Trimurti Fragrances Pvt Ltd. and and 4 Others v. Directorate General of Goods and Services Tax and 2 Others

Chief Justice's Court Case :- WRIT TAX No. - 1280 of 2023 Petitioner :- Trimurti Fragrances Pvt Ltd. And And 4 Others Respondent :- Directorate General Of Goods And Services Tax And 2 Others Counsel for Petitioner :- Harish Kumar Shukla Counsel for Respondent :- Parv Agarwal,Krishna Agarawal Hon'ble Pritinker Diwaker,Chief Justice Hon'ble Ashutosh Srivastava,J.

¶1Heard Shri Vishwajeet Singh, learned Senior advocate, assisted by Sri Harish Kumar Shukla, learned counsel for the petitioners Sri Krishna Agarwal and Sri Parv Agarwal, learned counsels for the respondents.

¶2The challenge in this writ petition is to the Demand-cum-Show Cause Notice dated 27.04.2023 bearing No. DGGI/AZU/Gr-C/36-04/2023-24 and file No. DGGI/AZU/Gr-C/12(4) 432/2021-22 issued by the respondent No. 1 and 2 purportedly for alleged violation of the provisions of CGST Act, UPGST Act read with IGST Act further read with GST (Compensation to States) Act, 2017 whereby and whereunder the petitioner has been asked to show cause as to why:

(i) the CGST liability amounting to Rs. 1,35,38,441/- evaded by the petitioner on account of clandestine supplies of Pan Masala without payment of GST and Cess during the period September 2020 to December-2021 be not demanded and recovered under the provisions of Section 74 (1) read with Section 122 (2) (b) of the CGST Act, 2017;

(ii) the UPGST liability amounting to Rs. 1,35,38,441/- evaded by the petitioner on account of clandestine supplies of Pan Masala without payment of GST and Cess during the period from September 2020 to December 2021 be not demanded and recovered under the provisions of Section 74 (1) read with Section 122 (2) (b) of the UPGST Act 2017;

(iii) the IGST liability amounting to Rs. 48,90,60,658/- evaded by the petitioner on account of clandestine supplies of Pan Masala made to interstate buyers/recipients without payment of GST and Cess during the period from September, 2020 to December 2021 be not demanded and recovered under the provisions of Section 74 (1) read with Section 122

(2) (b) of the CGST Act 2017 read with Section 20 of the IGST Act, 2017 and further the amount of Rs. 6,72,88,939/- deposited voluntarily be not appropriated against outstanding IGST liability arising out of the notice;

(iv) the GST Compensation Cess liability amounting to Rs. 110,60,09,016/- being unpaid GST Compensation Cess evaded on account of clandestine supplies of Pan Masala made to interstate and intrastate buyers/recipients without payment of GST and GST Compensation Cess during the period September 2020 to December 2021 be not demanded and recovered under the provisions of Section 74 (1) read with Section 122 (2) (b) of the CGST Act 2017 read with like provisions of UPGST Act, 2017 read with Section 20 of the IGST Act, 2017 further read with the GST (Compensation to States) Act 2017 and further amount of Rs. 14,41,90,505/- voluntarily deposited should not be appropriated against the GST Compensation Cess liability arising out of the notice;

(v) the IGST amount to the tune of Rs. 85,872/- not paid and evaded on shortage of goods found during the Panchnama proceedings dated 22/23.12.2021 at the premises of the petitioner be not demanded and recovered under the provisions of Section 74 (1), Section 35(6) read with Section 122 (2) (b) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017;

(vi) the GST compensation Cess liability amounting to Rs. 1,84,010/- evaded on account of shortage of goods found at the premises during the Panchnama proceedings dated 22/23.12.2021 be not demanded and recovered under Section 74 (1), Section 35 (6) read with Section 122 (2)

(b) of the CGST Act, 2017 read with like provisions of UPGST Act, 2017 read with Section 20 of IGST Act, 2017 further read with GST (Compensation to States) Act 2017;

(vii) interest at applicable rates be not demanded and recovered under Section 50 (1) of the CGST Act, 2017 read with Section 50 (1) of the U.P. CGST Act, 2017 read with Section 20 of the IGST Act, 2017 further read with the GST (Compensation to States) Act, 2017 on the outstanding GST and GST Compensation Cess liabilities;

(viii) Penalty amounting Rs. 17,21,916/- be not imposed under Section 74 (1) read with Section 122 (2) (b) of the CGST Act, 2017 read with like provisions of UPGST Act, 2017 read with Section 20 of the IGST Act, 2017 further read with GST (Compensation to States) Act, 2017 for non-payment of GST and GST Compensation Cess after adjusting amount already paid voluntarily.

(ix) Unaccounted seized cash amounting to Rs. 51,14,925/- from the residential premises of the Director of M/s GRCPL and business Premises of M/s GRCPL being sale proceeds of unaccounted supply and Pan Masala effected by M/s TFPL (petitioner) be not appropriated against GST dues.

(x) Prosecution proceedings be not initiated against the petitioner for the acts of commission of offences under Section 132 (1) read with Section 137 (1) and Section 137 (2) of the CGST Act, 2017 and like provisions of the UPGST Act, 2017 read with Section 20 of the IGST Act, 2017 further read with GST (Compensation of States) Act, 2017.

¶3Learned counsel for the petitioners has assailed the impugned Show Cause Notice on the ground that Notice has been issued with oblique motive, is based on incorrect facts, contains numerous inaccuracies and is liable to be interfered with by this Court. It is alleged in the Show Cause Notice that 4 Trucks were intercepted by the Respondent no. 1 on 22.12.2021 near Bakarganj Chauraha, Kanpur i.e. a place outside the premises of the petitioner No. 1 located at 133/231-A, Transport Nagar, Kanpur Nagar, Kanpur which was allegedly carrying Shikhar Brand Pan Masala and SS-1 brand scented tobacco without any invoice/E-Way Bill, whereas the correct facts are that altogether 4 Trucks were being loaded with the above goods outside the factory of the petitioner No. 1 and the loading of 3 Trucks was complete and 4th Truck was being loaded. The loading of Pan Masala in the 4th Truck was complete and scented tobacco/zarda was yet to be loaded when the officials of the respondent no. 1 physically verified the goods. The documents pertaining to the transport of the said goods were to be prepared only after completion of the loading. At the time of physical verification one invoice and E-Way Bill had already been prepared and other 3 invoices and E-Way Bills were under preparation. The allegation that the Trucks were intercepted is patently false as the Trucks were standing at the factory gate and material was being loaded. It is also asserted that after physical verification of the Trucks, the applicable GST was paid in respect to the materials loaded in the 4 trucks. It is further submitted that the impugned notice is based on presumptions and assumptions without corroborating evidence and has been issued with a premeditated mind. The notice does not satisfy the criteria for ascertainment of duty envisaged under Section 74 of the CGST Act, 2017 and as such is bad in law. The notice is also vague inasmuch as on one hand it alleges that the invoices are fake and on the other hand it has been asserted that the value in the invoices have been kept low with intent to evade duty/taxes. It is accordingly, prayed that the impugned notice be set aside and the proceedings be quashed. It is also submitted that the petitioner has voluntarily deposited a sum of Rs. 50 Crores in response to the Show Cause notice. Reliance is placed upon a decision of a coordinate Bench of this Court in Bharat Mint and allied Chemicals vs. Commissioner Commercial Tax and 2 others (2022 Law Suit (All) 228.

¶4Per contra, the writ petition has been opposed by learned Counsels for the contesting respondents by submitting that the writ petition has been filed against a Show Cause Notice and the Competent Authority after due investigation, scrutiny of Invoices, and consignment notes, verification of the date available on the GSTN Portal regarding the registration of the Firms dealing with the petitioner having found to be fake/ non-existent has found that it is a fit case to issue the impugned notice. He submits that the consideration at the stage of the Show Cause Notice is limited to ascertainment of information that the assessee has evaded tax liability. Final determination is to be made after considering the reply of the assessee. It is also argued that the petitioner is at liberty to raise all factual issues/objections at the appropriate stage. It is thus submitted that no interference is warranted by this Court under Article 226 of the Constitution of India.

¶5We have heard learned counsels for the petitioner as also the learned counsels for the respondents and have perused the record.

¶6Having heard learned counsel for the parties and having perused the records particularly to the contents of the Show Cause Notice impugned, prima-facie we find that the allegations leveled against the petitioners have substance. We, however are not inclined to venture into the correctness or otherwise of the allegations set out in the impugned Show Cause Notice as the same would involve fact appreciation and with respect to the same the petitioners have adequate statutory remedies available by filing appropriate objections to the Show Cause Notice and lead defence evidence controverting the allegations. Suffice is to note that there is no inherent lack of jurisdiction of the Competent Authority to issue the impugned Show Cause Notice. The argument raised by learned counsel for the petitioner that the Show Cause Notice has been issued with a premeditated mind does not merit consideration at this stage of the proceedings. We are of the view that once allegations of infraction of law arise the adjudication proceedings may not be interjected in exercise of extra ordinary jurisdiction conferred under Article 226 of the Constitution of India particularly in view of the fact that reference made to other facts narrated in the Show Cause Notice would also remain to be examined in the adjudication proceedings.

¶7Accordingly, interference claimed is declined in the face of alternative statutory remedy available to the petitioner of filing objections/ reply to the Show Cause Notice. The case Law relied upon in our opinion has no application to the facts of the present case.

¶8In view of the above the writ petition is dismissed leaving it open for the petitioners to take recourse to the remedies available to them under the law. It is however, made clear that we have not adjudicated the facts and no observation made in this order may prejudice the defence that may be set up by the petitioner in the pending adjudication. Order Date :- 7.11.2023 Deepak/ (Ashutosh Srivastava,J.) (Pritinker Diwaker,CJ.) High Court of Judicature at Allahabad