Gujarat HC refuses writ petition on GST dispute over supply value discrepancies, directs appeal under Section 107

The Gujarat HC declined to entertain a writ petition challenging a GST adjudication order involving disputed product turnover calculations. The adjudicating authority found discrepancies between the petitioner's declared supply value of Rs. 693,92,53,454/- in GSTR-1 returns versus Rs. 115,60,11,418/- claimed in their reply, without proper reconciliation. The court held that these factual disputes regarding GST liability quantification required verification and constituted disputed questions of fact. Following Supreme Court precedent in Commercial Steel Limited, the HC disposed of the petition without examining merits, directing the petitioner to pursue the alternative remedy of filing an appeal before the Commissioner (Appeals) under Section 107 of the GST Act.

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1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the adjudicating authority erred in computing the GST liability by considering the total turnover of all products manufactured and supplied by the petitioner, instead of limiting the computation to the turnover of only five specific products identified in the show cause notice;

(b) Whether the impugned show cause notice and order were arbitrary, excessive, unjust, unfair, illegal, and without jurisdiction, particularly for including products beyond the scope of the inquiry and for not granting a personal hearing;

(c) Whether the writ petition under Article 227 of the Constitution of India is maintainable in the presence of an alternative statutory remedy under Section 107 of the CGST Act;

(d) Whether the petitioner's contention that the five products containing less than 5% fruit content should be classified as carbonated beverages attracting GST at a higher rate, while other products should not be included in such classification, is legally sustainable;

(e) Whether the adjudicating authority's reliance on the petitioner's self-declared turnover in GSTR-1 returns without reconciliation with the reply submissions was justified in determining the GST liability.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) - Computation of GST liability based on total turnover versus turnover of five specific products

The petitioner's primary grievance was that the adjudicating authority incorrectly computed the GST liability by including the entire turnover of Rs. 693,92,53,454/- instead of restricting it to the disputed turnover of Rs. 115,60,11,418/- pertaining only to the five specified products. The show cause notice and the adjudication process focused solely on these five products alleged to be carbonated beverages due to their fruit content being less than 5% as per FSSAI regulations.

The petitioner relied on the show cause notice paragraphs and product-wise turnover details to demonstrate that the inquiry was confined to these five products. The petitioner argued that the adjudicating authority's inclusion of the entire turnover was contrary to the facts and amounted to an error of jurisdiction and fact.

The adjudicating authority, however, noted that the petitioner had self-declared the supply value of Rs. 693,92,53,454/- under the relevant HSN codes in their GSTR-1 returns, while submitting a different calculation for the disputed products without any reconciliation or justification. Therefore, the authority treated the entire turnover as the basis for tax computation, applying the higher GST rate applicable to carbonated beverages.

This raised a disputed question of fact regarding the accuracy and consistency of the petitioner's declarations in statutory returns vis-`a-vis their replies during adjudication.

Issue (b) - Legality and procedural fairness of the show cause notice and impugned order

The petitioner contended that the show cause notice and the impugned order were arbitrary, excessive, and without jurisdiction, particularly because the order extended beyond the grounds indicated in the show cause notice and was passed without granting a personal hearing. The petitioner sought quashing of the notice and order on these grounds.

The Court observed that the adjudicating authority had issued the show cause notice with specific reference to the five products and had proceeded on that basis. The petitioner had been served with notice and had filed replies. There was no indication of violation of principles of natural justice such as denial of personal hearing. The Court found no established breach of fundamental rights or excess of jurisdiction.

Issue (c) - Maintainability of writ petition under Article 227 in presence of alternative remedy

The Court relied on the precedent set by the Supreme Court in a similar case, which held that the existence of an alternate statutory remedy under Section 107 of the CGST Act is not an absolute bar to entertaining a writ petition under Articles 226 or 227, but such petitions are to be entertained only in exceptional circumstances such as breach of fundamental rights, violation of natural justice, excess of jurisdiction, or challenge to the vires of the statute.

In the present case, none of these exceptions were established. The petitioner had a statutory remedy of appeal before the Commissioner (Appeals) under Section 107, which had not been availed. The Court emphasized that the assessment of disputed facts must be carried out by the appellate authority rather than by writ jurisdiction.

Issue (d) - Classification of products and applicability of GST rates

The petitioner argued that only the five specified products containing less than 5% fruit content should be classified as carbonated beverages attracting GST @ 28% plus compensation cess @ 12%, while other fruit juice-based beverages should be taxed at a lower rate of 12%. The petitioner contended that the adjudicating authority erred in applying the higher rate to the entire turnover.

The adjudicating authority found that the petitioner had self-declared the entire turnover under the relevant HSN codes, which included the disputed products, and had not reconciled the lower calculations submitted during adjudication with these declarations. Therefore, the authority treated the entire turnover as subject to the higher GST rate applicable to carbonated beverages.

This issue involved factual determination regarding product classification and turnover declarations, which the Court held was more appropriate for the appellate authority to decide.

Issue (e) - Reliance on self-declared turnover in GSTR-1 returns

The adjudicating authority relied on the petitioner's self-declared turnover figures in their statutory GSTR-1 returns to determine the GST liability, noting the absence of reconciliation with the petitioner's reply submissions. The petitioner challenged this reliance, asserting that only the turnover of the five disputed products should have been considered.

The Court noted that this factual dispute as to the correctness and reconciliation of turnover figures raised questions that required detailed examination by the appellate authority. The Court declined to interfere with the factual findings at the writ petition stage.

3. SIGNIFICANT HOLDINGS

The Court, applying the principles established by the Supreme Court in the cited precedent, held that:

"The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is: (i) a breach of fundamental rights; (ii) a violation of the principles of natural justice; (iii) an excess of jurisdiction; or (iv) a challenge to the vires of the statute or delegated legislation."

Since none of these exceptions were established, the Court was "not inclined to entertain this writ petition and relegate the petitioner to avail alternative remedy of preferring an appeal before the Commissioner (Appeals) challenging the impugned Order-in-Original under section 107 of the Act."

The Court further observed that the adjudicating authority's reliance on the petitioner's self-declared turnover in GSTR-1 returns, despite discrepancies in the petitioner's replies, raised disputed questions of fact that required verification by the appellate authority rather than interference by writ jurisdiction.

Accordingly, the Court disposed of the petition without entering into the merits, emphasizing the availability and efficacy of the statutory appeal mechanism. The Court did not make any observations on the substantive merits of the petitioner's claims or the correctness of the impugned order.

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