2025 (7) TMI 1621 - HC - GST

Maintainability of petition - learned Single Bench non-suited the appellant on the ground of availability of alternate remedy before the Appellate authority - Inadmissible transitional credit claimed by the writ petitioner - HELD THAT - It is settled legal principle that existence of an alternate remedy is not always a bar for the Constitutional Courts to exercise jurisdiction under Article 226 of the Constitution and the Hon ble Supreme Court has carved out certain exceptions - one of which is when the authority has acted without jurisdiction and the other is when the order is passed in violation of principles of natural justice etc. If the fact of the case on hand is tested on the anvil of these exceptions and if the case falls under any one of the exceptions the Writ Court can exercise jurisdiction. The transitional credit claimed by the writ petitioner has been denied by the State Tax Authority wholly relying upon the Verification Report submitted by the Central Tax Authority dated 20th February 2023 sent vide e-mail dated 21st February 2023 setting out certain reasons for denying transitional credit to the appellant. The procedure which has to be followed in such cases has been laid down by issuance of a circular/guideline by the Central Board of Indirect Taxes and Customs dated 10th November 2022. On reading of the order impugned in the writ petition dated 27th February 2023 we find State Tax Authority was of the opinion that he is bound by the opinion expressed in the verification report of the Central Tax Authority. The guideline framed by the Central Board of Indirect Taxes and Customs speaks otherwise. If such interpretation is not given then clause 5.3.7 of the guideline would become redundant and this obviously is not the purpose for issuing of guideline. Therefore the State Tax Authority should consider the verification report as of the Central Tax Authority as an information furnish copy thereof to the dealer/RTP invite their objections and request for comments to be furnished by the Central Tax Authority on the objections raised by the RTP and thereafter afford an opportunity of personal hearing to the RTP and then take a decision by passing a reasoned order. The order passed by the Deputy Commissioner of Revenue Salt Lake Charge dated 27th February 2023 has to be held to be in violation of principle of natural justice and not in accordance with the policy guideline framed by the Central Board. Therefore the same calls for interference and the Writ Court is well within its jurisdiction to exercise its powers - Appeal allowed.

Summary

ISSUES:

Whether the existence of an alternate remedy bars the exercise of jurisdiction by the Constitutional Court under Article 226 of the Constitution.Whether the State Tax Authority was bound to accept the verification report of the Central Tax Authority without independent consideration.Whether the procedure prescribed by the Central Board of Indirect Taxes and Customs' circular dated 10th November, 2022, was followed in denying the transitional credit claimed by the appellant.Whether denial of transitional credit without providing an opportunity of personal hearing and without passing a reasoned order violates the principles of natural justice.

RULINGS / HOLDINGS:

The Court held that the existence of an alternate remedy is not always a bar for the Constitutional Courts to exercise jurisdiction under Article 226, especially where the authority has acted without jurisdiction or in violation of principles of natural justice.The State Tax Authority is not bound by the verification report of the Central Tax Authority and must independently decide on the admissibility of transitional credit as per clause 5.3.7 of the guideline; treating the report as conclusive would render the guideline redundant.The procedure laid down in the circular/guideline dated 10th November, 2022, including issuance of notice, opportunity for explanation, and personal hearing, must be strictly followed before denying transitional credit.The impugned order denying transitional credit without considering the appellant's rebuttal and without passing a reasoned order violates the principle of natural justice and is liable to be set aside.

RATIONALE:

The Court applied settled legal principles under Article 226 of the Constitution, recognizing exceptions to the bar of alternate remedy where jurisdictional errors or natural justice violations occur.The Court relied on the circular/guideline issued by the Central Board of Indirect Taxes and Customs dated 10th November, 2022, which prescribes a detailed procedure for verification and adjudication of transitional credit claims, including clauses 5.3.5 to 5.3.8.The Court emphasized that clause 5.3.7 confers independent decision-making power on the jurisdictional tax officer, requiring a reasoned order after considering the verification report, applicant's submissions, and comments from the counterpart officer.The Court found that the impugned order failed to comply with the procedural safeguards mandated by the guideline and principles of natural justice, warranting interference by the Writ Court.