M/S New Green Basket / Khursheed Traders vs. Union Of INDIA And Ors. (Finance)

Held

The Court held that the petitioners had an equally efficacious remedy available under the CGST Act, 2017. For show cause notices issued under Section 74(1), the petitioners could file a reply and contest the matter on merits. If an order confirming the demand was passed, they had a remedy of appeal under Section 107 of the CGST Act. The Court found no merit in entertaining the writ petitions due to the availability of these statutory remedies and relegated the petitioners to pursue them. The Court clarified that its observations on the merits of the controversy were prima facie and not binding on the authorities. Question No. 5 was left open to be determined by the authorities. The Court directed petitioners to file replies within four weeks and for proper officers to conclude proceedings within three months of receiving the reply, or for those with confirmed demands to file appeals within three months.

Facts

A batch of writ petitions were filed before the High Court of Jammu & Kashmir and Ladakh challenging show cause notices issued under Section 74(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) and the J&K GST Act, 2017. The petitioners, traders involved in cross-LoC trade, argued that these notices were issued without jurisdiction. The cross-LoC trade, initiated in 2008, was treated as a zero-rated sale under the erstwhile J&K VAT Act, 2005. Following the implementation of the GST regime in 2017, the petitioners continued to treat this trade as zero-rated, not indicating it in their returns or paying GST. The respondent authorities initiated investigations based on information from the DGGI, JRU, Jammu, leading to the issuance of the impugned show cause notices.

Key Issues

1. Whether the High Court should entertain writ petitions challenging show cause notices issued under Section 74(1) of the CGST Act, 2017, when statutory remedies of reply and appeal are available? (Question of law) 2. Whether the impugned show cause notices are without jurisdiction, thereby barring the availability of alternative statutory remedies? (Question of mixed law and fact) Petitioner's arguments: The petitioners contended that the show cause notices were issued without jurisdiction, making the availability of alternative statutory remedies no bar to entertaining the writ petitions. They relied on the principle that writ jurisdiction can be invoked in cases of lack of jurisdiction or violation of natural justice. Revenue's arguments: The respondents argued that the petitioners had efficacious alternative remedies under the CGST Act, 2017, including filing a reply to the show cause notice and subsequently filing an appeal against any confirmed demand. They cited case law emphasizing the exhaustion of statutory remedies before approaching the High Court under Article 226.