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TMI Blog2024 (11) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... Thousand one Hundred Seventy-three only) should not be demanded and recovered under the provisions of Section 74 of the Central Goods and Services Tax/State Goods and Services Tax Acts, 2017, (CGST/SGST Acts), as to why interest should not be demanded on the aforesaid sum and as to why penalty should not be imposed in terms of the provisions contained in the CGST/SGST Acts for violation of the provisions of the law. 2. According to the petitioner, Ext.P1 show cause notice is clearly without jurisdiction and is liable to be quashed in the exercise of the jurisdiction vested in this Court under Article 226 of the Constitution of India. Though Exts. P5 to P8 notifications are challenged, it is submitted for the petitioner that the challenge to those notifications is presently not pressed. There is a further challenge to Ext.P9 notification which relates to the rate of GST for commission received in terms of the provisions contained in Section 21(1)(b) of the Chit Funds Act, 1982 (hereinafter referred to as the '1982 Act'). It is submitted that the said challenge also need not be considered now and can be left open for consideration. 3. Sri. V Raghuraman, the learned Senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of the CGST/SGST Acts. It is submitted that Section 9 of the CGST/SGST Acts cannot apply, as the provisions apply only to goods and services. It is submitted that Ext.P1 show cause notice concludes that the transaction between the foreman and the chit subscriber is not a loan transaction. It is submitted that the said assertion in the show cause notice flies in the face of the decision of the Supreme Court in Oriental Kuries Limited. (Supra). The learned Senior Counsel has also referred to the definition of 'goods' in Section 2(52), the definition of 'services' in Section 2(102) of the CGST/SGST Acts and also to the guidance notes of education guide issued by the Central Board of Excise and Customs under the service tax regime to contend that even under the service tax regime transactions in money were outside the scope of 'service'. The learned Senior Counsel referred to the decisions of the Supreme Court in Girdhari Lal Nannelal v. Sales Tax Commissioner, M.P; (1976) 3 SCC 701, and Haleema Zubair, Tropical Traders v. State of Kerala; (2008) 16 SCC 504, to contend that even if a certain amount is received by a person and that would fall within the definition of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other amount received by the foreman is clearly a consideration for services rendered. It is pointed out with reference to the provisions of Sections 20, 22 to 25, 22(6), 28, 29 and 30 of the 1982 Act that the act of refraining from removing a subscriber or permitting him to continue after paying interest on the defaulted subscription is clearly an act of service or forbearance on receipt of some payment and this clearly falls within the definition of 'service' under Section 2(102) of the CGST/SGST Acts. It is submitted that the decision of the Supreme Court in Oriental Kuries Limited (Supra) was with reference to the recovery of amounts from defaulting subscribers and the observations therein must be confined to those provisions in the 1982 Act permitting recovery and they cannot be held as defining every aspect of the relationship between the foreman and the subscriber. It is submitted that the provisions of Notification No.12/2017 also do not apply to the petitioner, as the transaction of the petitioner with its subscribers cannot fall within the scope of extending deposits, loans or advances where consideration is represented by way of interest or discount. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n normal circumstances. However, where on admitted facts, the show cause notice is found to be without jurisdiction, I do not think that an objection raised to the maintainability of the writ petition is sustainable. It is settled law that where the proceedings are challenged as being without jurisdiction, the availability of an alternate mechanism for resolution of disputes (here through adjudication of the show cause notice) is no ground for the Court to refuse to exercise jurisdiction. The judgment of a Constitution Bench of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO and Anr, (1961) 41 ITR 191 is the authority for this proposition. When faced with an argument that the question as to whether re-assessment notices were properly issued under the provisions of Section 34 of the erstwhile Indian Income Tax Act, 1922 should not be investigated in a writ petition under Article 226 of the Constitution of India it was held:- "25. Mr Sastri argued that the question whether the Income Tax Officer had reason to believe that underassessment had occurred "by reason of nondisclosure of material facts" should not be investigated by the courts in an application under Article 226. l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y would have sufficient opportunity to raise this question viz. whether the Income Tax Officer had reason to believe that underassessment had resulted from non-disclosure of material facts, before the Income Tax Officer himself in the assessment proceedings and if unsuccessful there before the appellate officer or the Appellate Tribunal or in the High Court under Section 66(2) of the Indian Income Tax Act. The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. 28. In the present case the Company contends that the conditions precedent for the assumption of jurisdiction under Section 34 were not satisfied and come to the court at the earliest opportunity. There is nothing in its conduct which would justify the refusal of proper relief under Article 226. When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. In the present case we can fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one that is aimed at persuading a Court against 'entertaining' a writ petition that is otherwise 'maintainable' before it. While accepting such an argument, the Court essentially finds that notwithstanding the petitioner having made out a sound legal point it would be against public interest for it to entertain and adjudicate the matter. 12. While it is fairly well settled that when confronted with disputed questions of fact, the Writ Court will not ordinarily entertain a writ petition, but leave it to the Civil Courts or statutory forums to adjudicate the matter, it is equally well settled that the existence of an alternate remedy is not a bar to the entertainment of a writ petition where (i) the writ petition seeks the enforcement of any of the fundamental rights, (ii) where there is a violation of the principles of natural justice, (iii) where the order or the proceedings are wholly without jurisdiction or (iv) where the vires of an Act is challenged (Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others, 1998 KHC 1225 : 1998 (8) SCC 1 : AIR 1999 SC 22). That apart, as observed in State of UP and Others v. Indian Hume Pipe Co. Ltd., 1977 KHC 585 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Notification No.12 of 2017 that the issuance of a show cause notice alleging that the transactions, which are the subject matter of Ext.P1 show cause notice, should be subject to a levy of GST is clearly without jurisdiction. There are no disputed questions of fact. The matter can be decided purely as a matter of law. Therefore, the fact that this writ petition has been filed challenging a show cause notice is no ground to refuse the exercise of jurisdiction under Article 226 of the Constitution of India. Analysis of other contentions:- 8. An analysis of the contentions taken before this Court must start with a reference to Section 21 of the 1982 Act, which reads as follows: "21. Rights of foreman.-(1) The foreman shall be entitled,- (a) in the absence of any provision in the chit agreement to the contrary, to obtain the gross chit amount at the first instalment without deduction of the discount specified in the chit agreement, subject to the condition that he shall subscribe to a ticket in the chit: Provided that in a case where the foreman has subscribed to more than one ticket, he shall not be eligible to obtain more than one gross chit amount in a chit without d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld go to the benefit to the subscribers, are amounts received for the provisions of services. Even if I take into consideration the provisions of Section 28 of the 1982 Act and hold that there is a discretion in the hands of the foreman to either remove a defaulting subscriber or to retain him after accepting from the defaulting subscriber, the amount of subscription together with any interest as contemplated by the provisions of Section 21(1)(c) of the 1982 Act, the same does not come to the aid of the Revenue in this case. In Oriental Kuries Limited (Supra) it was held:- " 5. In Janardhana Mallan, a five-Judge Bench of the Kerala High Court overruled the decision in P.K. Achuthan, and held that it would not be possible to say that on entering into the chitty agreement a debt is incurred by the subscriber for the amount of all the future instalments, and in respect of such amount there is a debtor-creditor relationship. The chitty variola embodies a promise to pay on future dates. It is not a promise to repay an existing debt, but in discharge of a contractual obligation. The prize amount is not received as a loan, but by virtue of the terms of the contract between the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain the equivalent amount from other sources, to meet the obligations for payment of the chit amount to the other members, who prize the chit on subsequent draws. For raising such an amount, the foreman may be required to pay high rates of interest. 14. The stipulation of empowering the foreman to recover the entire balance amount in a lump sum, in the event of default being committed by a prized subscriber, is to ensure punctual payment by each of the individual subscribers of the chit fund. Without punctual payments, the system would become unworkable, and the foreman would not be in a position to discharge his obligations to the other members of the chit fund. 15. In view of the aforesaid discussion, the relationship between a chit subscriber and the chit foreman is a contractual obligation, which creates a debt on the day of subscription. On default taking place, the foreman is entitled to recover the consolidated amount of future subscriptions from the defaulting subscriber in a lump sum." The learned Senior Standing Counsel appearing for the Revenue may be right in contending that the observations of the Supreme Court were in relation to the right of the foreman to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot on account of delayed payment of any consideration for supply the said amount of interest, late fee or penalty would not partake the nature of consideration for supply. I find that the observations of the Supreme Court in Pratibha Processors (Supra) clearly indicate that in so far as interest is concerned, the amount charged as interest takes colour from the principal amount upon which such interest is charged and it has no independent existence. In the facts of the present case, the Revenue has no case that the payment of subscription by a subscriber is payment for services rendered by the foreman. Therefore, any interest charged by the foreman on account of delayed payment of subscription cannot partake the nature of consideration for the supply of services. Paragraph 14 of the Pratibha Processors (Supra) reads thus:- "14. In the above backdrop, let us consider the scope and content of Section 61(2) of the Act as it existed at the relevant time. Section 61(1) prescribes the period during which the goods imported may remain in the warehouse. The normal period in different cases are provided therein. Extension of time in special cases is also provided. If the goods imported re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Haleema Zubair (Supra) also indicate that unless there is a nexus between the amounts received by a person and the actual supply of goods, the amount cannot be attributed as consideration for the supply of goods. The decisions of the Supreme Court in Indian Oxygen (Supra) and Baroda Electric Meters (Supra) are also authorities for the proposition that it is not any income that would be the subject matter of levy under GST law unless it could be clearly shown that the amount was received either for the supply of goods or for the supply of services. As already observed, Ext.P1 show cause notice is confined to the interest received from the defaulting subscribers. In such circumstances, for reasons indicated, it must be held that the amount of interest received by the foreman of a chit on defaulting subscriptions cannot be said to be amounts received as consideration for the supply of services. For all the aforesaid reasons, this writ petition is to be allowed. Accordingly, this writ petition is allowed. It is declared that Ext.P1 show cause notice is issued without jurisdiction. It is accordingly quashed. In view of the submission of the learned Senior Counsel for the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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