Himachal Pradesh High Court

Reserved On: 05.05.2025 vs Union Of India & Ors on 8 May, 2025

Bench: Tarlok Singh Chauhan, Sushil Kukreja

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.

CWP No. 9239 of 2024 Reserved on: 05.05.2025 Date of decision: 08.05.2025

M/s Himalaya Wellness Company ...Petitioner

Versus

Union of India & Ors. ...Respondents Coram The Hon'ble Mr. Justice Tarlok Singh Chauhan, Judge. The Hon'ble Mr. Justice Sushil Kukreja, Judge. Whether approved for reporting? Yes.

For the Petitioner: Mr. G. Shivadass, Sr. Advocate with Ms. Shradha Rajgiri, Mr. Vipul Sharda and Mr. Raditya Katoch, Advocates.

For the Respondents: Mr. Janak Raj Central Govt. Standing Counsel, for respondent No. 1.

Name of respondent No. 2 deleted vide order dated 04.09.2024.

Mr. Vijay Kumar Arora, Sr. Advocate with Ms. Godawari, Ms. Lalita Sharma, Ms. Aastha Kohli, Mr. Hitansh Raj and Mr. Gaurav Kumar, Advocates, for respondent No. 3.

Mr. Rajiv Kumar Assistant Commissioner, CGST, Audit committee, Chandigarh in person.

Tarlok Singh Chauhan, Judge

The instant petition has been filed for grant of the

following substantive reliefs:-

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"(A) That this Hon'ble Court may be pleased to issue a writ in the nature of certiorari, or any other writ quashing the show cause notice dated bearing DIM No. 20240550ZG00000039B 31.05.2024 (Annexure P-1) passed by the Respondent No. 3 whereby the demand of Rs. 4,37,17,830/- along with interest and penalty was created.

(B) That this Hon'ble Court may be pleased to issue writ in the nature of mandamus or any other writ holding that the petitioner is rightly eligible for the input tax credit availed for the period from 2017-18 to 2021-22 (C) That this Hon'ble Court may be pleased to issue of writ in the nature of certiorari holding that the amendment to explanation to section 16(2)(b) is to be applied retrospectively.

(D) That this Hon'ble Court may be pleased to issue of writ of mandamus holding that the proceedings under Section 74 of the proceedings under Section 74 of the CGST Act, 2017 does not survive in the absence of willful suppression."

2. The respondents have raised preliminary objections

regarding the maintainability of the instant petition on the

ground of availability of alternate statutory remedy as per the

scheme of the Central Goods and Service Tax Act, 2017 (for

short the 'CGST Act'). It is submitted that the petition is

premature at this stage as the petitioner has approached this

Court against a show cause notice which is yet to be adjudicated.

Even after the adjudication of the show cause notice, which

always is done completely by observing principles of natural

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justice, there is a statutory alternate remedy available to the

petitioner before appropriate forum, hence, the present petition

deserves to be dismissed as not maintainable.

3. Thus, this Court is required to go into the question of

maintainability of the instant writ petition on the ground of

availability of alternate remedy and for this purpose certain

minimal facts need to be noticed.

4. The petitioner is a partnership firm incorporated

under the Indian Partnership Act, 1932 inter alia, engaged in the

supply of personal care and pharmaceuticals such as

Medicaments, Beauty or Make-up Preparations, Preparations for

use on the Hair Shampoos, Preparation for Oral or Dental

Hygiene, Soap.

5. The petitioner is registered vide GSTIM

02AADFT3025B1Z1 under the Goods and Services Tax regime for

the purpose of carrying out its business in the State of Himachal

Pradesh. The petitioner has filed their monthly returns and

discharged applicable tax liabilities.

6. The petitioner entered into an arrangement with the

Goods Transportation Agencies (hereinafter referred to as 'GTA')

for the transportation of goods into and out of the State of

Himachal Pradesh.

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7. The GTA services are taxable either under forward

charge or reverse charge in terms of Notification No. 11/2017-

Central Tax (Rate) dated 28.06.2017 and Notification No.

03/2022-Central Tax (Rate) dated 13.07.2022. The petitioner

accordingly discharged GST and availed Input Tax Credit

(hereinafter referred to as 'ITC') on the GTA services received.

8. The Books of Account of the petitioner were taken up

for auditing by the Central Tax Department, pursuant to which

audit enquiry notice was issued to the petitioner pointing out

various discrepancies.

9. The petitioner filed a reply to the enquiry notice

alongwith all the relevant supporting documents. The Deputy

Commissioner, Goods and Services Tax (Audit) Circle-Baddi,

Central Revenue Building, Plot No. 19,, Sector 17-C, Chandigarh-

160017 issued Final Audit Report without considering the

submissions made by the petitioner on the ground that the reply

filed by it is untenable.

10. Thereafter, the petitioner received notice in Form

DRC-01A dated 21.05.2024 directing it to discharge GST to the

tune of Rs. 4,37,17,830/- alongwith interst and penalty by

31.05.2024. The petitioner filed a detailed reply on 30.05.2024

wherein it was submitted that the petitioner is not liable to

discharge any outward liability.

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11. The respondent No. 3 issued show cause notice

bearing DIN No. 20240550ZG000000D39B, dated 31.05.2024 in

FORM GST DRC-01 under Section 74(1) of the CGST Act

proposing to demand and recover the alleged inadmissible input

tax credit (hereinafter referred to as 'ITC') or Rs. 4,36,75,439/-,

alleged short paid GST to the tune of Rs. 27,446/-, interest on

non-payment of GST of Rs. 14,945/- and interest and penalty in

terms of CGST Act on the demands proposed above. The show

cause notice also proposed to appropriate the GST paid

amounting to Rs.6,85,440/- towards the demand proposed in the

show cause notice.

12. The petitioner being aggrieved by the aforesaid show

cause notice has filed the present writ petition.

13. It is vehemently argued by Shri G. Shivadass, learned

Senior Advocate, assisted by Ms. Shradha Rajgiri, Advocate, for

the petitioner, that the present writ petition is maintainable

despite the availability of alternate remedy to the petitioner as

the present show cause notice has been issued with a pre-

conceived mind and in violation of natural justice.

14. On the other hand, it has been strongly urged by Shri

Vijay K. Arora, learned Senior Advocate assisted by Ms.

Godawari, Advocate, that the instant writ petition is not

maintainable that too against the mere show cause notice, which

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would be adjudicated upon completely by observing the

principles of natural justice, as undertaken in the reply. Merely

because the show cause notice has been issued by the

respondents does not mean that the same has been issued with

a pre-conceived mind.

15. We have heard learned counsel for the parties and

have gone through the material placed on record.

16. At the outset, it needs to be observed that the high

Court has the discretion not to entertain the writ petition and one

of the restriction placed on the power of the High Court is where

an effective alternate remedy is available to the aggrieved

person.

17. The exception to the rule of alternate remedy arise

where:

(a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution;

(b) there has been a violation of the principles of natural justice;

(c) the order or proceedings are wholly without jurisdiction; or

(d) the vires of a legislation is challenged.

18. However, an alternate remedy by itself does not

divest the High Court of its powers under Article 226 of the

Constitution in an appropriate course though ordinarily, a writ

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petition should not be entertained when an efficacious alternate

remedy is provided by law.

19. When a right is created by a statute, which itself

prescribes the remedy or procedure for enforcing the right or

liability, resort must be had to that particular statutory remedy

before invoking the discretionary remedy under Article 226 of

the Constitution. This Rule of exhaustion of statutory remedies is

a rule of policy, convenience and discretion. (Ref.:- Radha

Krishan Industries vs. State of H.P. 2021 (6) SCC 771).

20. No exceptional situation exists in the instant case

and moreover the petitioner otherwise has a right created by a

statute, which itself prescribes the remedy or procedure for

enforcing the right or liability.

21. In coming to such conclusion, we are duly supported

by a judgment of Three-Judge Bench of the Hon'ble Supreme

Court in Assistant Commissioner of Sales Tax vs. M/s

Commercial Steel Ltd. decided on 03.09.2021, 2022 (16)

SCC 447.

21(i) The facts therein were that the High Court in exercise

of its writ jurisdiction under Article 226 of the Constitution, set

aside the action of the appellants therein in collecting an

amount of Rs.4,16,447/- from the respondents towards tax and

penalty under CGST and the State Goods and Service Tax Act

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(hereinafter referred to as the 'SGST Act') and directed a refund

together with interest @ 6% per annum from 13.12.2019. A

further direction was given to the State of Telangana to consider

initiating disciplinary proceedings against the Assistant

Commissioner and costs of Rs. 25,000/- was also imposed on the

first appellant, who was the first respondent before the High

Court.

21(ii) The respondent therein was a proprietary concern

engaged in the business of iron and steel and was registered

under CGST. The respondent purchased certain goods from a

dealer JSW Steel Limited, Vidyanagar, Karnataka under a tax

invoice dated 11.12.2019. The consignment of goods was being

carried in a truck bearing registration No. KA 35C 0141. While it

was proceeding from the State of Karnataka, it was intercepted

on 12.12.2019 at 5:30 pm at Jeedimetala. The tax invoice

indicated that the goods were earmarked for delivery at

Balanagar, Telangana. The case of the appellant was that

Balangar is situated between the State of Karnataka and

Jeedimetala and that no reasonable person would cross

Balanagar and then turn around to go back to the place of

destination. The purchase value of the goods appeared to be in

the amount of Rs.11,14,579/- from the tax invoices.

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21(iii) The case of the revenue was that in the guise of an

inter-State sale, the respondent was attempting to sell the goods

in the local market by evading both SGST as well as CGST. An

order of detention was issued in Form GST MOV-06 on

12.12.2019 and a notice was served on the person in charge of

the conveyance. The respondent paid the tax and penalty,

following which the goods and the conveyance were released on

13.12.2019.

21(iv) The respondent instituted writ proceedings under

Article 226 of the Constitution before the High Court challenging

the order of detention dated 12.12.2019 and the notice which

was issued under Section 20 of the IGST Act 2017. A refund of

tax was also sought. A counter affidavit was filed on behalf of the

appellants before the High Court. The High Court entertained the

writ petition and ordered the refund of the amount collected

towards tax.

21(v). As observed above, High Court not only entertained

the writ petition but allowed it in the aforesaid terms.

21(vi). Aggrieved by the judgment passed by the High

Court, the appellant therein filed an appeal before the Hon'ble

Supreme Court wherein it was argued that the High Court was in

error in entertaining the writ petition under Article 226 of the

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Constitution having regard to the statutory alternate remedy

which was available under Section 107 of the GST Act.

21(vii). Allowing the appeal, the Hon'ble Supreme Court after

quoting Section 107 of the CGST Act observed as under:-

"11. The respondent had a statutory remedy under Section 107. Instead of availing of the remedy, the respondent instituted a petition under Article 226. The existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution. But a writ petition can be entertained in exceptional circumstances where there is:

(i) a breach of fundamental rights;

(ii) a violation of the principles of natural justice;

(iii) an excess of jurisdiction; or

(iv) a challenge to the vires of the statute or delegated legislation.

12. In the present case, none of the above exceptions was established. There was, in fact, no violation of the principles of natural justice since a notice was served on the person in charge of the conveyance. In this backdrop, it was not appropriate for the High Court to entertain a writ petition. The assessment of facts would have to be carried out by the appellate authority. As a matter of fact, the High Court has while doing this exercise proceeded on the basis of surmises. However, since we are inclined to relegate the respondent to the pursuit of the alternate statutory remedy under Section 107, this Court makes no observation on the merits of the case of the respondent.

13. For the above reasons, we allow the appeal and set aside the impugned order of the High Court. The writ petition filed by the respondent shall stand dismissed.

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However, this shall not preclude the respondent from taking recourse to appropriate remedies which are available in terms of Section 107 of the CGST Act to pursue the grievance in regard to the action which has been adopted by the state in the present case."

22. Adverting to the facts of the instant case, as already

noticed above, none of the exception, as carved out by the

Hon'ble Supreme Court in Radha Krishan's case (supra) has

been established before this Court. Merely because the

petitioner has been served with the show cause notice would not

mean that the same has been issued with the pre-conceived

mind and in violation of natural justice. The proceedings are still

at the stage of show cause notice, which has been assailed in the

instant case. Therefore, the petitioner cannot raise this claim,

that too, at this stage. Even otherwise, it would be premature on

the part of the High Court to quash a show cause notice by

invoking Article 226 of the Constitution of India. It is premature

for the High Court to opine anything whether there was any

evasion of tax or not, the same is required to be considered in an

appropriate proceedings for which show cause notice has already

been issued to the petitioner.

23. In coming to such conclusion, we are duly supported

by the judgment of the Hon'ble Supreme Court in Civil Appeal

No. 359 of 20203 (Arising out of SLP (C) No. 19295/2022),

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titled as The State of Punjab vs. M/s Shiv Enterprises &

Ors., decided on 16.01.2023.

23(i) The facts there were that the respondents therein

issued a show cause notice dated 14.09.2021, as to why the

goods in question and conveyance used in transport of such

goods should not be confiscated under Section 130 of the Punjab

GST Act, 2017, IGST Act, 2017 and CGST Act, 2017 and why the

tax, penalty and other charges payable in respect of such goods

and the conveyance should not be payable.

23(ii) In the show cause notice, there was a specific

allegation with respect to evasion of duty which was yet to be

considered by the appropriate authority. The question arose as

to whether the High Court should have entertained the petition,

when the petitioner approached the High Court against mere

show cause notice. The High Court while entertaining the petition

observed in para-29 as under:-

"29. From the pleadings on record, it is clear that there is no allegation that the petitioner has contravened any provision of the Act or the rules framed thereunder much less with an intent to evade payment of tax. It is also not the case of the State that the petitioner did not account for any goods on which he is liable to pay tax under the Act or that he supplied any goods liable to tax under the Act without having applied for registration or that he supplied or received any goods in contravention of any of the provisions of the Act. From the perusal of show cause notice issued to the petitioner under Section 130, the

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case alleged against the petitioner is that of wrongful claim of input tax credit. The petitioner or for that matter any registered person shall be entitled to tax credit of input tax on any supply of goods or services, only when he shall is able to show that the tax in respect of such supply has been paid to the Government either in cash or through utilization of input tax credit admissible in respect of the said supply. Needless to reiterate any person can claim input tax credit under the provisions of the 2017 Act only if the same has been actually paid to the Government. Thus, the action of the respondents in initiating proceedings under Section 130 on the basis of show cause notice dated 14.09.2021 cannot be sustained."

23(iii). Setting aside the judgment passed by the High Court,

the Hon'ble Supreme Court observed as under:-

"Apart from the fact that the aforesaid is factually incorrect, even otherwise, it was premature for the High Court to opine anything on whether there was any evasion of the tax or not. The same was to be considered in an appropriate proceeding for which the notice under Section 130 of the Act was issued. Therefore, we are of the opinion that the High Court has materially erred in entertaining the writ petition against the show cause notice and quashing and setting aside the same. However, at the same time, the order passed by the High Court releasing the goods in question is not to be interfered with as it is reported that the goods have been released by the appropriate authority."

24. Reverting back to the facts of the instant case, it

would be noticed that the respondents have served upon the

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petitioner a detailed show cause notice running into 15 pages,

containing extensive details how it has arrived at a conclusion,

sufficient enough to issue a show cause notice to the petitioner.

Therefore, entertaining the petition would be annihilating a still

born proceeding by going into the merits of the show cause

notice

25. In view of the above and for the reasons stated

above and without expressing anything on merits in favour of

either of the parties, more particularly, against the petitioner