provisions to avoid conflicts within the same legislation.- Final Determinations on Each Issue: The Court deferred final determinations on the issues pending further submissions and evidence. The matter was scheduled for further proceedings on 29th April 2025.
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