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IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
SHEKHAR B. SARAF, MANJIVE SHUKLA, JJ.
HCL Infotech Ltd - Petitioner
Versus
Commissioner, Commercial Tax And Another - Respondents
Writ Tax No. 1396 Of 2024
Decided On : 27-09-2024
(A) Central Goods and Services Tax Act, 2017 - Sections 73 and 74 - Show Cause Notice issued under Section 74 for excessive Input Tax Credit - The court held that proceedings under Section 74 cannot be initiated without evidence of fraud or wilful misstatement, and if proceedings under Section 73 have been concluded, they cannot be reopened under Section 74 without proper jurisdictional basis. (Paras 22, 26)
(B) Jurisdiction - The court emphasized that a Show Cause Notice must contain essential ingredients for jurisdiction under Section 74, failing which it is liable to be quashed. (Paras 25, 27)
Facts of the case:
The petitioner challenged a Show Cause Notice under Section 74 of the CGST Act regarding excessive Input Tax Credit claimed, after previous proceedings under Section 73 were dropped.
Findings of Court:
The Show Cause Notice lacked necessary allegations of fraud or misstatement, rendering it without jurisdiction.
Issues: Whether the Show Cause Notice under Section 74 can be issued after proceedings under Section 73 have been concluded.
Ratio Decidendi: The court ruled that without allegations of fraud or misstatement, proceedings under Section 74 cannot be initiated if prior proceedings under Section 73 have been finalized.
Result: The Show Cause Notice dated 03.08.2024 is quashed.
JUDGMENT :
1. Heard Sri Atul Gupta, learned counsel appearing for the petitioner and Sri Ankur Agarwal, learned Standing Counsel appearing for the respondents.
2. Petitioner has filed this writ petition challenging therein the Show Cause Notice No. ZD090824020702H dated 03.08.2024 issued by the Deputy Commissioner, State Tax, Sector-2 NOIDA, Uttar Pradesh under Section 74 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘CGST Act’).
3. Facts of the case, in brief, are that the petitioner is a public limited company and under the erstwhile regime it had centralised Service Tax registration in the State of Uttar Pradesh and was procuring various input services to supply the IT services and had availed CENVAT Credit of the Service Tax and Cess paid thereon in terms of the CENVAT Credit Rules, 2004. Thereafter the Goods and Services Tax (GST) was introduced w.e.f. 01.07.2017 and for the purposes of GST petitioner got itself registered under the new regime vide GSTIN 09AADCH0305F1Z4. Since on the appointed date i.e. on 01.07.2017, the petitioner had unutilized CENVAT Credit of Service Tax, Education Cess Secondary & Higher Education Cess and Krishi Kalyan Cess amounting Rs. 5,47,57,755 as such said amount was transferred into the GST regime by filing Form GST TRAN-1 in terms of Section 140 of the CGST Act.
4. The petitioner out of the aforesaid carried forward transitional credit transferred the Input Tax Credit amounting Rs. 3,28,25,979/-under Section 140(8) of the CGST Act to the persons having same PAN and registered in the States of Gujarat, Himachal Pradesh, Karnataka and Rajasthan therefore, the net transitional credit remained with the petitioner in State of Uttar Pradesh amounting to Rs. 2,19,31,776/-. The petitioner in the month of March, 2018 reversed Rs. 25,31,801/-pertaining to carried forward credit of Education Cess, Secondary & Higher Education Cess and Krishi Kalyan Cess in GSTR-3B return filed for the month of March, 2018.
5. The Department issued a notice under Section 61 of the UPGST Act in Form GST ASMT-1 bearing reference no. ZD0904231397471 dated 29.04.2023 whereby the alleged discrepancies in the returns filed for the FY 2017-18 based on alleged scrutiny of such returns were intimated to the petitioner. Petitioner filed his reply on 05.07.2023 wherein it was categorically stated that there are no discrepancies and further clarified that the transitional credit of Rs. 2,19,31,776 has been claimed in accordance with provisions of Section 140(1) and Section 140(9) of the CGST Act and out of such total transitional credit, an amount of Rs. 25,31,801/-pertaining to Cess was already reversed.
6. Thereafter on 30.09.2023 a Show Cause Notice under Section 73 of the CGST Act was issued to the petitioner whereunder for the period from July, 2017 to March, 2018 a demand of Rs. 5,76,12,310/-along with interest and penalty was proposed. The petitioner submitted a detailed reply on 18.11.2023 to the aforesaid Show Cause Notice issued under Section 73 of the CGST Act. The petitioner in its reply submitted that credit of Rs. 2,19,31,776/-has been claimed under Section 140(1) and 140(9) of the CGST Act and further out of such credit of Rs. 2,19,31,776/-and amount of Rs. 25,31,801/-pertaining to Cess was already reversed. The petitioner in its reply also clarified that Section 140(9) allows the registered person to take credit on the amount of service tax, which was earlier reversed due to non-payment of consideration, on payment of the consideration within a period of three months from the appointed date.
7. The Deputy Commissioner, State Tax, Sector-2 NOIDA, Uttar Pradesh after considering the reply submitted by the petitioner and carrying out the verification of the documents and amounts passed the adjudication order No. ZD0912236703957 on 30.12.2023 whereby proceedings initiated against the petitioner under Section 73 of the CGST Act were dropped.
8. The Respondent No. 2 once again on the same
Proceedings under Section 74 of the CGST Act cannot be initiated without evidence of fraud or misstatement if prior proceedings under Section 73 have been concluded.
The jurisdiction under the Central Goods and Services Tax Act prohibits State GST authorities from initiating parallel proceedings once Central GST proceedings have commenced on the same subject matt....
Tax authorities must provide substantial evidence of fraud or suppression of facts before imposing penalties under Sections 74 and 50, especially when input tax credit has already been reversed volun....
Show-cause notices under Sections 73 and 74 of the WBGST/CGST Act can coexist for the same tax period if based on distinct grounds, and petitioners must pursue available appellate remedies before see....
Dual proceedings concerning the same subject matter initiated by State GST authorities after Central GST proceedings are barred under Section 6(2)(b) of the CGST Act.
The court determined that prior dismissal of proceedings under Section 61 does not prevent initiation of actions under Section 74 when fraud is alleged, affirming legislative intent regarding fraud i....
Composite show-cause notices covering multiple financial years under CGST/KGST Act are illegal as assessments must pertain to individual years, respecting statutory limitations and ensuring natural j....
The main legal point established in the judgment is that the proper officer must consider the explanation offered by the registered person before assuming jurisdiction to issue show cause notice unde....
The main legal point established in the judgment is the mandatory and imperative nature of the show cause notice requirement under Section 74(1) of the JGST Act and the need for specific charges in t....
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