2026 (4) TMI 139 - HC - GST

Jurisdiction under GST notice questioned for concluded redevelopment transactions; proceedings stayed pending final hearing.

A serious prima facie jurisdictional question arose whether a show cause notice under the CGST Act could invoke Section 74 for transfer of flats or ... Lack of jurisdiction - Validity of the show cause notice(s) issued under Section 74 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) issued without jurisdiction, arbitrarily and in violation of the principles of natural justice. - HELD THAT:- Having perused the show cause cum demand notice(s) dated 2 January 2025, and more particularly from the contents of paragraph 9, on what is sought to be taxed, is on a concluded issue in respect of the development in question, namely the flats constructed by the petitioner have been handed over to the tenants under the scheme ‘free of cost’. The show cause cum demand notice(s) clearly indicates that the development agreement in question was of 6 March 2011. The construction was undertaken by the petitioner for Dattaramanad CHS Ltd. in respect of which Occupation Certificate was granted on 31 December 2021, and in respect of SAT Anupa CHS Ltd. the development agreement was dated 22 November 2008. Under both these development agreements, the obligations of the petitioner stood crystallized. The said development agreement(s), were executed between the petitioner and the society much prior to the GST regime being brought into force, by the promulgation of the CGST and MGST Act with effect from 1 July 2017. Be that as it may, prima facie, we see substance in the petitioners contentions that having regard to the nature of the development agreement and the obligations of the petitioner thereunder, to provide free of cost flats/tenements to the existing members of the society, the approach of the commissioner appears to us to be in the teeth of the audit report dated 26 October 2023. Whether the audit report as accepted by the assessing officer, had concluded the issue is also a question more particularly when the petitioner had settled the taxes as set out in the communication dated 27 October 2023 (Exhibit B, page 81 of the paper-book). We thus, prima facie, find substance in the contention as urged by Mr. Dada that the impugned show cause notice(s) are issued without jurisdiction in purported exercise of Section 74 of the CGST Act. Hence, the parties would be required to be heard finally on this Writ Petition. Summary order. Rule was issued and, pending final disposal of the writ petition, further proceedings pursuant to the impugned show cause notice were stayed, the Court recording only a prima facie view that the challenge to jurisdiction required consideration. Issues: Whether the show cause notice issued under Section 74 of the Central Goods and Services Tax Act, 2017 was prima facie without jurisdiction in respect of a concluded issue arising from redevelopment agreements executed before the GST regime.Analysis: The notice sought to tax the transfer of flats/tenements given free of cost to existing society members under redevelopment agreements executed in 2008 and 2011, while the audit report dated 26 October 2023 had accepted the settled tax position for the relevant period. The communication leading to the notice also indicated that the matter had been examined in audit and that the proposed demand related to a concluded arrangement. On that basis, the challenge raised a serious prima facie question whether Section 74 could be invoked for a matter already crystallized under the redevelopment agreements and reflected in the audit outcome.Conclusion: The show cause notice was found to be prima facie without jurisdiction and further proceedings were stayed pending final hearing.