2025 (5) TMI 772 - HC - GST

Jurisdiction of GST-ASMT-10 notices issued by Respondents purporting to invoke power under Section 61 of Jharkhand Goods and Services Tax Act 2017 - quoting of lower market price in the returns than the actual market price - HELD THAT - Admittedly in present cases notices under Section 61 have been issued to writ petitioners and instead of pointing out discrepancies in the returns filed by writ petitioners the competent officer has embarked upon an exercise of comparing the price at which Petitioners have sold their stone-boulders/stone-chips with that of prevalent market price and thereafter accordingly issued notices to writ petitioners asking them to show cause as to why appropriate proceedings for recovery of tax and dues be not initiated against them. The notices issued comparing the particulars at which Petitioners have sold their goods with that of prevalent market price is wholly without jurisdiction and beyond the scope of Section 61 of the Act. In fact it is settled law that unless transactions of sale are shown to be sham transactions or the mere fact that the goods were sold at a concessional rate/rate less than market price would not entitle the Revenue to assess the difference between the market price and the price paid by the purchaser as transaction value. There are no hesitation in declaring that notices issued under Section 61 to the respective writ petitioners are wholly without jurisdiction and are accordingly liable to be quashed/set aside by this Court - petition allowed.

Summary

The core legal question considered by the Court was whether the GST-ASMT-10 notices issued under Section 61 of the Jharkhand Goods and Services Tax Act, 2017 ("JGST Act")-which alleged that the petitioners declared a lower market price in their GST returns than the actual market price and sought explanations-were beyond the jurisdictional scope of Section 61, given that the notices did not point to any discrepancy within the returns themselves.

In essence, the issue was whether Section 61, which empowers scrutiny of returns to identify discrepancies within the returns or related particulars, can be invoked merely because the transaction value declared by a dealer is lower than the prevailing market price of the goods sold.

Another related issue was the proper scope and procedural limits of Section 61 of the JGST Act, vis-`a-vis other provisions such as Sections 65 to 67 (investigative powers) and Sections 73 and 74 (adjudication and determination of tax dues), and whether the issuance of notices under Section 61 without pointing out actual discrepancies in returns constituted premature or unlawful action.

Regarding the first issue, the Court analyzed Section 61 of the JGST Act, which provides that the proper officer may scrutinize the return and related particulars furnished by a registered person to verify correctness and inform the person of any discrepancies noticed. The statute further provides that if the explanation is satisfactory, no further action is taken; otherwise, the proper officer may initiate further proceedings under Sections 65, 66, 67, or proceed to determine tax dues under Sections 73 or 74.

The Court noted that the legislative scheme contemplates a graduated process: initial scrutiny of returns under Section 61 to identify discrepancies within the returns or related particulars, followed by investigative or adjudicatory actions if discrepancies are not satisfactorily explained or corrected.

Applying this framework, the Court observed that in the present cases, the notices under Section 61 did not identify any actual discrepancies within the returns filed by the petitioners. Instead, the notices compared the declared transaction value with the prevailing market price and alleged that the petitioners had undervalued their supplies. This, the Court held, was beyond the scope of Section 61, which is limited to scrutiny of returns and related particulars, not an inquiry into the correctness of the declared transaction value vis-`a-vis market price.

The Court emphasized that under Section 15 of the JGST Act, the value of supply is the transaction value, i.e., the consideration actually received for the supply. A dealer is entitled to sell goods at any price agreed upon with the purchaser, including a price lower than the prevailing market price. The mere fact that the transaction value is less than market price does not, by itself, constitute a discrepancy in the return or a basis for invoking Section 61 scrutiny.

The Court relied on precedent establishing that unless the transaction is a sham or there is evidence of fraud or misstatement, the Revenue cannot assess tax on the difference between market price and transaction value. The Court referred to a Division Bench decision of the same High Court which held that selling goods at a concessional or lower rate than market price does not justify initiating proceedings under Section 61.

On the competing argument by the State that subsequent notices also highlighted other discrepancies in returns and that the notices under Section 61 are merely procedural and without adverse consequences, the Court acknowledged that Section 61 notices are preliminary and procedural. However, the Court found that issuing notices solely based on comparison with market price, without identifying discrepancies in the returns, was an overreach of jurisdiction.

The Court clarified that it was not expressing any opinion on other alleged discrepancies mentioned in the notices. The Assessing Officer remains free to issue fresh notices strictly limited to discrepancies within the returns, as permitted by Section 61.

In conclusion, the Court held that the notices issued under Section 61 of the JGST Act solely on the ground that the declared transaction value was lower than the market price were wholly without jurisdiction and beyond the scope of the statute. Such notices were quashed and set aside.

The Court summarized the statutory scheme as follows: Section 61 is for scrutiny of returns and related particulars to identify discrepancies within those returns; investigative powers under Sections 65 to 67 and adjudicatory powers under Sections 73 and 74 are separate and can be invoked if discrepancies are found and not satisfactorily explained.

Significant holdings include the following verbatim excerpt from the judgment:

"We are of the firm opinion that notices issued comparing the particulars at which Petitioners have sold their goods with that of prevalent market price, is wholly without jurisdiction and beyond the scope of Section 61 of the Act. In fact, it is settled law that unless transactions of sale are shown to be sham transactions or the mere fact that the goods were sold at a concessional rate/rate less than market price would not entitle the Revenue to assess the difference between the market price and the price paid by the purchaser as transaction value."

The Court thus established the core principle that Section 61 scrutiny must be confined to discrepancies within the returns and related particulars, and cannot be extended to question the transaction value declared by a dealer merely because it is lower than the market price.

Final determinations on the issues were:

1. Notices issued under Section 61 of the JGST Act solely on the basis of comparison of declared transaction value with market price are beyond jurisdiction and liable to be quashed.

2. The Assessing Officer may issue fresh notices under Section 61 if actual discrepancies within returns are found, but cannot initiate scrutiny proceedings merely on the ground of lower declared prices.

3. The statutory scheme contemplates a graduated enforcement process, with Section 61 limited to return scrutiny, and other sections governing investigation and adjudication.

4. The writ petitions challenging the impugned notices under Section 61 were allowed to the extent indicated, and the notices were quashed and set aside.