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 tenements given free to society members under redevelopment agreements executed in 2008 and 2011, when the audit report had already accepted the settled tax position for the relevant period. The challenge treated the demand as relating to a concluded arrangement already examined in audit. On that basis, the Bombay HC held the notice was prima facie without jurisdiction and stayed further proceedings pending final hearing.

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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.

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