Recently, the Gauhati High Court held that a GST show cause notice against a leading company for alleged wrongful input tax credit of over ₹19 crore was without jurisdiction. The notice, based on a mismatch in Form GSTR-9 and GSTR-9C (optional Table 14), was issued without following the mandatory procedure under Section 61 of the CGST Act. The court observed that revenue authorities cannot bypass statutory safeguards, and such procedural lapses render notices legally invalid.
Brief Facts:
The case arose from the issuance of a show cause notice by the GST authorities alleging that the company had wrongly availed and utilized input tax credit amounting to over nineteen crore rupees for the financial year 2017-2018. The notice was based on an alleged mismatch between details furnished in the annual return (Form GSTR-9) and the reconciliation statement (Form GSTR-9C), particularly the non-furnishing of information in Table 14. The company challenged the notice on the ground that Table 14 had been expressly made optional by successive CBIC notifications, and that the proceedings were initiated without adhering to the mandatory scrutiny procedure prescribed under Section 61 of the CGST Act, read with Rule 99 of the CGST Rules.
Contentions of the Petitioner:
The petitioner argued that the impugned notice was issued without jurisdiction as the preconditions under Section 61 were not fulfilled and no notice in Form GST ASMT-10 was ever served before invoking Section 73. Since filing Table 14 of Form GSTR-9C was optional for the relevant years, no discrepancy could arise. The department’s action was said to be contrary to binding CBIC circulars and hence ultra vires. Reliance was placed on the judgment in Joint Commissioner v. Goverdhandham Estate Pvt. Ltd., affirmed by the Supreme Court, which held that proceedings under Section 73 cannot be initiated without first following the procedure under Section 61.
Contentions of the Respondents:
The respondents maintained that the show cause notice was legally valid under Section 73, as furnishing information in Table 14 was necessary for reconciling input tax credit. They contended that the petitioner ignored repeated opportunities for hearing and failed to respond to the notice. It was also argued that an effective statutory remedy existed under the CGST Act, and hence, the writ petition was not maintainable.
Observations of the Court:
The Court undertook a detailed examination of the statutory scheme under Sections 61 and 73 of the Central Goods and Services Tax Act, 2017, read with Rule 99 of the CGST Rules. It observed that the proper officer is required to scrutinize the return filed by a registered person, notify discrepancies through Form GST ASMT-10, and provide the assessee an opportunity to explain or rectify such discrepancies before invoking jurisdiction under Section 73. The Court found that in the present case, no such procedure had been followed, and hence, the assumption of jurisdiction under Section 73 was unauthorized and contrary to law.
The Court noted that “From the facts which are placed before the Court by way of the pleadings, it is clear that no such proceedings was undertaken as contemplated under Section 61 of the GST Act read with Rule 99. Consequently, it prima facie appears that there is no basis for the proper officer to proceed with issuing the show cause notice under Section 73, as a bare reading of the impugned notice clearly reflects that it has been issued solely on the basis of a discrepancy noticed regarding wrongful availment or utilization of Input Tax Credit by the registered person. The absence of any procedure required to be undertaken by the proper officer as mandated under section 61 does not reflect that any opportunity to the petitioner was given as contemplated under section 61 by issuance of GST ASMT-10 Form or notice.”
Relying on the Rajasthan High Court’s decision in Joint Commissioner v. Goverdhandham Estate Pvt. Ltd., which had been affirmed by the Supreme Court, the Court reiterated that “Where show cause notice is based on discrepancies found in the return and not on any other independent material, the proper officer is obliged under the law to follow the mandate of Section 61 before invoking jurisdiction under Section 73 of the Act.”
The Court further emphasized that the CBIC notifications clearly made Table 14 of Form GSTR-9C optional for the financial years 2017-18 to 2022-23, and the authorities were bound by those circulars. It observed that “The revenue was duty bound to comply with the decisions taken by the competent authority in the Finance Department. It is a settled law that circulars issued by the Department are binding on the Revenue authorities.”
Holding that the proceedings were initiated in violation of the statutory mandate and that the opportunity required under law had not been granted, the Court concluded that “This Court is of the considered view that the invocation of jurisdiction under Section 73, without mandatorily following the procedure prescribed under Section 61 read with Rule 61 of the Act, 2017, read with Rule 99 of the Rules, 2017, is contrary to the prescribed procedure and opposed to the very scheme of the Act. This Court holds that the revenue, through the proper officer, invoked its jurisdiction under Section 73 without due compliance with the procedure prescribed under Section 61; therefore, such invocation of jurisdiction is completely unauthorized, and consequently, all further actions taken thereunder must be held to be contrary to the provisions of law.”
The decision of the Court:
The Court held that the show cause notice was issued without jurisdiction, as the department failed to follow the mandatory procedure under Section 61 of the CGST Act and Rule 99 of the CGST Rules, particularly the requirement to issue Form GST ASMT-10 before invoking Section 73. It also noted that Table 14 of Form GSTR-9C was made optional by CBIC notifications, making the alleged discrepancy baseless. The objection regarding alternative remedy was rejected, and the Court allowed the writ petition, quashing the show cause notice and all consequential proceedings.
Case Title: M/S. Pepsico India Holdings Pvt. Ltd., Versus the Union of India and Ors
Case No.: WP(C)/6960/2023
Coram: Hon’ble Mr. Justice Soumitra Saikia
Counsel for the Petitioner: Adv. R BORAH and Adv. D Borah
Counsel for the Respondent: DY.S.G.I., SC, GST
Read Judgment @LatestLaws.com
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