2023 (8) TMI 399 - HC - GST

Validity of SCN - SCN failed to disclose that any tax has not been paid or short paid or erroneously refunded or input tax credit has been wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts have been made to evade tax - HELD THAT - The challenge in this writ petition is merely to the show cause notice issued under Section 74 of the Act 2017 whereby the petitioner has been called upon to submit its explanation/reply/objections to the show cause notice. It is not within the domain to opine anything whether there has been any evasion of the tax or not which has to be assessed by the department in appropriate proceedings for which the petitioner has been called upon to show cause. Petition dismissed.

Summary

Issues:
The issues involved in the judgment are the challenge to the show cause notice issued u/s 74 of the U.P.G.S.T. Act, 2017 and the justification of special circumstances under Section 74 towards determining tax liability.

Challenge to Show Cause Notice (u/s 74 of the Act, 2017):
The writ petitioner, a proprietorship firm engaged in exporting cricket bats, challenged the show cause notice dated 19.7.2023 issued u/s 74 of the Act, 2017 by the Assistant Commissioner of State Tax, Meerut. The petitioner sought relief in quashing FORM GST-DRC-01 and GST ASMT-10 issued against reference numbers. The challenge was based on the notice's failure to demonstrate tax non-payment, short payment, or fraud to evade tax. The petitioner contended that the notice lacked justification for determining tax liability and was vague and mechanically issued.

Opposition to Writ Petition:
In opposition, the respondent's counsel argued that the show cause notice was just and proper, requiring no interference via a writ petition under Article 226. The petitioner was advised to file objections, as the notice indicated the receipt of input tax credit from bogus firms, prompting a response with evidence. Citing a Supreme Court decision, it was argued that the writ petition was premature and not maintainable against a show cause notice. The analogy from the mentioned decision was used to assert that the writ petition against the notice u/s 74 of the Act, 2017 was not maintainable.

Judgment:
The Court found merit in the respondent's submissions, stating that the challenge in the writ petition was solely against the show cause notice calling for the petitioner's explanation. The Court clarified that it was not their role to determine tax evasion, which should be assessed by the department in appropriate proceedings. Consequently, the writ petition was not entertained and was dismissed. However, the petitioner was given the opportunity to file a reply to the show cause notice within two weeks. The Appropriate Authority was directed to consider the objections and pass orders in accordance with the law.