M/S Fahad Traders vs. Union Of INDIA And Ors. (Finance)

Held

The Court held that the petitioners have an efficacious alternative remedy under the CGST Act, 2017. For show cause notices issued under Section 74(1), the petitioners can file their reply, contest the matter on merits, and if an order confirming the demand is passed under Section 74(9), they have a remedy of appeal under Section 107. The Court found that the writ petitions challenging the show cause notices simpliciter were premature. For cases where the demand has already been confirmed, the statutory remedy of appeal under Section 107 is available. The Court relied on the principles laid down in M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors, emphasizing that while the High Court has discretion under Article 226, it should ordinarily relegate parties to statutory remedies, especially when such remedies are effective and available. The Court clarified that its observations on the merits 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 where not already filed, and for final orders already passed, to avail the appeal remedy 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 DGGI, JRU, Jammu, leading to the issuance of the impugned show cause notices.

Key Issues

1. Whether the show cause notices issued under Section 74(1) of the CGST Act, 2017, are without jurisdiction, thus warranting interference by this Court under Article 226 of the Constitution of India, despite the availability of alternative statutory remedies? Petitioner's arguments: The petitioners contended that the impugned notices are without jurisdiction because the cross-LoC trade, which they treated as zero-rated, falls outside the purview of the CGST Act, 2017, as there is no specific provision akin to Section 5 of the J&K VAT Act, 2005, under the GST regime. They argued that the availability of alternative remedies does not bar writ jurisdiction when the notices are fundamentally flawed and without jurisdiction. They relied on various precedents establishing exceptions to the rule of alternative remedy. Revenue's arguments: The respondents argued that the petitioners have an efficacious alternative remedy by way of filing a reply to the show cause notices and, if necessary, pursuing appeals under the CGST Act, 2017. They contended that the High Court should not entertain writ petitions when statutory remedies are available and that the issue of jurisdiction and the nature of the trade under GST are matters to be decided through the prescribed statutory process.