M/S Divya Upchar Sansthan vs. Directorate Gen. Of Goods And Service Tax Intelligence

Held

The Court held that the Rajasthan High Court lacks territorial jurisdiction to entertain the writ petition. It reasoned that while Article 226(2) of the Constitution allows for jurisdiction where the cause of action arises, the mere existence of business transactions with an entity in Rajasthan, or the fact that the Show Cause Notice originated from a common investigation file involving an entity in Rajasthan, does not constitute a part of the cause of action for the petitioner. The Court emphasized that the evasion, if any, by the petitioners was noted by authorities in Punjab, leading to the issuance of the Show Cause Notice to them in Punjab. The Court found the arguments regarding the Circular dated 03.03.2015 and the multiplicity of proceedings to be irrelevant to establishing territorial jurisdiction. Consequently, the prayer to transfer proceedings from Chandigarh to Jodhpur was also rejected. The Court relied on Supreme Court pronouncements, including the doctrine of forum conveniens, to conclude that even if a small part of the cause of action arises within the jurisdiction, the court may refuse to exercise its discretionary jurisdiction if it is not the appropriate forum.

Facts

The petitioner, M/s Divya Upchar Sansthan, a partnership firm based in Punjab, engaged in the promotion, trading, and manufacture of Ayurvedic medicines, received a Show Cause Notice dated 28.09.2020 from the Directorate General of GST Intelligence, Chandigarh. This notice was issued based on intelligence inputs regarding alleged evasion of Central Excise Duty. The petitioners had business transactions with M/s Gagan Pharmaceuticals, located in Sriganganagar, Rajasthan, from whom they purchased goods. M/s Gagan Pharmaceuticals also received a Show Cause Notice and filed a writ petition before the Rajasthan High Court. The petitioners challenged their own Show Cause Notice through the present writ petition before the same High Court, seeking its quashing. The revenue raised a preliminary objection regarding the maintainability of the writ petition before the Rajasthan High Court due to lack of territorial jurisdiction.

Key Issues

1. Whether the Rajasthan High Court has territorial jurisdiction to entertain the writ petition filed by M/s Divya Upchar Sansthan, a firm located in Punjab, challenging a Show Cause Notice issued by the Directorate General of GST Intelligence, Chandigarh, based on Article 226(2) of the Constitution of India and the principles laid down in Oil & Natural Gas Commission V/s Utpal Kumar Basu & Ors. and Kusum Ingots and Alloys Ltd. V/s Union of India. Petitioner's Arguments: The petitioners contended that a part of the cause of action arose within the territorial jurisdiction of the Rajasthan High Court because the entire proceedings emanated from a file concerning M/s Gagan Pharmaceuticals, located in Sriganganagar, Rajasthan. They argued that the manufacturing of goods, on which duty evasion was alleged, occurred in Rajasthan, and the subsequent sale to the petitioner constituted a single transaction, thereby conferring jurisdiction. They also cited a Circular dated 03.03.2015 regarding the adjudication of cases involving multiple Commissionerates and argued for the transfer of proceedings to Jodhpur to avoid multiplicity. Revenue's Arguments: The revenue argued that neither the petitioner-firm nor the issuing authority (DGGI, Chandigarh) is located in Rajasthan, and no part of the cause of action has arisen within its territorial jurisdiction. They asserted that the mere fact that the Show Cause Notice originated from a file related to respondent No.7, who is in Rajasthan, does not grant jurisdiction. They also argued that Clause (v) of the Circular dated 03.03.2015 does not create a cause of action for the petitioner.