Power to Remand u/s 107(11) of GST Act: Telangana HC allows Petition on Non-Consideration of Jurisdiction Objection [Read Order]

The Telangana High Court allowed writ petition citing violation of natural justice principle. It was found that there was  breach of principles of natural justice and for not considering the objection of jurisdiction.

Sreenidhi International Pvt. Ltd,the petitioner was served with a show-cause notice for the period from July, 2017 to March, 2019. The petitioner filed detailed reply. The competent authority did not agree with the stand taken by the petitioner in the said reply and passed the 010 dated 28.06.2024.

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Ms. Velanati Jyothirmai,  counsel for the petitioner by criticizing the impugned order submitted that for the similar business activity when the petitioner was put to notice in previous year, the petitioner filed a detailed reply to the said show-cause notice and after getting satisfied with the said response of the petitioner, the previous similar notice was dropped. Categorical stand in this regard is taken in paragraph No.B.16 of the reply dated 17.10.2022. Reliance is placed on Goods and Services Tax entry No.66 of the Notification No. 12 of 2017, dated 28.06.2017whereby the nature of activities undertaken by petitioner have been 'exempted'. Reliance is also placed on paragraph No.C.11 of the said reply dated 17.10.2022, wherein reference is made to the earlier notice regarding 'manpower supply services' and after receiving reply, the said earlier notice was dropped.

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The bone of contention of the counsel for the petitioner is that firstly the aforesaid categorical stand of the petitioner mentioned in paragraph Nos.B. 16 and C. 11 of the reply dated 17.10.2022 has not been considered in the impugned 010. It is not the case of the department that the nature of activity of the petitioner has undergone change. In that event, there was no justification in treating the petitioner in a comparatively  disadvantageous manner in the subsequent year when a notice for tax about similar activity in previous year was dropped. In any case, the 'decision making process' is polluted.

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In as much as, the specific stand taken by the petitioner in the reply to the showcause notice has not been considered. This is a clear violation of the principles of natural justice. Secondly, it is argued by the counsel for the petitioner by taking this Court to paragraph No. 17.3 (i) of the impugned 010 that the conclusion arrived at is founded upon the finding given in the show-cause notice. The show-cause notice always has a tentative character and allegations of it have to be considered after going through the reply of the petitioner. Thirdly, since the case of the petitioner is covered by aforesaid exemption notification No. 12 of 2017, the impugned 010 is passed without any jurisdiction and justification.

It was argued that the appellate authority does not have power of remand under Section 107 (11) of the Goods and Services Tax Act, 2017. Therefore, it is for the original authority to apply mind on the objections raised by the petitioner. The court held that 'entertainability' and 'maintainability' are two different facets. Merely because the matter is 'maintainable', there is no compulsion for the Court to 'entertain' it. If the matter is arguable, the petitioner can always be relegated to avail the remedy of appellate authority.

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On a specific query from the bench, Senior Standing Counsel for the CBIC could not point out any finding from the impugned order where the aforesaid paragraphs of reply to the show-cause notice have been considered by the competent officer. The sending of reply followed by hearing should not be an empty public relations exercise. If the petitioner has filed reply by taking relevant objections, it is imperative on the part of the quasi judicial authority to consider and decide it. When the objection is of a nature that in the previous order a similar notice has been dropped. In absence of any whisper about the said stand taken by the petitioner, the impugned 010 cannot be permitted to stand.

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The petitioner has also raised objection relating to jurisdiction by taking the assistance of GST Notification No. 12 of 2017, dated 28.06.2017. The objection of the petitioner based on the aforesaid GST notification providing 'exemption' goes to the root of the matter and the said aspect needs to be exarnined. When benefit of 'exemption' was granted to the petitioner in the previous year and stand of petitioner is that thereafter, there is no change in the nature of activity of the petitioner. As per Article 265 of the Constitution, tax can be demanded and levied only when there exists an authority to do so.

A division bench of Justice Sujoy Paul and Dr. Justice G.Radha Rani viewed that “If activity is 'exempted', the question of imposition of tax does not arise. Sadly, this relevant aspect/ objection has escaped notice of the authority, who has passed the impugned order. . The said objection certainly goes to the root of the matter and relates to the competence of authority in subjecting the petitioner to impugned proceedings. Thus, for twin reasons namely for breach of principles of natural justice and for not considering the objection of jurisdiction, which goes to the root of the matter, we are not inclined to relegate the petitioner to avail alternative remedy.”

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