M/S Adhiraj Cements (A Partnership Firm) vs. Principal Commissioner

Held

The Court held that it is reluctant to interfere with a mere show cause notice at this juncture, as it does not infringe any party's rights until a final adverse order is passed. The petitioners are at liberty to raise all grounds, including the applicability of Section 122(1A) of the CGST Act and the vagueness of the notice, before the competent adjudicating authority. The Court also directed that if the petitioners wish to cross-examine any witnesses, they may file an appropriate application before the competent authority. The petitioners are to file their reply within 15 days of receiving the order, and thereafter, may file an application for cross-examination within 7 days. The concerned authority shall decide such application in accordance with law. The Court did not decide the issue of the release of seized cash.

Facts

The petitioners, M/s Adhiraj Cements and its partner Shubham Singhal, filed a writ petition challenging a show cause notice dated March 28, 2024, issued by the respondent authorities (Principal Commissioner CGST and Central Excise, Raipur, and others). Searches were conducted at the petitioner's premises on September 11, 12, and 14, 2020. Statements of employees were recorded on September 15, 2020, under Section 70 of the CGST Act, after which the petitioners paid Rs. 6,37,49,114/- towards taxable liability. Subsequently, an intimation in Form DRC-01A was issued under Sections 74 & 122(1A) of the CGST Act for the period April 2018 to March 2021. The petitioners filed a reply on April 24, 2024, and requested cross-examination of witnesses whose statements were relied upon in the show cause notice, but no opportunity was provided. The petition also sought the release of Rs. 17,50,000/- seized cash.

Key Issues

1. Whether the show cause notice dated March 28, 2024, issued under Rule 100(2) and 142(1)(a) in Form GST DRC-01 is liable to be quashed on the ground that Section 122(1A) of the CGST Act, relied upon, was not applicable during the relevant period as it was inserted retrospectively from January 1, 2021. (Petitioner's contention: Section 122(1A) was not applicable as it was inserted by the Finance Act, 2020, effective from January 1, 2021, rendering the notice without jurisdiction. The notice is also vague and hit by a departmental circular dated July 6, 2022. Reliance on Sarva Shramik Sangh vs. Indian Oil Corporation Limited and Commissioner of Central Excise, Bangalore vs. Brindavan Beverages (P) Ltd.). 2. Whether the petitioners are entitled to cross-examine the witnesses whose statements were relied upon in the show cause notice. (Petitioner's contention: An opportunity for cross-examination was denied, and the show cause notice is the foundation of the case, thus High Court's jurisdiction is not ousted if it is vague). 3. Whether the writ petition is premature, considering the existence of an alternative remedy. (Respondents' contention: The writ petition is premature as the petitioners can raise all grounds before the adjudicating authority and have an alternate remedy of appeal. Reliance on Trade Tax Officer, Saharanpur vs. Royal Trading Company, Union of India and Another vs. Kunisetty Satyanarayana, and Pankaj Ispat Limited and another vs. Union of India).