2023 (1) TMI 1442 - HC - GST

Challenge to SCN on the ground of lack of jurisdiction of the taxation authority - transactions in question were High Sea Sales and thus subject to the Integrated Goods and Services Tax Act 2017 or not - input tax credit - HELD THAT - The scope of interference in the writ jurisdiction under Article 226 of the Constitution of India against show cause notices is limited. Though there is no bar as such for entertaining the writ petition at the stage of show cause notice but it has been settled in catena of decisions by the Hon ble Supreme Court as also this Court as to when writ petition can be entertained at stage of issuance of the show cause notice. In the case of Union of India and Others Vs. Coastal Container Transporters Association and Others 2019 (2) TMI 1497 - SUPREME COURT while dealing with an issue with regard to dispute regarding classification of taxable services their Lordships in the Hon ble Supreme Court cautioned against exercise of writ jurisdiction holding When there is a serious dispute with regard to classification of service the respondents ought to have responded to the show-cause notices by placing material in support of their stand but at the same time there is no reason to approach the High Court questioning the very show-cause notices. Further as held by the High Court it cannot be said that even from the contents of show-cause notices there are no factual disputes. Conclusion - It is not required to entertain this writ petition at the stage of issuance of show cause notices but leave the petitioner to work out its remedy. It is made clear that all the issues raised by the petitioner are left open to be decided by the respondents after receipt of reply/detailed reply to show cause notices impugned in this writ petition pertaining to financial years 2019-20 2020-21 and 2021-22. Petition dismissed.

2024 (9) TMI 435 - HC

1. ISSUES PRESENTED and CONSIDERED

The High Court of Rajasthan considered the following core legal questions in this judgment:

Whether the taxation authority had jurisdiction to issue show cause notices for the financial years 2019-20, 2020-21, and 2021-22 concerning transactions alleged to be in the course of import.
Whether the transactions in question were 'High Sea Sales' and thus subject to the Integrated Goods and Services Tax Act, 2017 (IGST Act) instead of the Central Goods and Services Tax Act, 2017 (CGST Act) and the Rajasthan Goods and Services Tax Act, 2017 (RGST Act).
Whether the petitioner was entitled to input tax credit in light of the alleged invalidity of invoices issued by their supplier, M/s. Keyaan Enterprises, due to non-compliance with e-invoicing requirements under the RGST Rules, 2017.
Whether the writ jurisdiction under Article 226 of the Constitution of India could be exercised at the stage of issuance of show cause notices.

2. ISSUE-WISE DETAILED ANALYSIS

Jurisdiction of Taxation Authority

Relevant Legal Framework and Precedents: The petitioner challenged the jurisdiction of the taxation authority under the CGST Act, 2017 and RGST Act, 2017, asserting that the transactions were governed by the IGST Act, 2017, as they were in the course of import.
Court's Interpretation and Reasoning: The Court noted that the determination of jurisdiction depended on whether the transactions were 'High Sea Sales'. The Court emphasized that this was a factual determination requiring examination of evidence.
Key Evidence and Findings: The show cause notices were based on findings from search and survey operations, indicating that the transactions were not 'High Sea Sales'.
Application of Law to Facts: The Court found that the factual nature of the transactions needed to be resolved before jurisdiction could be determined.
Treatment of Competing Arguments: The petitioner argued that the transactions were 'High Sea Sales', while the respondents contended they were taxable under the CGST and RGST Acts.
Conclusions: The Court did not interfere with the show cause notices, leaving the jurisdictional issue open for determination after factual examination.

Nature of Transactions ('High Sea Sales')

Relevant Legal Framework and Precedents: The determination of whether transactions qualify as 'High Sea Sales' affects the applicable tax regime under the IGST Act, 2017.
Court's Interpretation and Reasoning: The Court highlighted that the classification of transactions as 'High Sea Sales' was a factual matter requiring evidence and could not be resolved at this stage.
Key Evidence and Findings: The respondents provided evidence from the Import General Manifest (IGM Portal) indicating the transactions were not 'High Sea Sales'.
Application of Law to Facts: The Court determined that the factual nature of the transactions needed further examination.
Treatment of Competing Arguments: The petitioner claimed the transactions were 'High Sea Sales', while the respondents disputed this based on their findings.
Conclusions: The Court did not make a final determination on this issue, leaving it to be resolved through further factual inquiry.

Entitlement to Input Tax Credit

Relevant Legal Framework and Precedents: The entitlement to input tax credit was challenged based on compliance with e-invoicing requirements under the RGST Rules, 2017.
Court's Interpretation and Reasoning: The Court noted that the dispute over input tax credit involved factual determinations regarding the supplier's compliance with e-invoicing rules.
Key Evidence and Findings: The respondents argued that the supplier's invoices were invalid due to non-compliance with e-invoicing rules.
Application of Law to Facts: The Court found that the issue required factual resolution concerning the supplier's turnover and e-invoicing obligations.
Treatment of Competing Arguments: The petitioner disputed the respondents' claims regarding the invalidity of invoices.
Conclusions: The Court left the issue of input tax credit entitlement open for determination after factual examination.

Exercise of Writ Jurisdiction

Relevant Legal Framework and Precedents: The Court referenced several Supreme Court decisions cautioning against interference at the show cause notice stage unless there is a lack of jurisdiction or abuse of process.
Court's Interpretation and Reasoning: The Court emphasized the limited scope of writ jurisdiction at the show cause notice stage, particularly when factual disputes are involved.
Key Evidence and Findings: The Court noted that the petitioner had the opportunity to respond to the show cause notices and that factual issues needed resolution.
Application of Law to Facts: The Court applied the principle that writ jurisdiction should not be exercised prematurely when factual determinations are pending.
Treatment of Competing Arguments: The petitioner sought writ intervention, while the respondents argued for the continuation of the administrative process.
Conclusions: The Court declined to exercise writ jurisdiction, allowing the administrative process to proceed.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The interference at the show-cause notice stage should be rare and not in a routine manner. Mere assertion by the writ petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice."
Core Principles Established: The Court reinforced the principle that writ jurisdiction should not be exercised at the show cause notice stage unless there is a clear lack of jurisdiction or abuse of process.
Final Determinations on Each Issue: The Court did not make final determinations on the substantive issues, leaving them open for resolution through administrative and factual inquiry.

In conclusion, the High Court of Rajasthan dismissed the writ petition, emphasizing the need for factual determinations regarding the nature of transactions and compliance with tax regulations. The Court refrained from exercising writ jurisdiction at the show cause notice stage, allowing the administrative process to address the disputed issues.

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