GST Notice u/s 61 stating Price Comparison Instead of Pointing Out Discrepancies beyond Jurisdiction: Jharkhand HC [Read Order]

The Division Bench comprising Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan quashed such notices issued to a batch of petitioners including M/s. Sri Ram Stone Works and other similarly situated stone suppliers.

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The dispute began when tax inspectors claimed in scrutiny letters (Form GST ASMT-10) that the petitioners had sold boulders and stone chips for less than the going rates in the market. The notices directed the petitioners to explain why proceedings under Sections 73/74 should not be initiated, implying possible underpayment of tax.

The petitioners contended that these notices were fundamentally flawed as Section 61 of the JGST Act pertains only to discrepancies in returns filed by registered persons. It empowers officers to verify correctness of returns and notify errors therein, not to question pricing decisions or compare them with market benchmarks.

The notices, it was argued, lacked any specific discrepancy in the actual returns submitted and instead drew conclusions based on external price comparisons, which is impermissible under the statutory scheme.

The Court observed that “We are of the firm opinion that notices issued comparing the particulars at which Petitioners have sold their goods with that of prevalent market price, is wholly without jurisdiction and beyond the scope of Section 61 of the Act. In fact, it is settled law that unless transactions of sale are shown to be sham transactions or the mere fact that the goods were sold at a concessional rate/rate less than market price would not entitle the Revenue to assess the difference between the market price and the price paid by the purchaser as transaction value.”

‘We have no hesitation in declaring that notices issued under Section 61 to the respective writ petitioners are wholly without jurisdiction and are, accordingly liable to be quashed/set aside by this Court’ said the bench.

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The Court further clarified that while officers are free to issue fresh notices if genuine discrepancies in returns are found, no action can be sustained merely due to differences between transaction value and market price.

Accordingly, all impugned notices under Section 61 were quashed and the writ petitions allowed.