M/S. Siddhi Vinayak Trading Company vs. Union Of INDIA And 2 Others

Facts

The petitioner, M/s. Siddhi Vinayak Trading Company, challenged an order dated 8.9.2020 passed by the Deputy Commissioner, Division-4, Commercial Tax, Bareilly, under Section 74 of the U.P. Goods and Services Tax Act, 2017. The challenge was based on a CBEC circular dated 5.10.2018, which clarified that officers of both Central and State tax authorities are authorized to initiate intelligence-based enforcement actions on any taxpayer and complete the entire process. The petitioner contended that since a notice/summons dated 30.10.2018 was issued by the Central Tax Authority, the adjudication under Section 74 should have been completed by the same authority, not the State Authority. Additionally, the petitioner argued that the order was passed ex-parte without reasonable opportunity of hearing, citing personal hardship due to the father's illness and hospitalization during the pandemic.

Held

The Court held that the State Tax Authority had the jurisdiction to pass the order under Section 74 of the UPGST Act, 2017. The Court found that the summons dated 30.10.2018 was issued while initiating inquiry under Section 70 of the CGST Act, 2017, which is independent of the proceedings for determination of tax and penalty initiated under Chapter XV of the UPGST Act, specifically Section 74. The Court reasoned that the CBEC circular dated 5.10.2018 did not preclude the State Tax Authority from adjudicating the matter, as the initiation of proceedings for imposition of tax and penalty was with the issuance of the notice under Section 74. Regarding the denial of opportunity of hearing, the Court held that this issue, along with the dispute relating to the service of notice under Section 74, would require a factual inquiry and is therefore open for the petitioner to raise in an appeal under Section 107 of the UPGST Act, 2017. The appellate authority was directed to adjudicate all issues raised by the petitioner without being influenced by any observations made by the High Court. The prayer to quash the order dated 8.9.2020 was rejected.

Key Issues

1. Whether the State Tax Authority had the jurisdiction to pass an order under Section 74 of the U.P. Goods and Services Tax Act, 2017, when the initial inquiry under Section 70 of the CGST Act, 2017, was initiated by the Central Tax Authority, in light of the CBEC circular dated 5.10.2018? Petitioner's arguments: The petitioner argued that the CBEC circular dated 5.10.2018 mandates that the authority which initiates intelligence-based enforcement action is empowered to complete the entire process. Therefore, the State Tax Authority could not have conducted the proceeding under Section 74 of the UPGST Act, 2017, as the Central Tax Authority had initiated the action. They relied on paragraph 4 of the circular. Respondent's arguments: The respondent defended the action taken by the State Authority and argued that the petitioner has an alternative statutory remedy of appeal under Section 107 of the UPGST Act, 2017. 2. Whether the order dated 8.9.2020 was passed in violation of the principle of natural justice by denying the petitioner a reasonable opportunity of hearing?