M/S. Vaishnav Stone Works, Thr0Ugh Its Proprietor, Namely, Awadh Kishor Singh vs. State Of Jharkhand, Through The Secretary, Department Of State Tax

Held

The Court held that the notices issued under Section 61 of the JGST Act were wholly without jurisdiction and liable to be quashed. The Court reasoned that Section 61 of the JGST Act empowers the proper officer to scrutinize returns and related particulars to verify their correctness and inform the registered person of any discrepancies, seeking their explanation. It also outlines that if no satisfactory explanation is furnished or corrective measures are not taken, the proper officer may initiate appropriate action under Sections 65, 66, 67, 73, or 74. However, the Court found that in the present cases, the competent officers had embarked on an exercise of comparing the price at which the petitioners sold their goods with the prevalent market price, which is beyond the scope of Section 61. The Court clarified that unless transactions are shown to be sham, the mere fact that goods were sold at a rate less than the market price does not entitle the Revenue to assess the difference as the transaction value. The Court also clarified that it was not commenting on any alleged discrepancies relating to the returns themselves, and 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, are proprietorship concerns engaged in the business of stone boulders and stone chips. They 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 alleged discrepancies in the returns filed by the petitioners. Specifically, the authorities compared the price at which the petitioners sold their goods with the prevalent market price and sought explanations, threatening initiation of proceedings for recovery of tax and dues. The petitioners contended that these notices were issued without jurisdiction and were beyond the scope of Section 61.

Key Issues

1. Whether the notices issued under Section 61 of the JGST Act, comparing the transaction value of goods sold by the petitioners with the prevalent market price, are within the jurisdiction of the proper officer. Petitioner's contention: The petitioners argued that Section 61 of the JGST Act is for scrutinizing returns and verifying correctness, not for comparing sale prices with market prices. They contended that the notices were issued without jurisdiction and were premature, as they were merely procedural notices. They asserted that the authorities had embarked on an exercise beyond the scope of Section 61 by comparing sale prices with market prices, which is not a ground for initiating proceedings under Section 61. Revenue's contention: The respondents (State of Jharkhand and its tax authorities) 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. They further argued that the writ petitions were premature and liable to be dismissed.