Preliminary issues,identity of the taxpayer, must be decided before proceeding with the assessment in GST.

Issue: Whether a show cause notice (SCN) issued under Section 74 of the GST Act is valid when the assessee contends that it pertains to a separate entity and that there was no cause of action to invoke Section 74.

Facts:

An SCN was issued against the assessee under Section 74 of the GST Act, which deals with cases involving fraud, misstatement, or suppression of facts.
The assessee challenged the SCN, arguing that it was issued to the wrong entity and that there was no basis for invoking Section 74.

Decision:

The court disposed of the writ petition with specific directions.
The court directed the adjudicating authority to treat the assessee’s contentions regarding the incorrect entity and the objection to invoking Section 74 as preliminary issues.
The authority was instructed to pass an order on these preliminary issues before proceeding to adjudicate other issues in the SCN.

Key Takeaways:

This case highlights the importance of addressing preliminary objections and jurisdictional issues before proceeding with the substantive adjudication of a show cause notice.
The court’s decision ensures that the assessee’s fundamental objections regarding the validity of the SCN are addressed first.
This approach promotes fairness and procedural clarity in GST proceedings, allowing the assessee to have their objections heard and decided before the merits of the case are examined.

HIGH COURT OF KERALA

Minimol Sabu

State of Kerala

Gopinath P., J.

WP(C) No. 40226 OF 2024

NOVEMBER 22, 2024

Akhil Suresh, Isabell Manoj, Rahul T. and Kalliyani Krishna B., Advs. for the Petitioner. Smt. Thushara James, Sr. Government Pleader for the Respondent.

ORDER

1. The petitioner is before this Court challenging Ext.P1 show cause notice issued under the provisions of Section 74 of the CGST/SGST Acts.

2. Sri. Akhil Suresh, the learned counsel appearing for the petitioner would submit that there is absolutely no cause of action for invoking Section 74 of the CGST/SGST Acts in the facts and circumstances of the case. It is also submitted that Ext.P1 show cause notice also relates to a separate entity belonging to the husband of the petitioner with separate registration number and for this reason also, Ext.P1 show cause notice cannot be sustained in law. The learned counsel would further submit that the petitioner has taken up both the issues in the reply filed to Ext.P1 show cause notice and the petitioner will be satisfied if a direction similar to the one issued by this Court as Ext.P3 judgment in W.P.(C) No.31434 of 2024 is issued in this case also.

3. Learned Senior Government Pleader submits that there is no ground made out to challenge Ext.P1 in a writ petition under Article 226 of the Constitution of India. It is submitted that all contentions will be considered by the Adjudicating Authority, including the contention that there is no reason to invoke Section 74 of the CGST/SGST Acts in the facts of this case.

4. Having heard the learned counsel for the petitioner and the learned Senior Government Pleader and having regard to the directions issued by this Court in Ext.P3, this writ petition will stand disposed of directing that the contention that the show cause notice (at least in part) pertains to a separate entity belonging to the husband of the petitioner with separate registration number and also the objection raised by the petitioner against the invocation of Section 74 of the CGST/SGST Acts will be considered as a preliminary issue and an order shall be passed with regard to the same before proceeding to adjudicate the other issues in the show cause notice.

5. The writ petition is ordered accordingly.