“The petitioner cannot be forced to undergo the entire process of litigation under the statute once when the issuance of show cause notice itself was per se bad and since it is a case of excess of jurisdiction exercised by the respondents, the petitioner has a right to avail a Writ remedy rather than undergoing the process of appeal, revision etc. under the statute.” – Telangana High Court
The Telangana High Court set aside the proceedings initiated under Section 73 of the Goods and Services Tax Act, for not being sustainable as tax and interest were remitted by the petitioner as per audit before the issuance of the Show Cause Notice.
The Division Bench of the Telangana High Court comprising Justice P Sam Koshy and Justice N Tukaramji noted that, “the show cause notice was issued on 20.04.2022, however, during the course of the audit itself certain discrepancies were pointed out by the audit team. Even much before of the final audit report being published, the petitioner is said to have paid the entire tax liability along with the updated interest on 28.10.2022.”
M. Naga Deepak appeared for the petitioner and Dominic Fernandes, Standing Counsel represented Central Board of Indirect Taxes and Customs ( CBIC ), for the respondents.
The Bench observed that, “Section 74 would get attracted only in the event of there being strong materials available on record to show that the petitioner had played fraud or there was any misstatement made by him and there being any suppression of fact.”
It was also noted that, “Further, keeping in view the provisions of Sub-Sections (5) and (6), it will go to establish that once having discharged their tax liability also by paying interest on the said tax payable, then no further proceedings could be drawn for the same tax any further.”
The Bench also added that, “This view of the Bench stands further fortified from reading of Sub-Section (8) as well which again gives an indication that if necessary compliance in respect of tax as is stipulated under Sub-Sections (1) and (3) is paid along with interest even after issuance of show cause notice, even then the penalty cannot be levied and the notice proceedings shall be deemed to have been concluded.”
It was thus held that, “the action on the part of the respondents in initiating the show cause proceedings under Section 74 and passing of the impugned order dated 15.11.2023 both would be in excess of their jurisdiction and the same therefore deserves to be and are accordingly set-aside/quashed.”
It was also held that, “As regards the contention of the learned Senior Standing Counsel so far as the availability of a statutory alternative remedy of appeal, we are of the firm view that since the challenge to the impugned order in original and the show cause notice at the first instance itself is not sustainable in the eye of law in terms of Sub-Sections (5) and (6) of Section 73” of the Goods and Services Tax Act.
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