M/S City Lights And Equipments vs. State Of Meghalaya And 3 Ors.

Held

The Court held that the writ petition was not maintainable. Firstly, the allegation of violation of natural justice was not established, as the actions of the authorities were statutory, and no materials were placed to show bias. The distinction between authorizing an inspection and adjudicating was noted. Secondly, the dispute was found to be essentially one of fact, requiring examination and appreciation of documentary and testimonial evidence, specifically concerning whether the seized notepads represented suppressed sales or mere estimates, the correct GST slab applicable, and the reconciliation of bank deposits and GSTR-3B returns with seized materials. The Court reiterated the principle that when a statute provides a self-contained appellate machinery, it must ordinarily be resorted to, and recourse under Article 226 should not be taken to bypass this machinery, citing Thansingh Nathmal vs. A. Mazid and M/s Jorabat Shillong Expressway Ltd. vs. Union of India. The judgments cited by the petitioner were distinguished as they involved pure questions of law, unlike the present case. Therefore, the writ petition was dismissed, but the petitioner was allowed to pursue the alternate remedy of appeal under Section 109 of the MGST Act, with a direction that any delay in filing the appeal due to the writ petition being filed when GSTAT was not constituted would be favorably considered by the Tribunal.

Facts

M/s City Lights and Equipments, a proprietorship firm, filed a writ petition challenging a demand of Tax/Interest/Penalty of Rs. 59,18,980/- issued by the Additional Commissioner of Taxes. The demand stemmed from an inspection on 03.06.2020, where notepads containing rough estimates were seized and treated as memos of sales, allegedly indicating tax evasion. The petitioner argued that these were mere quotations and not actual sales. The proceedings were initiated by the Additional Commissioner, who also later heard the petitioner's appeal against the demand. The petitioner had provided GST returns, bank deposit details, and stock reports to support their claims. The initial demand was Rs. 34,26,901.40p as tax plus interest and penalties, which was later revised to Rs. 59,18,980/-. The petitioner's appeal against this demand was rejected by the Additional Commissioner on 26.04.2024.

Key Issues

1. Whether the seized notepads containing rough estimates can be treated as memos of sales for the purpose of determining tax liability under the Meghalaya GST Act, 2017? (Question of mixed law and fact, concerning interpretation of evidence and statutory provisions related to sales records). 2. Whether the proceedings are vitiated due to a violation of the principles of natural justice, specifically because the Additional Commissioner, who authorized the initial inspection, also acted as the Appellate Authority? (Question of law, concerning procedural fairness and bias). 3. Whether the High Court should entertain the writ petition despite the availability of an alternative statutory remedy under the MGST Act, 2017? (Question of law, concerning the exercise of writ jurisdiction). Petitioner's arguments: The seized notepads were mere quotations and not actual sales. The tax demand was arbitrary and perverse, lacking specificity regarding turnover and stock. The authorities failed to conduct a fair assessment or stock audit as required by Sections 65 and 66. The GST rate applied (18%) was incorrect, as most items fell within the 5-12% bracket. Bank deposit details and GST returns accounted for all sales. The same officer acting as both authorizing authority and appellate authority violated natural justice. Reliance was placed on Godrej Sara Lee Ltd. vs. Excise and Taxation Officer-cum-Assessing Authorities & Ors., CBI vs. V.C. Shukla, and Principal Commissioner Income Tax, Shillong vs. M/s NEEPCO regarding entries in loose sheets. The GST Tribunal was not constituted at the time of filing. Respondent's arguments: The writ petition should not be entertained due to the adequate alternative remedy under Section 109 of the MGST Act, 2017, and the constitution of the GST Appellate Tribunal (GSTAT). The matter involves factual disputes, not a substantial question of law, as per Section 117 of the MGST Act. Reliance was placed on Bikram Singh vs. Principal Commissioner Income Tax.