2025 (5) TMI 913 - HC - GST

Issuance of SCN u/s 74 of the West Bengal GST/CGST/IGST Act 2017 invoking the extended period of limitation - HELD THAT - Upon going through the provisions of the said Act and noting the explanation provided in Section 74A of the said Act it is opined that the petitioners have been able to make out an arguable case. The writ petition shall be heard. However taking note of the fact that an adjudication order has already been passed the petitioners should be put to terms. Let affidavit-in-opposition to the present writ petition be filed within a period of six weeks from date. Reply if any thereto be filed within four weeks after the summer vacation - Liberty to mention.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

- Whether the issuance of a show-cause notice under Section 74 of the West Bengal GST/CGST/IGST Act, 2017 invoking the extended period of limitation was justified in the facts of the case.

- Whether the petitioners' alleged failure to correctly classify their outward supplies and assess the correct GST payable amounts to "suppression" under Section 74A of the said Act, thereby justifying invocation of the extended period.

- Whether the petitioners' classification of their services under SAC 99652 (freight forwarding and booking space on foreign shipping lines) was appropriate or whether they should have been classified under SAC 9967 (supporting services in transport).

- Whether the writ petition challenging the impugned orders is maintainable given the existence of an alternative remedy in the form of appeal against the order passed under Section 74.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification for invoking the extended period under Section 74

Relevant legal framework and precedents: Section 74 of the GST Act empowers tax authorities to initiate proceedings beyond the normal limitation period if there is "suppression" of facts or information. Section 74A provides an explanation of "suppression" as non-declaration or failure to furnish required information.

Court's interpretation and reasoning: The Court examined the explanation under Section 74A, which defines "suppression" as non-declaration of facts or information required to be declared in returns or failure to furnish information when asked. The Court noted that the respondents invoked the extended period on the ground that the petitioners did not properly classify their outward supplies and consequently under-assessed their GST liability.

Key evidence and findings: The record shows that the petitioners consistently classified their services under SAC 99652 and filed returns accordingly. The respondents, however, contend that this classification was incorrect and that the petitioners should have classified their services under SAC 9967.

Application of law to facts: The Court found that the petitioners' conduct did not necessarily amount to "suppression" as defined under Section 74A because the petitioners had declared their supplies under a specific SAC code and filed returns accordingly. The mere incorrect classification or erroneous assessment without deliberate concealment or nondisclosure may not constitute suppression warranting invocation of the extended period.

Treatment of competing arguments: The petitioners argued that since there was no intentional non-declaration or concealment, the extended period was wrongly invoked. The respondents argued that the incorrect classification and resultant short payment of GST amounted to suppression. The Court found the petitioners' argument to raise a substantial question and thus an arguable case.

Conclusions: The Court held that the invocation of the extended period under Section 74 was not prima facie justified on the facts and that the petitioners had made out an arguable case against it.

Issue 2: Correct classification of services under SAC codes

Relevant legal framework and precedents: The GST regime requires classification of services under appropriate SAC codes to determine applicable tax rates. SAC 99652 relates to freight forwarding and booking space on foreign shipping lines, while SAC 9967 covers supporting services in transport.

Court's interpretation and reasoning: The petitioners classified their services under SAC 99652, consistent with their role as freight forwarding agents booking space on ocean liners. The respondents contended that the petitioners should have classified under SAC 9967, implying a different tax treatment.

Key evidence and findings: The Court noted the nature of petitioners' business as freight forwarding and booking space on foreign liners, which prima facie aligns with SAC 99652.

Application of law to facts: While the respondents disputed the classification, the Court did not make a final determination at this stage but recognized that the classification issue was central to the dispute and warranted further adjudication.

Treatment of competing arguments: The petitioners' classification was challenged as incorrect, but the Court found that this issue required detailed examination and could not be summarily decided at the writ stage.

Conclusions: The classification issue remains open and is to be adjudicated in the regular course of proceedings.

Issue 3: Maintainability of the writ petition in view of alternative remedy

Relevant legal framework and precedents: It is a well-established principle that where an alternative statutory remedy is available, courts generally refrain from entertaining writ petitions.

Court's interpretation and reasoning: The respondents argued that since an order under Section 74 had already been passed, the petitioners have an alternative remedy in appeal, and thus the writ petition should not be entertained.

Application of law to facts: The Court acknowledged the existence of an alternative remedy but did not dismiss the writ petition outright. Instead, it allowed the writ petition to be heard on merits, indicating that the petitioners had made out an arguable case warranting judicial scrutiny.

Treatment of competing arguments: The respondents' reliance on alternative remedy was noted, but the Court balanced this against the petitioners' contentions and the nature of the issues raised.

Conclusions: The writ petition was admitted for hearing despite the alternative remedy, with directions for filing affidavits and further proceedings.

3. SIGNIFICANT HOLDINGS

- The Court held that "the reason given by the authorities while invoking the extended period does not qualify to be a suppression within the meaning of the expression 'suppression' as provided in Section 74A of the said Act."

- It was established that mere incorrect classification of services and resultant short payment of GST does not ipso facto amount to suppression warranting invocation of the extended period under Section 74.

- The Court recognized that the classification of services under SAC 99652 versus SAC 9967 is a crucial issue to be adjudicated but refrained from deciding it at the writ stage.

- The writ petition challenging the show-cause notice and order under Section 74 was admitted for hearing despite the availability of an alternative remedy, reflecting the Court's view that the petitioners had raised substantial questions of law and fact.

- The Court granted an unconditional stay of the impugned order for four weeks, subject to the petitioners depositing 5% of the disputed tax amount, with the deposit to carry interest if the petitioners succeed.