All Contentions to be Addressed by Adjudicating Authority in Fraud/Suppression Cases u/s 74.
Issue: Whether an assessee can challenge a show cause notice issued under Section 74 of the CGST/SGST Acts (involving fraud, misstatement, or suppression) directly through a writ petition, arguing that the audit report ignored their submissions and there were no grounds for Section 74 proceedings.
Facts:
- The assessee challenged a show cause notice issued under Section 74 of the CGST/SGST Acts.
- The assessee contended that the audit report was prepared ignoring their submissions.
- The assessee argued that there were no grounds for initiating proceedings under Section 74.
Decision:
- The court held that all contentions, including challenges to audit findings and the grounds for Section 74 proceedings, can be raised before the adjudicating authority.
- The adjudicating authority was directed to consider all aspects before passing final orders, after providing an opportunity for a hearing.
- The time for replying to the show cause notice was extended by two weeks.
- The writ petition was disposed of.
- The ruling was in favor of the assessee, by allowing them to present their case before the adjudicating authority.
Key Takeaways:
- Disputes regarding audit findings and the validity of Section 74 proceedings should be addressed before the adjudicating authority.
- Courts generally prefer that administrative remedies be exhausted before resorting to writ petitions.
- Adjudicating authorities are required to provide a reasonable opportunity for a hearing and consider all relevant aspects before issuing final orders.
- Section 74 of Central Goods and Services Tax Act, 2017/Kerala State Goods and Services Tax Act, 2017 applied to this case.
HIGH COURT OF KERALA
Maya Pradeep Kumar
v.
Audit Officer
Gopinath P., J.
WP(C) NO. 33107 OF 2024
OCTOBER 7, 2024
K. Krishna Achyuth Menon and Nirmal Krishnan, Advs. for the Petitioner. Smt. Jasmin M.M., GP for the Respondent.
JUDGMENT
1. Petitioner has approached this Court, challenging Ext.P4 show notice issued under the provisions of Section 74 of the CGST/SGST Acts.
2. Learned counsel appearing for the petitioner would submit that there were certain audit proceedings initiated against the petitioner and the petitioner had duly replied to all the audit queries. It is submitted that, however, the audit party prepared Ext.P3 audit report, totally ignoring the contentions taken by the petitioner in the replies submitted to the notices issued by the Audit Wing. It is submitted that, on account of the findings in Ext.P3 Audit Report, Ext.P4 show cause notice has been issued to the petitioner under Section 74 of the CGST/SGST Acts. It is contended that, at any rate, there is no cause of action to issue a show cause notice under Section 74 of the CGST/SGST Acts.
3. Learned Government Pleader submits that the matter is at the stage of show cause notice and all the contentions taken by the petitioner can be raised before the Adjudicating Authority. It is submitted that the submission of the petitioner that the findings in Ext.P3 are incorrect is also a matter that can be considered by the Adjudicating Authority at the time of adjudication of Ext.P4 show cause notice. It is submitted that the question as to whether there was warrant for initiating proceedings under Section 74 of the CGST/SGST Acts, is also a matter that can be considered by the Adjudicating Authority. It is submitted that no ground has been made out for interference with the show cause notice issued to the petitioner in exercise of the jurisdiction vested in this Court under Article 226 of the Constitution of India.
4. Having heard the learned counsel appearing for the petitioner and the learned Government Pleader and having regard to the facts and circumstances of the case, I am of the opinion that there is considerable merit in the contention taken by the learned Government Pleader that all contentions taken by the petitioner before this Court, in challenge to Ext.P4 show cause notice, are matters that can be taken up before the Adjudicating Authority. The contention of the petitioner that the Audit Report was finalized without considering the contentions taken by the petitioner is also a matter that can be raised before the Adjudicating Authority and I have no reason to believe that if such contention is taken, the Adjudicating Authority will not consider such objections and will proceed to finalize the demand solely on the basis of the findings in the Audit Report. Further, the question as to whether the petitioner is liable to be proceeded against under Section 74 of the CGST/SGST Acts is also a matter that can be considered by the Adjudicating Authority.
Accordingly, this writ petition will stand disposed of, directing that if the petitioner were to take up contentions against the findings in the Audit Report and an objection is raised that there was no ground for initiating proceedings under Section 74 of the CGST/SGST Acts before the Adjudicating Authority, the Adjudicating Authority would consider such aspects also before passing final orders on the adjudication. The petitioner shall also be afforded an opportunity of hearing before final orders are passed by the Adjudicating Authority. Petitioner is at liberty to raise all contentions before the Adjudicating Authority. Considering the fact that this writ petition was pending before this Court along with an interim order, the time for filing the reply to Ext.P4 show cause notice will stand extended by a period of two weeks from today. The Adjudicating Authority shall consider and pass orders as above, within a period of three months from the date of receipt of a certified copy of this judgment. I make it clear that I have not expressed any opinion on the merits of any contention taken by the petitioner.
The writ petition is disposed of in terms of the above observations.