Karnataka High Court

Athani Sugars Ltd vs The Joint Commissioner Of on 15 April, 2024

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                                                     NC: 2024:KHC-D:6369
                                                       WP No. 105397 of 2021




                  IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

                         DATED THIS THE 15TH DAY OF APRIL, 2024

                                            BEFORE

                            THE HON'BLE MRS. JUSTICE M.G.UMA

                         WRIT PETITION NO.105397/2021(T-RES)

                 BETWEEN:

                 ATHANI SUGARS LTD.,
                 VISHNUNNA NAGAR, POST NAVALIHAAL- 591 234,
                 TQ: ATHANI, DIST: BELAGAVI,
                 REP. BY ITS SENIOR ACCOUNTS
                 OFFICER SHRI. AMTI M. JADHAV.
                                                                 ...PETITIONER
                 (BY SRI RAGHAVENDRA B. HANJER, AND
                 SRI H. R. KAMBIYAVAR, ADVOCATE)
                 AND:

                 1.   THE JOINT COMMISSIONER OF
                      CENTRAL GST AND CENTRAL EXCISE
                      OFFICE OF THE COMMISSIONER OF
                      CENTRAL GST AND CENTRAL EXCISE,
                      AUDIT COMMISSIONERATE,
                      NO.71, CLUB ROAD, BELAGAVI - 590 001.
Digitally
signed by
MANJANNA E
Location: High
                 2.   THE SUPERINTENDENT CENTRAL GST,
Court of
Karnataka
                      OFFICE OF THE SUPERINTENDENT
                      OF CENTRAL GST, NIPPANI-II RANGE
                      ADARSHA NAGAR, P.B.ROAD,
                      NIPPANI - 591 237, DIST: BELAGAVI.
                 3.   THE UNION OF INDIA,
                      REPRESENTED BY ITS FINANCE SECRETARY
                      MINISTRY OF FINANCE,
                      DEPARTMENT OF REVENUE, NEW DELHI - 110 001.
                 4.   THE STATE OF KARNATAKA,
                      REPRESENTED BY ITS, FINANCE SECRETARY,
                      VIDHANA SOUDHA, BENGALAURU - 560 001.
                                                              ...RESPONDENTS
                 (BY SRI GIRISH HULMANI, ADVOCATE FOR R1 AND R2;
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                                     NC: 2024:KHC-D:6369
                                       WP No. 105397 of 2021




SRI M.B.KANAVI, ADVOCATE FOR R3;
SRI P.N.HATTI, HCGP FOR R4)


     THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT OF
CERTIORARI OR A DIRECTION IN THE NATURE OF A WRIT OF
CERTIORARI QUASHING THE DEMAND-CUM SHOW CAUSE NOTICE
BEARING.SCN-SLNO.01/2021    22/GST/JOINTCOMMISSIONER-282/
21 DATED 23.09.2021 ISSUED UNDER SECTION 74(1) OF THE CGST
ACT FOR THE TAX PERIODS JULY, 2017 TO MARCH, 2018
(ANNEXURE-K) AND ETC.,

    THIS PETITION, COMING ON FOR PRELIMINARY HEARING - B
GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

                             ORDER

Petitioner has approached this Court for grant of writ in the

nature of certiorari to quash the Show Cause Notice dated

23.09.2021 issued by respondent No.1 and alternatively issue

the writ in the nature of writ of prohibition by restraining the

respondents from levying the Goods and Services Tax Act,

2017 (for short, 'GST') on Extra Neutral Alcohol (for short,

'ENA') supplied by the petitioner.

2. Heard learned counsel Sri.Raghavendra B. Hanjer

and Sri.H.R.Kambiyavar, for petitioner and learned counsel

Sri.Girish Hulamani, for respondent Nos.1 and 2 learned

counsel Sri.M.B.Kanavi, for respondent No.3, and Sri.P.N.Hatti,

learned High Court Government Pleader for respondent No.4.

NC: 2024:KHC-D:6369

3. Learned counsel for the petitioner submits that the

petitioner is aggrieved by the Show Cause Notice produced as

per Annexure-K passed by respondent No.1, calling upon the

petitioner to Show Cause as to why the CGST should not be

demanded on Extra Neutral Alcohol supplied by the petitioner.

According to the petitioner the ENA being un-denatured spirit is

not covered under the notification relied on by the respondents

and respondents have no authority to issue such Show Cause

Notices. Therefore, petitioner is before this Court.

4. Learned counsel submits that when notifications

relied on by respondents disclose that the ENA being denatured

spirit is not covered under GST rate schedule, respondents

cannot justify the Show Cause Notice produced as per

Annexure-K. Therefore, petitioner is before this Court seeking

the relief of writ in the nature of certiorari and any other writs

to be granted under this circumstance.

5. Learned counsel for the petitioner placed reliance

on the decision of the Hon'ble Apex Court in Bihar Distillery

and another Vs. Vs. Union of Indian and others1, in

support of his contention that the industries engaged in

(1997) 2 SCC 727

NC: 2024:KHC-D:6369

manufacture of rectified spirit exclusively for obtaining or

manufacturing potable liquors shall be under exclusive control

of the State Government and therefore, it is only the State

Government which can have the say in the matter. Therefore,

respondent Nos.1 and 2 were not having any authority to issue

the Show Cause Notice. Accordingly, he prays for allowing the

petition.

6. Per contra, learned counsel for respondents

opposing the petition submitted that the petitioner is

challenging Annexure-K-Show Cause Notice issued by

respondent No.1 dated 23.09.2021. As per Annexure-K

respondent No.1 has referred to the notification issued by the

Central Government and when petitioner was called upon to

Show Cause as to why total GST Rs.17,90,89,650/- should not

be demanded. The petitioner was called upon to submit his

written explanation within a period of 30 days. The same was

not complied by the petitioner and he has not submitted any

written explanation. This Show Cause Notice was issued under

Section 50 of Goods and Services Tax (for short, 'the GST Act').

The document produced by respondents the disclose that

respondent Nos.1 and 2 are having the authority under the

NC: 2024:KHC-D:6369

notification issued by the Central Government to levy the tax

and GST. Accordingly, the Show Cause Notice was issued. The

petitioner was challenged the Show Cause Notice without filing

his written explanation.

7. Learned counsel for the respondents placed reliance

on the decision of the Apex Court in Union of India Vs

Coastal Container Transporters Associations and others2,

in support of his contention that, the Supreme Court has made

it very clear referring to several decisions that at the stage of

issuance of the Show Cause Notice, the petitioner cannot

challenge the same without submitting the written explanation.

Therefore, petition itself is not maintainable and prays for

dismissal of the petition.

8. Learned counsel further submitted that in view of

the decision of the Division Bench of Allahabad High Court in

Jain Distillery Private Limited Vs. State of U.P. and

others3. The decision of Bihar Distillery (supra) relied on by

the learned counsel for the petitioner is considered and it is

held that it is against the 7 judges Bench decision in

(2019) 73 GST 211

MANU/UP/2425/2021

NC: 2024:KHC-D:6369

Synthetics and Chemicals Ltd and other Vs. state of U.P

and others4. Therefore, no reliance could be placed on the

decision relied on by learned counsel for the petitioner.

9. Learned counsel submitted that the petitioner has

chosen to submit his written explanation to the Show Cause

Notice and there is no reason as to why he has not chosen to

do so. Under such circumstances, this Court may not interfere

at the stage of the Show Cause Notice to pass any order as it is

the Competent Authority which will decide the issue, if any,

raised by the petitioner. Accordingly, he prays for dismissal of

the petition as not maintainable.

10. Learned High Court Government Pleader for

respondent No.4 adopting the arguments addressed by learned

counsel for respondent Nos.1 and 2 submits that since it is only

the Show Cause Notice which was issued by respondent and

since the petitioner has not chosen to file his written

explanation to the said Show Cause Notice. The petition is liable

to be dismissed as not maintainable.

11. Perused the material on record.

1(1980)2 SCC 441

NC: 2024:KHC-D:6369

12. Petitioner is aggrieved by issuance of show-cause

notice dated 23.09.2021 issued by respondent No.1 calling

upon by the petitioner to show-cause as to why demand for

GST at Rs.17,90,89,650/- should not be levied. The petitioner

was called upon to submit his written explanation for not

making demand along with the interest. It is also stated that

petitioner can seek personal hearing while filing the written

explanation. It is made clear that no such written explanation

was submitted nor the opportunity to have the personal hearing

is sought for by the petitioner. No reasonable explanation is

given by the petitioner as to why he has not chosen to file

written explanation, seeking personal hearing.

13. As rightly contended by the learned counsel for the

respondents, it is only a show-cause notice issued by

respondent No.1 calling upon the petitioner to submit his

explanation. An option was also given to seek personal hearing.

Even though, there is no explanation by the petitioner for the

reasons best known to him, the petitioner has rushed to this

court seeking to quash the show-cause notice on several

grounds and such grounds could have been raised by the

NC: 2024:KHC-D:6369

petitioner in his written explanation as to why said show-cause

notice could not have been issued.

14. Even though learned counsel for the petitioner

placed reliance on the decision in Bihar Distillery (supra), the

dispute in the said case was in respect of cancellation of

licence. On the other hand, learned counsel for the respondents

placed reliance on the recent decision of the Hon'ble Apex Court

Union of India (supra) where the Apex Court in para 19 held

as under.

"19. On the other hand, we find force in the contention of the learned senior counsel, Sri Radhakrishnan, appearing for the appellants that the High Court has committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show cause notices. Though there is no bar as such for entertaining the writ petitions at the stage of show cause notice, but it is settled by number of decisions of this Court, where writ petitions can be entertained at the show cause notice stage. Neither it is a case of lack of jurisdiction nor any violation of principles of natural justice is alleged so as to entertain the writ petition at the stage of notice. High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to this Court. The judgment of this Court in the case of Union of India & Anr. v. Guwahati Carbon Ltd. (supra) relied on by the learned senior counsel for the appellants also supports their case. In the aforesaid judgment, arising out of Central Excise Act, 1944, this Court has held that excise law is a complete code in order to seek redress

NC: 2024:KHC-D:6369

in excise matters and held that entertaining writ petition is not proper where alternative remedy under statute is available. 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. Further, the judgment of this Court in the case of Malladi Drugs & Pharma Ltd. v. Union of India, relied on by the learned senior counsel for the appellants also supports their case where this Court has upheld the judgment of the High Court which refused to interfere at show cause notice stage."

15. Therefore, it is clear that the Apex Court frowned

upon the practice of approaching this court on issuance of

show-cause notice, without giving written explanation to enable

the authority to consider his defence and to pass appropriate

orders. Therefore, I am of the opinion that the petitioner has

rushed to this court to challenge the show-cause notice without

availing the opportunity given to him to submit his written

explanation. Therefore, the writ petition is not maintainable.

Accordingly, I proceed to pass the following: