2025 (9) TMI 114 - HC - GST

Writ petition challenging Section 74 CGST notices dismissed; notices within Section 73(10) limitation; pursue statutory appeals

M/s. MRJS Lead Private Limited Versus The Assistant Commissioner of State Tax And Ors.

M/s. MRJS Lead Private Limited Versus The Assistant Commissioner of State Tax And Ors. - 2025:BHC - AS:36721 - DB ISSUES PRESENTED AND CONSIDERED 1. Whether writ petitions challenging adjudication orders made pursuant to notices issued under Section 74 of the CGST Act are maintainable when statutory appeals against those adjudication orders have been filed and are pending. 2. Whether a show cause notice issued under Section 74 is vitiated for want of jurisdiction if it does not expressly allege fraud, willful misstatement or suppression of facts to evade tax. 3. Whether a notice that quotes an incorrect provision (Section 74) can be sustained by re-characterisation under Section 73 where it is issued within the three-year period prescribed by Section 73(10). 4. Whether notices issued by State authorities under Section 73 (as invoked substantively) are beyond the jurisdiction of State authorities such that the writ forum should entertain challenges notwithstanding available statutory appellate remedies. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of writs where statutory appeals are available and invoked Legal framework: The CGST Act provides an appellate mechanism to challenge adjudication orders. Constitutional writ jurisdiction under Article 226 is discretionary and traditionally restrained where efficacious alternate remedies exist, particularly in fiscal matters and where specialist appellate fora are available. Precedent Treatment: The Court relies on settled principles emphasising exhaustion of alternate remedies and the supervisory role of writ jurisdiction. The judgment refers to higher-court authorities that have stressed the need to resort to appellate forums in fiscal disputes. Interpretation and reasoning: The Court observed that petitioners had already instituted statutory appeals against the adjudication orders, thereby invoking the alternate remedy. Given that appeals are available, efficacious and pending, and that issues raised are substantially arguable and likely within the competence of the appellate authority, the writ forum should not ordinarily entertain the petitions. The Court emphasised the appellate authorities' domain expertise in fiscal matters. Ratio vs. Obiter: Ratio. The Court's decision to dismiss the petitions primarily on the ground of alternate remedy constitutes a core holding applicable to similar circumstances. Conclusion: Writ petitions challenging adjudication orders under the CGST Act are not entertained where effective statutory appeals have been filed and are pending; petitioners must pursue the appellate remedy. Issue 2 - Necessity of explicit allegations of fraud, willful misstatement or suppression to sustain a Section 74 notice Legal framework: Section 74 of the CGST Act contemplates extended limitation for issuance of notices where fraud, willful misstatement or suppression of facts is alleged. Section 73 deals with general recovery for tax not paid or short paid and prescribes a three-year limitation. Precedent Treatment: The Court declined to decide at length whether the impugned notices in fact contained allegations of fraud etc., noting that such factual and legal questions are appropriately examined by the appellate authority. Interpretation and reasoning: Even assuming absence of express allegations of fraud, the Court found that where a notice is issued within the three-year period provided by Section 73(10), the notice can be sustained under Section 73 and no jurisdictional error is made out merely because Section 74 was quoted. The requirement of alleging fraud applies to invoking the extended five-year period under Section 74; it is not a prerequisite for a valid notice under Section 73 issued within three years. Ratio vs. Obiter: Ratio with respect to sustenance of notices within three years under Section 73 despite incorrect reference to Section 74; obiter as to whether particular notices in the record truly contained fraud allegations (left undecided). Conclusion: Absence of express fraud allegations does not render a notice a-priori without jurisdiction if the notice can be sustained under Section 73 and was issued within the three-year limitation period; the writ court will not interfere on that ground where appeals are available. Issue 3 - Effect of incorrect citation of statutory provision in the show cause notice Legal framework: Validity of administrative notices depends on whether they can be sustained under the statutory scheme applicable at the time; mis-quotation of provisions does not automatically invalidate action if the substantive requirements of a correct provision are met. Precedent Treatment: The Court treated the incorrect quotation as not determinative of jurisdiction when the notice, without prejudice, is capable of being sustained under Section 73. Interpretation and reasoning: The Court held that mere quotation of an incorrect section (Section 74 instead of Section 73) is insufficient to render the notice void for want of jurisdiction. If the facts and timing support a notice under Section 73(10), the notice survives despite erroneous reference. The writ forum should not permit bypass of the appellate remedy on this basis alone. Ratio vs. Obiter: Ratio. The Court's conclusion that mis-quotation does not vitiate jurisdiction where the notice fits within another statutory provision is a binding aspect of the decision. Conclusion: A show cause notice that quotes an incorrect statutory provision can be sustained if it otherwise falls within the correct provision's parameters (here Section 73(10)); such mis-quotation is not a ground for writ interference when appeals are available. Issue 4 - Jurisdiction of State authorities to issue notices and whether a purported admission by Central authorities changes the analysis Legal framework: CGST scheme contemplates allocation of powers between Central and State authorities; challenges to territorial or functional competence of issuing authorities raise jurisdictional questions which may be examinable on facts. Precedent Treatment: The Court noted authorities interpreting the division of powers between Central and State tax authorities but declined to resolve the complex issue on the present record, preferring leave to the appellate forum. Interpretation and reasoning: The petitioners urged that State authorities lacked power to issue the notices and relied on an alleged admission by Central authorities. The Court observed that the Central authority's affidavit on record did not, on a plain reading, unequivocally concede absence of State power; thus the contention of admission could not be accepted without detailed examination. The Court regarded the question as arguable but not so manifestly without jurisdiction as to permit bypassing the appellate remedy. The Court pointed to the appellate forum as the proper forum to adjudicate such factual and legal disputes (including any plea on jurisdiction raised or amended in appeals). Ratio vs. Obiter: Mixed. The guidance that jurisdictional objections based on authority to issue notices are to be examined by the appellate authority (and do not automatically permit writ relief when an appeal exists) is ratio. Observations on the insufficiency of the affidavit to constitute admission are interlocutory/obiter inasmuch as they relate to factual assessment. Conclusion: Allegations that State authorities lacked jurisdiction to issue notices are arguable but not, on the present record, manifestly ex facie without jurisdiction; such contentions should be ventilated before the appellate authority rather than in a writ petition when statutory appeals are available. Cross-references and supplemental points 1. The Court reiterated that where notices are issued within the three-year limitation under Section 73(10), the necessity to invoke Section 74 (and its fraud requirement) does not arise; see Issues 2 and 3. 2. The Court left all substantive contentions open for adjudication by the appellate authority and clarified that its prima facie observations are not intended to influence the appellate forum; this limits the precedential effect of factual remarks made in the course of deciding maintainability. 3. In line with higher-court jurisprudence emphasising exhaustion of alternate remedies, the Court refused to entertain writ petitions in fiscal disputes where specialized appellate remedies have been invoked and are pending; see Issue 1. Final disposition The petitions were dismissed on the ground that alternate statutory remedies (appeals) exist and have been invoked; all parties' contentions remain open for determination by the appellate authority in the appeals already instituted.