Writ Jurisdiction Not Invocable at SCN Stage: Chhattisgarh HC Dismisses State Beverages Corporation’s Plea on Service Tax Demand [Read Order]

The Chhattisgarh High Court has declined to exercise its writ jurisdiction at the show cause notice (SCN) stage, holding that the petitioner must first participate in the adjudication process and raise all its objections before the statutory authority.

The Court dismissed a writ petition filed by the Chhattisgarh State Beverages Corporation Limited (CSBCL) challenging a service tax demand proposed by the Central GST and Excise authorities.

In the matter of Chhattisgarh State Beverages Corporation Limited, the petitioner approached the High Court under Article 226 of the Constitution seeking to quash a show cause notice dated 08 July 2008, by which the department proposed to recover service tax for the year 2006-07, along with interest and penalty.

The demand was raised by treating the petitioner as a “Clearing and Forwarding Agent” (C&F Agent) under the Finance Act, 1994.

The petitioner, state beverages corporation argued that the issue was no longer res integra, as a Division Bench of the Chhattisgarh High Court had earlier, in Union of India v. Chhattisgarh State Beverages Corporation , upheld the CESTAT’s view that CSBCL could not be treated as a C&F Agent of the State Government.

On this basis, it was contended that issuance of the impugned show cause notice itself was without jurisdiction and amounted to abuse of process.

The Revenue, however, opposed the maintainability of the writ petition, pointing out that the petitioner had already submitted its reply to the show cause notice, and that no adjudication order had yet been passed.

It was argued that the writ petition was premature, as the petitioner had an effective statutory remedy and could raise all factual and legal grounds, including reliance on earlier judicial precedents, before the adjudicating authority itself.

Justice Naresh Kumar Chandravanshi noted that since the petitioner had already responded to the show cause notice, it would not be appropriate for the Court to examine the legality or correctness of the notice at this stage.

Therefore, the bench observed that interference at the SCN stage is ordinarily unwarranted, especially when the adjudicating authority has not yet applied its mind or passed any final order

The Court held that all contentions raised by the petitioner including the plea that it could not be classified as a C&F Agent and that the issue stood settled by earlier judgments could be raised before the adjudicating authority.

The court said that “.. it would not be appropriate to consider legality of notice, rather all the grounds raised by petitioner in this petition can be raised by it before the adjudicating authority, thereafter, petitioner may take recourse to law.

I am not inclined to entertain instant petition invoking extraordinary jurisdiction of the High Court, hence the same is disposed of granting liberty to petitioner to raise all grounds before adjudicating authority for redressal of its grievance.”

Accordingly, the High Court refused to invoke its extraordinary writ jurisdiction and disposed of the petition as premature, while granting liberty to the petitioner to raise all grounds before the adjudicating authority for redressal of its grievance.

Ms. Sara Jain, Advocate appeared for the petitioner and Mr. Maneesh Sharma, Advocate appeared for the department.

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