2025 (5) TMI 1677 - HC - GST

Maintainability of the writ petition - Parameters for issuance of SCN - fraud/ wilful misstatement/suppression of facts - invoking the extended period of limitation under Section 74 - supplies made without purchasing any goods - evasion of tax - lack of jurisdictional foundation - non supply of a particular document - exercise of extra ordinary jurisdiction under Article 226 of the Constitution of India - HELD THAT - No doubt it is necessary that there must be an element of fraud/wilful misstatement/suppression of facts the same must be apparrent from the allegations made in the show cause notice it is not necessary that the specific words as used in the section have to be reproduced/allegations be made by using the words indicated in the provision for bringing the case within the parameters prescribed under the provisions of Section 74 of the Act. Thus the allegations made in the show cause notice falls within the parameters of Section 74 of the Act and therefore the plea sought to be raised in this regard cannot be countenanced. So far as plea raised pertaining to the supply of the SIB report and allegedly not quoting the part of the reply to the show cause notice wherein the application demanding the SIB report was annexed as to whether there has been a prejudice on account of the same essentially requires determination on merits as mere non supply of a particular document unless the same is prejudicial to the petitioner affecting his right to defend the show cause notice by itself cannot vitiate the order impugned. Consequently we do not find any reason to entertain the present writ petition in exercise of extra ordinary jurisdiction under Article 226 of the Constitution of India. The writ petition is therefore dismissed leaving it open for the petitioner to avail remedy of appeal in accordance with law. We make it clear that the observations made herein have been made with a view to examine the maintainability of the writ petition and none of the observations shall come in the way of the petitioner in raising any of the issues before the Appellate Authority.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

(a) Whether the show cause notice and demand order issued under Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017, are valid and maintainable in the absence of explicit allegations of fraud, wilful misstatement, or suppression of facts;

(b) Whether the absence of specific allegations using the exact language of Section 74 vitiates the jurisdiction of the authority issuing the notice;

(c) Whether the failure to supply or consider the SIB (Special Investigation Branch) report and the petitioner's application for the same prejudices the petitioner and vitiates the impugned order;

(d) Whether the writ petition is maintainable in view of the alternative remedy of appeal available under Section 107 of the Act;

(e) Whether the adjudicating authority's findings of fraud, wilful misstatement, or suppression of facts require detailed factual examination, precluding interference at the writ petition stage.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Validity of Show Cause Notice under Section 74 without explicit allegations of fraud/wilful misstatement/suppression of facts

The legal framework is Section 74 of the Uttar Pradesh Goods and Services Tax Act, 2017, which permits issuance of a show cause notice for extended period assessment only if tax has not been paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts. The extended period of limitation is thus conditional upon these ingredients.

Petitioner contended that the show cause notice lacks these essential allegations and thus is without jurisdiction. The Court examined the language of the notice, which detailed specific factual allegations indicating that the petitioner declared sales of iron scrap without corresponding purchases, suggesting tax evasion. The notice included quantitative details of purchases and sales, and findings from an investigation conducted on 29.07.2021. Although the notice did not explicitly use the exact words "fraud" or "wilful misstatement," the Court held that it is not necessary to reproduce the exact statutory language. The substance and nature of the allegations must be considered.

The Court interpreted the allegations as falling squarely within the parameters of Section 74, since the notice implied fraudulent conduct by indicating sales without purchase and tax evasion. Therefore, the absence of explicit statutory terminology did not render the notice invalid or without jurisdiction.

The Court relied on the principle that the sine qua non for invoking Section 74 is the presence of fraud or wilful misstatement or suppression of facts, but this need not be expressed in specific words. The facts alleged must, however, clearly indicate such conduct.

Issue (c): Non-supply and non-consideration of the SIB report and its impact on the validity of the order

The petitioner had applied for a certified copy of the SIB report and mentioned this application in its partial reply to the show cause notice. The petitioner argued that the final order failed to mention or consider this aspect, thereby vitiating the order.

The Court held that mere non-supply or non-consideration of a particular document, such as the SIB report, does not by itself vitiate the order unless it causes prejudice to the petitioner's right to defend. The Court emphasized that the question of prejudice and impact on the petitioner's defense is a matter of merit and cannot be determined at the stage of maintainability of the writ petition.

Thus, the Court declined to interfere on this ground, leaving the issue to be examined in the appropriate forum where the merits can be fully considered.

Issue (d): Maintainability of the writ petition in view of alternative remedy of appeal under Section 107 of the Act

The respondents contended that the petitioner has an efficacious alternative remedy of appeal under Section 107 of the Act, which should be availed instead of invoking writ jurisdiction.

The Court acknowledged that the issues raised, although projected as legal, involve detailed factual examination, particularly regarding the findings of fraud, wilful misstatement, or suppression of facts. The Court noted that the adjudicating authority had exhaustively dealt with the petitioner's replies on merits.

The Court held that since an alternative statutory remedy of appeal is available, the writ petition is not maintainable in the exercise of extraordinary jurisdiction under Article 226 of the Constitution of India. The Court emphasized the principle that writ jurisdiction is not a substitute for statutory appeal mechanisms, especially when disputed questions of fact are involved.

Issue (e): Examination of merits and findings of fraud/wilful misstatement/suppression of facts

The petitioner attempted to challenge the merits of the adjudicating authority's determination that fraud or wilful misstatement had occurred. The Court declined to entertain such submissions at the writ stage, reiterating that the petitioner's remedy lies in the appeal before the Appellate Authority.

The Court made clear that the observations made in the judgment were only for deciding maintainability and would not prejudice the petitioner's right to raise any issues on merits before the appellate forum.

3. SIGNIFICANT HOLDINGS

"The reason of fraud/wilful misstatement/suppression of facts are sine qua non for invoking the extended period of limitation under Section 74 of the Act. However, none of the said ingredients have been alleged in the show cause notice and, therefore, for lack of jurisdictional foundation, the show cause notice and consequential order is bad in law." - This submission was rejected by the Court, holding that explicit use of statutory terms is not necessary if the factual allegations clearly indicate such conduct.

"It is not necessary that the specific words as used in the section have to be reproduced/allegations be made by using the words indicated in the provision, for bringing the case within the parameters prescribed under the provisions of Section 74 of the Act." - The Court emphasized substance over form in allegations.

"Mere non supply of a particular document unless the same is prejudicial to the petitioner affecting his right to defend the show cause notice by itself cannot vitiate the order impugned." - The Court clarified the threshold for procedural irregularity to vitiate an order.

"The petitioner indeed has a remedy of appeal under Section 107 of the Act." - The Court underscored the availability of an alternative statutory remedy as a bar to writ jurisdiction.

"We do not find any reason to entertain the present writ petition in exercise of extra ordinary jurisdiction under Article 226 of the Constitution of India." - The final determination that the writ petition is not maintainable.

The Court established the core principle that for invoking Section 74 extended period assessments, the show cause notice must contain allegations that, in substance, disclose fraud, wilful misstatement, or suppression of facts. Such allegations need not be verbatim statutory language but must be clear and specific. Further, procedural lapses such as non-supply of documents must be shown to cause prejudice to invalidate orders. Finally, the existence of an alternative remedy of appeal precludes writ relief, especially when factual disputes predominate.