Transactional value under Section 15 of the GST Act must be the decisive element for tax liability, and arbitrary assumptions regarding pricing or profit margins are impermissible.

ORDER :

1. The petitioner is engaged in the business of trading of electronic goods on Amazon [an On-line Retailer] and is registered under the Central Goods and Services Tax Act, 2017 [CGST Act]/ KARNATAKA GOODS AND SERVICES TAX ACT , 2017 [KGST Act]. The petitioner has filed this petition impugning the Show Cause Notice dated 30.09.2023 under Section 73(1) of the KGST Act read with the relevant provisions of the CGST Act and Integrated Goods and Services Tax Act, 2017 [IGST Act] which is also in Form GST DRC - 01.

2. The petitioner, in addition to impugning the notice dated 30.09.2023 [impugned Show Cause Notice], has also sought for further reliefs which read as under:

“(c) To issue order(s) or directions in the nature of Mandamus holding that reversal under Section 17(5)(h) of the CGST Act, 2017 cannot be sought on presumptive basis by the Respondent No. 1.

(d) To issue order(s) or directions in the nature of Mandamus holding that the Petitioner is neither liable to pay interest under Section 50 of the CGST Act nor can penalty under Section 122(2)(a) can be imposed on them.

(e) To issue order(s) or directions in the nature of Certiorari quashing endorsement notice issued by Respondent No. 3 from File No. Adcom/Enf/SZ/ACCT-24/INS-20/2022- 23 dated 03.08.2022 at Annexure-F as arbitrary, vague and in contradiction to the provisions of the CGST/KGST and violative of Article 265 of the Constitution.”

The impugned Show Cause Notice has two parts viz., Part -I, which relates to Input Tax Credit [ITC] availed but disallowed for not complying with the requirements of Section 16 (2) and Section 15 of the CGST Act and the relevant Rules, and Part - II, which relates to alleged short declaration of Outward Supply and excess claim of ITC in Karnataka.

3. Sri. G. Shivadass, the learned Senior Counsel for the petitioner, at the outset submits that the petitioner is categorical that its grievance, as of this stage, is limited to Part- II, and if such grievance is favoured by this Court, the proceedings could be restored to the stage of FORM GST DRC-01A as contemplated under Section 73(5) of the KGST Act with opportunity to the petitioner to file further reply and liberty to the respondents to reissue Show Cause Notice under Section 73[1] of the CGST/KGST Act. Sri. G. Shivadass, insofar as Part-1 of the Show Cause Notice, submits that the petitioner, because the Show Cause Notice is issued well within the prescribed time, will not raise the question of limitation in the event the writ petition is disposed of at the first instance.

4. This Court must observe that even if the petitioner's grievance with Part - II of the Show Cause Notice is favoured, and the proceedings is restored to the first respondent for reconsideration before issuance of notice under Section 73(1) of the KGST Act, the respondents, subject to this Court's observation herein, must also be at liberty to issue Show Cause Notice on both Part - I and Part - II of the notice without being impeded by the question of limitation.

5. The petitioner's Books of Accounts have been audited as contemplated under Chapter XIII of the KGST Act; and that during the enforcement under Chapter XIV of the KGST Act, the petitioner's representatives, when called upon to furnish records for inspection and give statements, have appeared before the proper officer and furnished documents and given certain statements. It is contended on behalf of the petitioner that the details furnished validate the petitioner's case that the transactional price [the price actually paid for the supply of goods and services by a recipient who is not related] received from the end customers without any add