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2020 Supreme(Guj) 550
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Vikram Nath, J.B. Pardiwala, JJ.
M/s Mahavir Enterprise - Petitioner
Versus
Assistant Commissioner of State Tax - Respondent
R/Special Civil Application No. 7613 of 2020
Decided On : 22-06-2020
For the Petitioner: Mr. Avinash Poddar.
For the Respondent: Ms. Manisha Lavkumar Shah, Government Pleader with Mr. Dharmesh Devnani, AGP.
Point of Law:
The interference at the show-cause notice stage should be rare and not in a routine manner. Mere assertion by the writ petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice. It should be prima facie established to be so. Where factual adjudication would be necessary, interference is ruled out.
Headnote:
Taxation – Constitution of India, 1950 – Article 14, 19 (1) (g) and 226 – Central Goods and Services Tax Act, 2017 – Sections 74 122(1) – CGST Rules – Rule 142(1)(a) – Assessment – Determination of the tax liability – Notice – Seeking to Quash and set aside the show cause notice to this petition and declare the Rule 142(1)(a) of CGST/GGST Rules, being ultra vires and dehors the Act and violative of Articles 14 and 19 (1) (g) of the Constitution to the extent it says notice issued under section 122 – Seeks to challenge the legality and validity of show cause notice November 2019 issued by the respondent No.1 under Section 122(1) of Tax Act, 2017 calling upon writ applicant to show cause why an amount should not be recovered for alleged contravention of the provisions of the Act and the Rules, it appears on plain reading of the impugned show cause notice that it is the case of department that the writ applicant is involved in bogus billing transactions without any physical movement of the goods – Held, A rule under delegated legislation can be held to be ultra vires the statutory provisions of the Act if it is shown that it is beyond the scope of or in excess of the rule-making power f the delegate conferred under the Act, or that it is in conflict with or repugnant to any enactment in the Act – It may be noted that Section 164 of Act confers power on Central Government to frame the rules – Under Section 164 of Act, Central Government has the power to make rules generally to carry out all or any of the purposes of Act – In our opinion, Rule 142(1)(a) of Rules, 2017 is valid and is no manner conflict with any of provisions of Act – Challenge to legality and validity of the show cause should fail having regard to scope of judicial review and challenge to the validity of Rule 142(1)(a) of Rules should also fail – Application is rejected. (Paras 26 to 31)
Facts of the case:
Applicant vehemently submitted that the impugned show cause is invalid as Section 122 of the Act, 2017 does not contemplate issue of any show cause notice. According to the learned counsel, if it is the case of the department that the writ applicant is guilty of fraud or suppression, then a show cause notice under Section 74 of the Act, 2017 is contemplated for the purpose of determination of the tax liability – respondent No.1 has committed a serious error in adding both the outward supply and the input tax credit for the purpose of imposition of the amount of penalty. According to him, it is contrary to the scheme of the CGST Act, more particularly, Section 74 of the Act, 2017.
Findings of the court:
A rule under delegated legislation can be held to be ultra vires the statutory provisions of the Act if it is shown that it is beyond the scope of or in excess of the rule-making power f the delegate conferred under the Act, or that it is in conflict with or repugnant to any enactment in the Act – Whether any particular legislation suffers from excessive delegation has to be decided having regard to the subject matter, scheme, the provisions of the Statutes including its preamble and the facts and circumstances in the background of which Statute is enacted. (See Registrar, Co-operative Societies vs. K. Kunjabmu, AIR 1980 SC 350 and State of Nagaland v. Ratan Singh, AIR 1967 SC 212). It is also well settled that in considering the vires of subordinate legislation one should start with presumption that it is intra vires and if it is open to two constructions, one of which would make it valid and other invalid, the Courts must adopt that construction which makes it valid and the legislation can also be read down to avoid its being declared ultra vires – In the case of Ajay Canu vs. Union of India, AIR 1988 SC 2027, Supreme Court held that it was well established proposition of law that where a specific power is conferred without prejudice to the generality of power already specified, particular power is only illustrative and it did not in any way restrict general power – We have already quoted Section 164 of the Act which provides for the power to make rules – It may be noted that Section 164 of Act confers power on Central Government to frame the rules – Under Section 164 of Act, Central Government has the power to make rules generally to carry out all or any of the purposes of Act – In our opinion, Rule 142(1)(a) of Rules, 2017 is valid and is no manner conflict with any of provisions of Act – Challenge to legality and validity of the show cause should fail having regard to scope of judicial review and challenge to the validity of Rule 142(1)(a) of Rules should also fail.
Result: Application is rejected.
ORDER :
J.B. PARDIWALA, J.
1. By this writ application under Article 226 of the Constitution of India, the writ applicant, a proprietary concern through its proprietor, has prayed for the following reliefs:
“(a) Quash and set aside the show cause notice in Form GST DRC 01 dated 30.11.2019 at Annexure A to this petition.
(b) declare the Rule 142(1)(a) of CGST/GGST Rules, being ultra vires and dehors the Act and violative of Articles 14 and 19 (1) (g) of the Constitution of India, to the extent it says notice issued under section 122.
(c) Pending the admission, hearing and final disposal of this petition,
(i) Proceeding and Adjudication of impugned show cause notice at Annexure A to this petition to be stayed; and
(ii) No coercive action to be taken against the petitioners;
(d) Grant ad-interim reliefs in terms of prayers above;
(e) Any other and further relief deemed just and proper be granted in the interest of justice;
(f) To award Costs of and incidental to this application be paid by the Respondents;
2. The facts giving rise to this writ application may be summarised as under:
2.1 The writ applicant seeks to challenge the legality and validity of the show cause notice dated 30th November 2019 issued by the respondent No.1 under Section 122(1) of the Central Goods and Services Tax Act, 2017 (for short, 'the CGST Act') calling upon the writ applicant to show cause why an amount of Rs.6,87,68,821/-(Rupees Six Crore Eighty Seven Lac Sixty Eight Thousand Eight Hundred Twenty One only) should not be recovered for the alleged contravention of the provisions of the Act and the Rules.
3. Prima facie, it appears on plain reading of the impugned show cause notice that it is the case of the department that the writ applicant is involved in bogus billing transactions without any physical movement of the goods.
4. The show cause notice is yet to be adjudicated.
5. In such circumstances referred to above, the writ applicant has come up before this Court seeking to get the impugned show cause notice quashed and set aside.
6. It also needs to be stated at this stage that there is also a challenge to the constitutional validity of Rule 142(1)(a) of the CGST Rules on the ground that the same travels beyond the provisions of the Act and is a result of excessive delegation of powers.
SUBMISSIONS ON BEHALF OF THE WRIT APPLICANT:
7. Mr. Avinash Poddar, the learned counsel appearing for the writ applicant vehemently submitted that the impugned show cause is invalid as Section 122 of the Act, 2017 does not contemplate issue of any show cause notice. According to the learned counsel, if it is the case of the department that the writ applicant is guilty of fraud or suppression, then a show cause notice under Section 74 of the Act, 2017 is contemplated for the purpose of determination of the tax liability.
8. Mr. Poddar would submit that the respondent No.1 has committed a serious error in adding both the outward supply and the input tax credit for the purpose of imposition of the amount of penalty. According to him, it is contrary to the scheme of the CGST Act, more particularly, Section 74 of the Act, 2017.
9. Mr. Poddar would submit that Rule 142(1)(a) of the CGST Rules contemplates for issuance of summary notice electronically along with the notice issued under Section 52 or Section 73 or Section 74 or Section 76 or Section 122 or Section 123 or Section 124 or Section 125 or Section 127 or Section 129 or Section 130 of the GST Act, 2017. According to the learned counsel, as Section 122 of the Act, 2017 does not contemplate issue of any show cause notice, the Rule 142(1)(a) travels beyond the provisions of the Act. In such circumstances, according to the learned counsel, Rule 142(1)(a) deserves to be declared as ultra vires being in excessive delegation of the powers.
10. In such circumstances referred to above, Mr. Poddar, the learned counsel prays that there being merit in his writ application, the same may be allowed and the reliefs prayed for in the writ applicatio
