M/S. Britannia Industries Limited vs. Union Of INDIA And Ors.

Held

The Court held that the writ petition is not maintainable. The issues raised, including the invocation of the extended period of limitation, allegations of misclassification of goods, and denial of Input Tax Credit (ITC), necessitate a detailed factual inquiry that falls outside the purview of the High Court's writ jurisdiction. Citing Aloke Bhowmick, the Court stated that the question of whether the SCN is barred by time and whether there is an allegation of suppression or misstatement are factual issues, not purely legal ones. The Court reiterated the principle from Whirlpool Corporation that writ petitions against show cause notices are entertained only in exceptional circumstances like violation of fundamental rights, principles of natural justice, or being wholly without jurisdiction, none of which were established. The Court emphasized that statutory remedies available under the CGST Act, including responding to the SCN, adjudication, and appellate remedies, are adequate. The Court explicitly refrained from adjudicating on the merits of the case and directed the adjudicating authority to decide the matter independently. The Petitioner was advised to exhaust statutory remedies.

Facts

M/s. Britannia Industries Limited (Petitioner) is engaged in manufacturing and supplying food items. On December 16, 2021, the Directorate General of GST Intelligence (DGGI) searched the Petitioner's premises and issued summonses. Subsequently, on August 3, 2024, the DGGI issued a Show Cause Notice (SCN) under Section 74(1) of the CGST Act, 2017, proposing recovery of ₹1,05,11,99,662 in GST, along with interest and penalty. The SCN alleged wrongful availment of exemption on 'Kulcha' by misclassifying it as 'bread', denial of credit notes for deficient services/destroyed goods due to alleged non-reversal of ITC by suppliers/recipients, and non-reversal of ineligible ITC on inputs for destroyed goods and sample free goods. The Petitioner filed a writ petition challenging the SCN, contending it was without jurisdiction and violated principles of natural justice.

Key Issues

1. Whether the invocation of the extended period of limitation under Section 74 of the CGST Act, 2017, is legally valid, considering the Petitioner's contention that the SCN failed to substantiate allegations of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade tax, and that the Petitioner had disclosed exemption claims prior to the SCN's issuance, thereby rendering the extended period inapplicable. The Petitioner relied on Supreme Court decisions in Gopal Zarda Udhyog and Uniworth Textiles Ltd. 2. Whether the SCN is procedurally defective due to the absence of pre-SCN intimation in Form GST DRC-01A, as mandated by Rule 142(1A) of the CGST Rules, which the Petitioner argued vitiates the SCN's validity, citing M/s New Morning Star Travels. 3. Whether the demand raised regarding credit notes is legally tenable, given the Petitioner's argument that Section 34 of the CGST Act does not mandate proof of ITC reversal by the recipient and that the SCN relies on a circular imposing additional requirements beyond statutory provisions, citing Suchitra Components. 4. Whether the Petitioner's use of goods for organoleptic testing renders the restriction on ITC under Section 17(5)(h) of the CGST Act inapplicable, as the Petitioner argues these are not free samples distributed to customers. 5. Whether the SCN, by combining demands for six financial years (FY 2017-18 to FY 2022-23), violates the CGST Act's mandate for year-wise determination, citing Titan Company Ltd. The Respondents argued that the invocation of the extended limitation period under Section 74(10) is valid as the Petitioner failed to disclose critical facts, constituting wilful misstatement, and that the classification of 'Kulcha' as 'Bread' is incorrect based on HSN and the 'Common Parlance Test' (Signature International Foods India Pvt. Ltd). They also contended that the burden of proof for exemption lies with the assessee (Commissioner of Customs v. Dilip Kumar and Co.) and that Form GST DRC-01A issuance is discretionary.