2025 (4) TMI 933 - HC - GST

Imposition of penalty by the CGST Department under Section 122(1A) of the CGST Act - vailability of an appellate remedy under Section 107 of the CGST Act - HELD THAT - The stand of other entities and individuals against whom demands have been raised and penalties have been imposed may also be necessary in the adjudication in the present case. The appellate jurisdiction would be the appropriate jurisdiction to comprehensively adjudicate the matter. In so far as the stand of the Petitioner that he has not retained the benefit of any transaction is concerned the same would also be a factual issue which cannot be gone into in writ jurisdiction by this Court. The Petitioner would be free to raise this issue in appeal. Further the argument that penalty could not have been imposed on the Petitioner for the Financial Years from 2017 can also be raised in appeal by the Petitioner. Conclusion - Considering that all the issues which have been raised can be clearly raised before the appellate authority this is a fit case for directing the Petitioner to avail of his remedies under Section 107 of the CGST Act. Entertaining the present writ petition would in fact mean that all the factual issues would have to be gone into by this Court which would not be permissible. The Petitioner had full knowledge of the proceedings in the SCN. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

(a) Whether the writ petition challenging the imposition of penalty by the CGST Department under Section 122(1A) of the CGST Act is maintainable before the High Court, given the availability of an appellate remedy under Section 107 of the CGST Act;

(b) Whether the Show Cause Notice (SCN) was validly served upon the Petitioner, considering the Petitioner's contention that he was not served;

(c) Whether the penalty under Section 122(1A) of the CGST Act can be imposed retrospectively for periods prior to the effective date of the provision (01 January 2021);

(d) Whether the Petitioner, being an accountant who did not retain any benefit from the transactions, can be held liable for the penalty imposed;

(e) Whether the writ jurisdiction is appropriate for adjudicating on the factual and legal issues involved in the penalty imposition, or whether such matters must be adjudicated through the statutory appellate mechanism.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Maintainability of the Writ Petition vs. Availability of Statutory Appeal

Legal Framework and Precedents: The CGST Act provides a statutory appellate remedy under Section 107 against orders passed by the adjudicating authority. The principle of exhaustion of statutory remedies before approaching the High Court under writ jurisdiction is well-established.

Court's Interpretation and Reasoning: The Court noted that the impugned order dated 16th January 2025 is an appealable order under Section 107 of the CGST Act. The Court emphasized that the issues raised by the Petitioner, including service of SCN, applicability of penalty provisions, and factual involvement, are intricately connected with the overall investigation involving multiple entities and individuals.

Application of Law to Facts: The Court observed that entertaining the writ petition would require it to delve into factual disputes and detailed examination of evidence, which is inappropriate in writ jurisdiction. The Court held that the Petitioner had full knowledge of the proceedings and that the statutory appellate remedy is the proper forum for adjudication.

Treatment of Competing Arguments: While the Petitioner argued that the writ petition was maintainable on grounds of jurisdictional error and non-service of SCN, the Court found these contentions insufficient to bypass the statutory appeal mechanism.

Conclusion: The writ petition is not maintainable; the Petitioner must avail the statutory appellate remedy under Section 107 of the CGST Act.

(b) Validity of Service of Show Cause Notice

Legal Framework: Proper service of SCN is a jurisdictional requirement to proceed with penalty imposition. Service by email to a designated official email address used by the Petitioner's employer can constitute valid service.

Court's Reasoning: The SCN was served on the email address [email protected], which was used by the Petitioner in his role as accountant. Additionally, the Petitioner's statement recorded under Section 14 of the Central Excise Act reflected his residential address, which was acknowledged by him. No alternate address was provided.

Key Findings: The Court found that the Petitioner had knowledge of the proceedings and the SCN, negating the claim of non-service.

Conclusion: The service of SCN was valid and sufficient for the purpose of initiating proceedings.

(c) Applicability of Section 122(1A) Penalty Provision for Periods Prior to 1 January 2021

Legal Framework: Section 122(1A) of the CGST Act came into effect on 1 January 2021. The question arises whether penalties under this provision can be imposed for transactions predating its effective date.

Court's Reasoning: The Court held that this issue is a factual and legal question that cannot be adjudicated in writ jurisdiction. The Petitioner is entitled to raise this argument before the appellate authority.

Conclusion: The question of retrospective applicability of Section 122(1A) penalty is reserved for the appellate forum.

(d) Liability of the Petitioner as an Accountant Not Retaining Benefit

Legal Framework: Liability under Section 122(1A) is contingent on involvement in fraudulent availment of ITC. Whether mere involvement as an accountant without benefit retention attracts penalty is a matter of fact and law.

Court's Interpretation: The Court noted that the Petitioner was involved in generating sale invoices, e-way bills, maintaining purchase bills and ledgers, and preparing data for audits, indicating awareness of transactions. However, the extent of his liability and benefit retention is a factual issue for the appellate authority to decide.

Treatment of Arguments: The Petitioner's contention that he did not retain any benefit and was acting under employer's instructions was acknowledged but not accepted as a ground to bypass appeal jurisdiction.

Conclusion: The issue of the Petitioner's liability as an accountant is to be adjudicated in appeal.

(e) Appropriateness of Writ Jurisdiction for Factual and Legal Issues

Legal Framework: Writ jurisdiction is generally not invoked for detailed factual adjudication where a statutory remedy exists.

Court's Reasoning: The Court emphasized that the present case involves complex factual matrix with multiple parties and collusive transactions. The adjudication of such matters requires comprehensive examination best suited for the appellate authority empowered under the CGST Act.

Conclusion: The Court declined to exercise writ jurisdiction and directed the Petitioner to pursue statutory appeal.

3. SIGNIFICANT HOLDINGS

"The impugned order dated 16th January, 2025 is clearly an appealable order under Section 107 of the Central Goods and Services Tax Act, 2017."

"Entertaining the present writ petition would in fact mean that all the factual issues would have to be gone into by this Court which would not be permissible."

"The Petitioner had full knowledge of the proceedings in the SCN."

"The Petitioner is free to avail of his appellate remedy in accordance with law."

"Considering the limitation period provided under Section 107 of the CGST Act, the Petitioner is given a further period of 30 days to enable him to file the appeal before the appellate authority. If the same is filed within 30 days from today, the same shall not be dismissed on the ground of being barred by limitation and shall be adjudicated on merits."

Core principles established include the primacy of statutory appellate remedies under the CGST Act for challenging penalty orders, the requirement of valid service of SCN, and the unsuitability of writ jurisdiction for detailed factual and legal determinations in tax penalty matters.

Final determinations on each issue are that the writ petition is not maintainable; the Petitioner was validly served; the penalty provision's retrospective applicability and the Petitioner's liability as an accountant are factual questions reserved for appeal; and the Petitioner is permitted to file an appeal within an extended limitation period.