Writ Jurisdiction Cannot Be Invoked Against Show Cause Notice U/S 74 Of CGST Act At Preliminary Stage: Kerala High Court
The issue raised by the assessee was that part of the alleged suppressed turnover belonged to a separate entity registered under her husband's name and should not be included in her liability.
The Kerala High Court ruled that a show cause notice issued under Section 74 of the CGST Act cannot be challenged at the preliminary stage by invoking Article 226 of the Constitution of India. The Court emphasized that Article 226 is not intended to be used to bypass the tax authorities’ decision-making process in such matters.
The case at hand involved a show cause notice issued to the assessee, requiring them to justify why an amount of Rs. 4,88,56,298 should not be assessed as short-paid due to the alleged suppression of outward supply for the period 2017-18 to 2023-24, along with an additional Rs. 11,85,843 to be levied as flood cess. The assessee filed a writ petition challenging this notice.
The Single Judge had previously directed the authorities under the SGST Act to address a preliminary issue raised by the assessee. The issue concerned the claim that a portion of the alleged suppressed turnover belonged to a separate entity registered under her husband's name, and therefore, should not be included in the assessee's liability.
The department, aggrieved by this decision, appealed the order, arguing that the CGST/SGST Act does not permit separate orders to be passed on such preliminary issues.
A Division Bench of Justice A.K. Jayasankaran Nambiar and Justice Easwaran S. said, “Article 226 of the Constitution of India is not meant to be used to break the resistance of the Revenue in this fashion. In exercise of such jurisdiction, the High Court is required to refrain from issuing directions to the authorities under the taxation statute to decide issues in stages or on a preliminary basis,”
Advoacte Resmitha Ramachandran appeared for the Petitioner and Advocate Akhil Suresh appeared for the Respondent.
Upon examining Section 74 of the CGST Act, the Court noted that there is no provision allowing the assessee to seek adjudication in stages, nor does the law confer power on the proper officer to resolve the issue in parts.
The Bench made it clear that the High Court's jurisdiction under Article 226 cannot be invoked by the assessee to seek part adjudication of a pending matter, which is within the jurisdiction of the proper officer under the Act. The Court acknowledged that in cases where a complete lack of jurisdiction is alleged in the issuance of the show cause notice, the High Court may intervene, but as a general principle, writ petitions challenging such notices should not be entertained at the preliminary stage.
The Bench also expressed concern that allowing parties to exploit the jurisdiction of the High Court in this way could lead to delays and unfairly disadvantage those who cannot afford to engage in lengthy litigation over peripheral issues, ultimately delaying the resolution of more important matters.
In conclusion, the court allowed the department's appeal, ruling that the jurisdiction under Article 226 could not be invoked at this stage, and the matter should proceed as per the established procedure under the CGST Act.
Cause Title: The Deputy Commissioner & Anr. v. Minimol Sabu, [2025:KER:10005]
