Writ petition challenging a Section 74 GST order on royalty tax is dismissed due to the availability of an alternate appeal remedy,

Writ petition challenging a Section 74 GST order on royalty tax is dismissed due to the availability of an alternate appeal remedy, directing the assessee to file an appeal.

Issue:

Whether a writ petition directly challenging an Order-in-Original passed under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), which imposes tax on royalty payments by invoking fraud/misstatement, should be entertained when an alternate statutory remedy of appeal under Section 107 of the CGST Act is available, and the assessee claims no fraudulent intention.

Facts:

• The petitioner challenged an order passed under Section 74 of the CGST/SGST Act, 2017 (which deals with demands involving fraud, willful misstatement, or suppression of facts).
• The main contention of the petitioner was that the respondent-authority could not have invoked Section 74 of the GST Act, as there was no fraudulent intention on the part of the petitioner in not depositing tax on royalty paid (which fell within the scope of service). This indicates a dispute on the applicability of Section 74 itself, as well as the merits of the demand.

Decision:

The court held in favor of the revenue. Considering the submissions raised by the petitioner, the instant petition was not to be entertained as the petitioner was challenging the Order-in-Original directly, instead of availing the alternate remedy of appeal under Section 107 of the GST Act. The court relied on the Supreme Court’s directions in Assistant Commissioner of State Tax & Ors. v. Commercial Steel Ltd. [2021] 9 TMI 480 SC, which specified when a writ petition could be entertained under Articles 226/227 of the Constitution of India in similar circumstances. Relying on this dictum, the petitioner was relegated to file an appeal under Section 107 of the GST Act, raising all contentions raised in the instant petition.

Key Takeaways:

• Alternate Remedy Rule: This case is a classic example of the “alternate remedy rule.” High Courts generally decline to exercise their extraordinary writ jurisdiction (under Article 226/227 of the Constitution) when an effective and efficacious alternate statutory remedy is available under the relevant statute. The appeal mechanism under Section 107 of the CGST Act is considered such an efficacious remedy.
• Scope of Appeal under Section 107: An appeal to the Appellate Authority under Section 107 allows the assessee to challenge both the factual findings and the legal interpretations made in the Order-in-Original. This includes challenging the very applicability of Section 74 (i.e., whether fraud or suppression existed), the quantification of the demand, and any other legal infirmities.
• Supreme Court Precedent: The reliance on the Supreme Court’s decision in Commercial Steel Ltd. underscores the binding nature of the apex court’s pronouncements regarding the maintainability of writ petitions when statutory appeals are available. This judgment emphasizes that only in very exceptional circumstances (e.g., patent lack of jurisdiction, violation of fundamental rights that cannot be remedied by appeal, or where the statutory remedy is illusory) should a writ petition be entertained directly.
• “No Fraudulent Intention” as an Appealable Issue: The petitioner’s contention regarding “no fraudulent intention” is a factual and legal argument that can be fully adjudicated by the appellate authority. It does not automatically elevate the matter to a level requiring direct writ intervention.
• Discretionary Nature of Writ Jurisdiction: The exercise of writ jurisdiction is discretionary. Even if a case could technically fall within writ purview, the court may choose to direct the petitioner to the alternate remedy.
• “In favour of revenue”: The dismissal of the writ petition means the revenue’s process is upheld, and the assessee must pursue the next level of statutory appeal.