M/S Rkec Projects Limited vs. Additional Commissioner

Services Tax Act, 2017 (for short 'COST Act’), though the ingredients for initiation of the proceedings i.e. suppression is not made out. The notice does not contain the reasons and particulars of any suppression. He places

Learned Senior Counsel however submits that the notice could have been under Section 73 but not under Section 74 of COST Act.

Learned counsel for the respondents has raised objection that the challenge to the show-cause notice on the ground of challenge is not sustainable at this stage under Article 226 of Constitution of India. The petitioner is granted opportunity of hearing and to the show-cause notice, he may submit the reply. She placed reliance in the judgment dated 09.11.2023 in W.P.No.28743 of 2023. 6. We have considered the submissions advanced and perused the material on record.

The submission is that the show-cause notice does not mention any ‘suppression’.

Section 74(1) of the COST Act reads as under: i

Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression offacts (1) Where it appears to the proper ofifcer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount speciifed in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice. ”

Learned senior counsel placed much reliance on Explanation 2 of Section 74 of COST Act which reads as under:- Explanation 2: For the purposes of this Act, the expression shall mean non-declaration of facts or suppression information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper ofifcer. ”

We have perused the show cause notice (Ex.Pl). It contains the grounds for its issuance, such as in Paras 5, 7, 8 86 9, which reads as under;- "

From the statutory provisions mentioned above, it appears that the taxpayer is not eligible to transition the credit of duty paid on inputs lying in stock as on 30.06.201 7, vide Table-7a of the TRAN- 1 filed by the taxpayer (RUD-3), for the following reasons:

CONTRAVENTIONS:

Section 59 of the COST Act provides: Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39. Section 59 - Self-assessment In the age of liberalisation, huge amount of trust and faith have been posed on the taxpayers. Revenue department allows the tax payer to determine his tax liability by himsel.f Since tax liability is determined by the tax payer himsel,f therefore, the term is labelled as self-assessment. Section 59 of COST Act covers self- assessment under GST regime. In the course of day to day business, a tax payer will do self-assessment and determine tax liability according to each and every sale invoice. The self- assessment is to be completed, except in the case of "provisional assessment", with regard to value and rate of tax etc., at the time and place of supply so that correct tax liability is ascertained and discharged. The other aspect of self-assessment is that at the end of tax period, the assessee is required to furnish a return electronically specified under Section 39 also certifying correctness of the data furnished and tax paid for each tax period to the taxation department so that departmental officials are able to scrutinise correctness of payment of taxes. Self-assessment is applicable to all the taxable persons under GST. It appears that the taxpayer contravened the provisions of Section 59 of the CGST Act, 2017 and rendered themselves liable

It appears that since the taxpayer is registered under the Service Tax Law, they are not eligible to transit the cenvat credit pertaining to the existing law, under the provisions of Section 140(3) of COST/APGST Act, 2017. However, they have carried forward the credit to GST as a dealer. Further, the carrying forward of credit under Section 140(3) is a conditional one, viz., the taxpayer shall be availing Notification No. 26/2012-ST which the taxpayer has not fuliflled. The acts of the taxpayer attract the provisions of Explanation (ii) to Section 74 of the CGST Act, 2017, viz., (i) non declaration offacts and (i) non-declaration of information, with intention to avail transition credit fraudulently unless noticed by the audit. Therefore, it appears that the irregularly availed transitional input tax credit is recoverable by invoking extended period of limitation and penalty can be imposed under the provisions of Section 74 (1) of the CGST Act. 2017. 9. In terms of the above statutory and recovery provisions, it appears that the taxpayer wrongly carried forward the transition credit of Rs.1,75,30,798/- vide Table 7a of the Transitional Credit/ Stock Statement filed by the taxpayer and the said amount is recoverable along with interest and penalty. ” In view of the above, we are not convinced with the or an 11. submission that the show cause notice does not contain the reasons for its issuance.

As per the Explanation 2, suppression shall mean non-declaration of facts or information, which a taxable person is required to declare in the return, statement. report or any other document furnished under the Act or the rules made thereunder, or failure to furnish any 6 information on being asked for, in writing, by the proper officer. The question if there is suppression or not can be determined by the authority, considering the reply, if so filed. ‘Suppression’ is a question of fact. In view of the explanation, whether the facts upon which show cause notice has been issued, constitute suppression or not cannot be determined at this stage in the exercise of writ juri iction. Use of word ‘suppression’ is not conclusive. Similarly, if this expression is not used in the show cause notice it cannot be said conclusively that there is no suppression. The petitioner by filing reply to the show- notice can demonstrate before the authority that cause there was no suppression. Besides, ‘suppression’ alone is not the ground under Section 74(1) of COST Act. Fraud or/and willful misstatement are also the grounds for issuance of show cause notice in evading tax etc.

The impugned show cause notice was issued on 21.09.2023. In the prayer clause, as reproduced above, the impugned notice was said to be barred by limitation. However, the learned senior counsel during arguments, on the same being pointed out by learned standing counsel

So, even if the submission of learned counsel for the petitioners be acceptable, though we are not expressing any view on that aspect, no fault can be found in the notice and it cannot be said to be without juri iction barred by limitation, under Section 73 and therefore or having been issued under Section 74 to overcome the bar of limitation.

In Uniworth Textiles Limited v. Commissioner of Central Excise^, the Hon’ble Apex Court held that the show cause notice must fulfill the requirement of the proviso to Section 28 of the Customs Act, 1962 (as was m (2013) 9 see 753

In Uniworth Textiles Limited (supra), there was challenge to the order. From the evidence adduced by the appellant therein, it was observed that one will draw an inference of bonafide eonduct in fact of the appellant therein. In the said case, it was held that the burden of proving malafide conduct under the proviso to Section 28 of Customs Act lies with the Revenue, that in furtherance of the same, no specific averments were mentioned in the show cause notice which was the mandatory requirement for commencement of action under the proviso to Section 28. There was also nothing on record to display a willful default on the part of the appellant therein. Consequently, it was held that the extended period of limitation under proviso of Section 28 could not be invoked against the appellant.

In the present case, in view of the submissions advanced as also the admitted position that the limitation period for notice under Section 73 did not expire on the date the impugned notice was issued, the question of extended period of limitation for issuance of notice under Section 74 is not involved. Had it been, the contention of the learned counsel for the petitioner that the period of limitation for issuance of notice under Section 73 had expired but any such notice was not issued and consequently to overcome the bar of limitation, the notice was issued under Section 74 even without satisfying the requirements of Section 74 the consideration might have been different.

In Vijaya Venkata Durga Oil Traders v. Commercial Tax Officer^, the Division Bench of High Court of Judicature at Hyderabad considered the judgment in Uniworth Textiles Limited (supra). It was held that if the allegations in the show cause notice accepted as true show that the dealer had committed willful evasion of tax and the finding recorded in the assessment order establish that the assessee had willfully evaded tax, it would suffice ^2014 see QnLine Hyd 775

In the present case we find that the show cause notice mentioned the grounds for its issuance. Even if it be taken that the ‘suppression’ is not mentioned, to meet the requirement of Section 74 to issue the notice. It is not the submission of the learned counsel for the petitioner that it does not meet the requirements of Section 73. Further the submission is that the notice should be under Section 73 but it mentions under Section 74. We are of the view that mere mention of a provision would not be determinative of the notice under that section. It dependents upon the contents.

In W.P.No.28743 of 2023 decided on 09.11.2023, the Coordinate Bench of this Court held in paras 26 to 30 as follows; on the point of entertainability of the writ petition against the show cause notice.

In special Director v. Mohd. Ghulam Ghouse^ the Hon’ble Apex Court deprecated the practice of High Courts entertaining writ petitions questioning the legality of show cause notices stalling enquiries as proposed and retarding investigative process. The Hon’ble Apex Court held that unless the High Court is satisfied ’ (2004) 3 see 440

It is apt to refer paragraph-5 ofMohd. Ghulam Ghouse (supra) as under:

In CCE V. Krishna Wax (P) Ltd.* the Hon’ble Apex Court reiterated that it is well settled that writ petition should \2020) 12 see 572

It is apt to refer paragraphs-14 and 15 of Krishna Wax (P) Ltd. (supra) as under:

It is thus well settled that writ petition should normally not be entertained against mere issuance of show-cause notice. In the present case no show-cause notice was even issued when the High Court had initially entertained the petition and directed the Department to prima facie consider whether there proceed with the matter. ”

In the present case, APGST Act is also a complete code and consequently, we are of the considered view that the petitioner should respond to the show cause notice raising all such objections, as may be raised before the authority issuing the show cause notice and in case any adverse order is passed and the petitioner feels aggrieved, the petitioner may then have recourse to the appropriate proceedings. ” was material to 23. For all the aforesaid reasons we are of the considered view that the present writ petition against the impugned show cause notice is not liable to be entertained.

The Writ Petition is dismissed, however, leaving it open to the petitioner to approach the competent authority by filing reply and raising such objections as may be open under law and as may be advised. No order as to costs. 25. 15 As a sequel thereto, miscellaneous petitions, if any pending, shall also stand dismissed. U. SRIDEVI ASSISTANT REGISTRAR //// SECTION OFFICER f To 1. One CC to SRI KARTHIK RAMANA PUTTAMREDDY Advocate [OPUC]

One CC to MS. SANTHI CHANDRA (Jr. Standing Counsel for CBIC) [OPUC]

Two CCS to GP for COMMERCIAL TAX, High Court of Andhra Pradesh. [OUT]

Two CCs to GP for REVENUE, High Court of Andhra Pradesh. [OUT]

One CC to SRI B. NARASIMHA SARMA (A/C), ADDITIONAL SOLICITOR GENERAL OF INDIA [OPUC]

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