M/S Sri Ram Stone Works, Through Its Authorised Signatory Namely, Bajrangi Bhagat vs. State Of Jharkhand, Through The Secretary, Department Of State Tax

Held

The Jharkhand High Court held that the notices issued under Section 61 of the JGST Act were wholly without jurisdiction and beyond the scope of the said provision. The Court reasoned that Section 61 is designed to enable the proper officer to scrutinize returns and related particulars to verify their correctness and inform the registered person of any discrepancies, seeking their explanation. The Court found that the authorities, instead of pointing out discrepancies in the returns, had embarked on an exercise of comparing the sale price of the petitioners' goods with the prevalent market price. The Court reiterated the settled law that unless transactions are shown to be sham or goods were sold at a concessional rate, the mere fact of selling at a rate less than the market price does not empower the revenue to assess the difference as the transaction value. Consequently, the Court quashed and set aside the impugned notices issued under Section 61. The Court clarified that it was not commenting on any alleged discrepancies in the returns themselves and that the Assessing Officer would be at liberty to issue fresh notices for such discrepancies, but no action could be taken solely based on the difference between the transaction value and the market value.

Facts

The petitioners, M/s. Sri Ram Stone Works and others, filed writ petitions before the Jharkhand High Court challenging notices issued under Section 61 of the Jharkhand Goods and Services Tax (JGST) Act. These notices were issued by the State Tax authorities, including the State Tax Officer, Assistant Commissioner of State Tax, and Joint Commissioner of State Tax, Sahibganj Circle. The notices were based on a scrutiny of returns, but the authorities compared the price at which the petitioners sold stone boulders/chips with the prevalent market price, rather than identifying discrepancies within the returns themselves. The petitioners argued that this action was beyond the scope of Section 61 and premature.

Key Issues

1. Whether the notices issued under Section 61 of the JGST Act, which compare the transaction value of goods sold by the petitioners with the prevalent market price, are within the jurisdiction and scope of Section 61. Petitioner's contention: The petitioners argued that the notices were issued prematurely and were beyond the jurisdiction of the authorities under Section 61. They contended that Section 61 is for scrutinizing returns for correctness and informing the registered person of discrepancies, not for comparing sale prices with market prices. They asserted that the action taken by the revenue was an attempt to assess tax based on market value, which is not permissible under Section 61, and that such an exercise should be initiated under Sections 73 or 74 if fraud or wilful misstatement were involved, which was not alleged. Revenue's contention: The respondents argued that the notices pertaining to the scrutiny of returns were merely procedural and had no adverse civil consequences. They contended that the petitioners should have replied to these notices, and if their explanations were satisfactory, no further proceedings would have been initiated. Therefore, the writ petitions were premature and liable to be dismissed.