The jurisdiction of CAG is limited to government departments, and show cause notices based on its audit findings are valid unless issued improperly.

JUDGMENT :

MS Sonak, J.

1. Heard learned counsel for the parties.

2. The Petitioner challenges Show Cause Notice No.80/JC/THANE/2023-24 dated 07 December 2023 issued under the Central Goods and Services Tax Act, 2017 (“CGST Act”) as being ultra vires and contrary to the law laid down by this Court in Kiran Gems Private Limited Vs Union of India and Ors. , 2021 (2) TMI 12 – Bombay High Court

3. Mr. Sridharan, the learned counsel for the Petitioner, submitted that the impugned show cause notice is issued solely based on the observations of the Central Excise Revenue Audit (“CERA) audit conducted by the Director General of Audit (Central), Mumbai, functioning under the control of Comptroller and Auditor General (“CAG). He submitted that in terms of the law as clarified by this Court in Kiran Gems Private Limited (supra), the CAG or its officials have no jurisdiction to audit private companies like the Petitioner.

4. Mr Shridaran, therefore, submitted that the impugned show cause notice, which is entirely based on CAG’s audit, which was itself without jurisdiction, is unsustainable, ultra vires and without jurisdiction. He submitted that in such a situation, interference by this Court is warranted without adverting to the rule of exhaustion of alternate remedies. In addition to Kiran Gems Private Limited (supra), he relied on East India Commercial Co. Ltd., Calcutta Vs. Collector of Customs, Calcutta , 1983 (13) E.L.T. 1342 (SC)

5. Mr Sridharan, without prejudice to the above-mentioned contention, submitted that the impugned show causes notice was issued with a “pre-determined mindset”. He submitted that all the documents placed on record by the Petitioner or of the explanation offered by the Petitioner were not considered before issuing the impugned show cause notice. Accordingly, he submitted that the impugned show cause notice is ex-facie illegal, untenable and unsustainable.

6. Mr Sridharan finally submitted that the extended limitation period was wrongly invoked in the present case. He submitted that this was not a case of suppression, and the allegations in the impugned show cause notice are cursory backed by no material. He submitted that since the impugned show cause notice was issued beyond the prescribed period of limitation and since the parameter necessary for invoking the extended period of limitation was unavailable, the impugned show cause notice was ex-facie without jurisdiction and warrants interference. He relied on Akhila Sujith Vs Income Tax Officer, International Tax Ward-4(2), Mumbai & ors., 2024 (9) TMI 152 – Bombay High Court

7. For all the above reasons, Mr. Sridharan submitted that the impugned show cause notice may be set aside and that the Respondents be restrained from proceeding in pursuance of the same.

8. Mr. Mishra, the learned counsel for Respondent No.1, and Mr. Ochani, the learned counsel for Respondent Nos. 3 to 5, submitted that the CAG or its officials did not audit the Petitioner. The audit, if any, was of the departments. Therefore, the decision in Kiran Gems Private Limited (supra) was not even remotely attracted to the present case. They submitted that in any event, the decision was appealed and leave has also been granted by the Hon’ble Supreme Court.

9. Mr. Mishra and Mr. Ochani pointed out that CERA was entitled and duty-bound to audit the departments of the Union of India. Since they found serious discrepanc