Challenge to Show Cause Notice for Fake Invoices Dismissed: Alternative Remedy Available
Summary in Key Points:
Issue: Could the petitioner challenge a show cause notice alleging issuance of fake invoices and tax evasion through a writ petition, or was he required to pursue alternative remedies under the GST Act?
Facts: The petitioner received a show cause notice under Section 127 for allegedly issuing fake invoices and using another entity’s GST registration to claim fraudulent Input Tax Credit (ITC). The petitioner challenged the notice, arguing that Section 122(1)(a) was not in force during the relevant period and that he was not a taxable person.
Decision: The court held that the petitioner had alternative remedies available under the GST Act, such as filing an objection and participating in the adjudication process. The reasons cited by the petitioner could be raised before the adjudicating authority. The court emphasized that a writ petition under Article 226 is not the appropriate remedy to challenge a show cause notice unless exceptional circumstances exist.
Important Note: This decision reinforces the principle that statutory remedies must be exhausted before invoking the extraordinary jurisdiction of the High Court under Article 226. The court clarified that the petitioner’s arguments regarding the applicability of Section 122(1)(a) and his status as a taxable person were matters to be decided by the adjudicating authority during the regular course of proceedings. This ruling ensures that the GST Act’s dispute resolution mechanisms are utilized effectively and prevents premature intervention by the High Court in matters where alternative remedies exist.
HIGH COURT OF KERALA
Abdul Saleem
v.
Assistant Commissioner, Anti Evasion*
Bechu Kurian Thomas, J.
WP(C) NO. 1711 OF 2025
JANUARY 16, 2025
M.P. Shameem Ahamed, Daniya Rasheed Palliyalil and Ahamed Iqbal, Advs. for the Petitioner. V. Girishkumar, Standing Counsel for the Respondent.
JUDGMENT
1. Petitioner has been served with a show cause notice dated 16.10.2024 issued under Section 127 of the Central Goods and Services Tax Act, 2017 and the Kerala State Goods and Services Tax Act, 2017, alleging that investigation revealed that petitioner and another person had issued fake invoices without any underlying supply of goods using the GST registration of another entity for monetary benefits. It is also alleged that there was a conspiracy between petitioner and two other persons to dupe the Government by issuing fake invoices and arranged fake Input Tax Credit for the purpose of evading tax at some stage.
2. Petitioner has challenged the aforesaid notice, stating that Section 122(1)(a) was brought into force only with effect from 01.01.2021, and therefore, petitioner cannot be proceeded against for the period from October 2019 to March 2020. It is also contended that the petitioner, being admittedly not a taxable person even as per the show cause notice, the proceeding initiated against him now, is without any legal validity.
3. I have heard Sri. M.P. Shameem Ahamed, the learned counsel for the petitioner and Sri. V.Girishkumar, the learned Standing Counsel for the respondent.
4. Since petitioner is assailing a show cause notice, he has a remedy of filing an objection and invite an adjudication on merits. Even though petitioner referred to the decision of the Bombay High Court in Shanthanu Sanjay Hundaikari v. Union of India and Others [2024 (89) GSTL 62 ], I am of the view that the facts of the said case were totally different. In the said case, an employee of a company was prosecuted against for the alleged mischief of the company. In such circumstances, the High Court of Bombay interfered with the show cause notice. However, facts and the instant circumstances of the present case are totally different.
5. The extraordinary remedy of Article 226 of the Constitution of India cannot be invoked to challenge a show cause notice unless there are exceptional reasons. In the decision in Union of India and Another v. Vicco Laboratories [(2007) 13 SCC 270], it was held that interference at the stage of show cause notice should be rare and not in a routine manner. It was also held that mere assertion that notice is without jurisdiction or that it is an abuse of process of law would not suffice to exercise jurisdiction. When factual adjudication is necessary, interference under Article 226 of the Constitution of India is ruled out.
6. The reasons now stated by the petitioner are all matters which can be agitated before the adjudicating authority itself. The issue requires factual adjudication as well.
7. Hence, I find no reason to entertain this writ petition under Article 226 of the Constitution of India and relegate the petitioner to pursue other remedies available under law by filing an objection and inviting an order of adjudication. Since it is conceded that the petitioner has not yet filed an objection to Exhibit-P1 show cause notice, a period of two weeks is granted to the petitioner to file an objection to the same. If any such objection is filed, the same shall be considered in accordance with law.
The writ petition is dismissed with the above observations.