Appeal, Not Writ, Proper Remedy for Disputed ITC Demand.
Issue: Whether a writ petition is maintainable when an alternate and efficacious statutory remedy of appeal is available, particularly when challenging orders demanding input tax credit (ITC), interest, and penalty.
Facts:
- The petitioner’s bank account was frozen due to five orders-in-original that collectively demanded a substantial amount of ITC, interest, and penalty.
- The petitioner, instead of filing an appeal, directly approached the High Court through a writ petition.
- The petitioner alleged a breach of natural justice, attempting to bypass the alternate remedy.
Decision:
- The court held that arguments regarding orders suffering from a “vice of want of jurisdiction” or being “contrary to judicial precedent” can be raised in an appeal.
- No sufficient grounds were presented to justify interference with the impugned order through a writ petition.
- The court dismissed the writ petition, even considering the petitioner’s claim of urgency due to the frozen bank account.
- The ruling was in favor of the revenue.
Key Takeaways:
- The statutory remedy of appeal is the primary recourse for challenging orders related to ITC, interest, and penalty demands.
- Writ petitions are generally discouraged when an effective alternate remedy is available.
- Claims of jurisdictional errors or orders contrary to precedent can be effectively addressed in an appeal.
- Financial urgency, such as a frozen bank account, does not automatically justify bypassing the statutory appeal process.
- Section 73, read with section 16, of Central Goods and Services Tax Act, 2017/Maharashtra Goods and Services Tax Act, 2017 and Article 226 of Constitution of India applied to this case.
HIGH COURT OF BOMBAY
SPCX (P.) Ltd.
v.
State of Maharashtra
M.S. Sonak and Jitendra Jain, JJ.
WRIT PETITION (STAMP) NO.18371 OF 2024
DECEMBER 19, 2024
Jas Sanghavi, Mihir Mehta and Suyog Bhave, Advs. for the Petitioner.
ORDER
1. Not on board. Upon mentioning taken on board.
2. Heard Mr. Jas Sanghavi, the learned counsel for the Petitioner.
3. This matter was circulated citing extreme urgency because the Petitioner’s bank account had been frozen yesterday.
4. The bank account has been frozen, given the five orders-in-original, all dated 31 May 2024, collectively demanding ITC of Rs.523.12 crores, interest, and penalty. These Orders are appealable, and we are not satisfied with the usual reasons for not availing the alternate remedy of appeal.
5. Though this Petition was filed on 02 July 2024, it was moved only this morning, citing extreme urgency.
6. Admittedly, the Petitioner has an alternate and efficacious remedy available under the statute to appeal the Orders in Original dated 31 May 2024. Even the Orders in Original clearly state this.
7. However, as has become routine, the Petitioner has rushed to this Court, alleging a breach of natural justice, and therefore seeking to bypass the alternate remedy.
8. In paragraph 65, the Petitioner has made the following averments regarding an alternate remedy. The averments read as follows: –
65. The Petitioner submits that the impugned orders are ex-facie illegal and without jurisdiction. In view of peculiar facts of the present case, the Petitioner is entitled to invoke the jurisdiction of this Hon’ble Court under Article 226 of the Constitution of India. The Petitioner submits that since the orders suffers from the vice of want of jurisdiction, the alternate remedy of appeal under Section 107 of the MGST Act is neither effective nor efficacious. It is further pertinent to note that the impugned orders are contrary to the binding judgment of the Hon’ble Supreme Court and this Hon’ble, in the cases of MDS Switchgear Ltd. and Nestle India Ltd. (supra). The Petitioner submits that the reliefs prayed for herein if granted, would afford to them complete relief and justice to the Petitioner.
9. Significantly, there is no reference in paragraph 65 of the ground of violation of natural justice. Yet, what is now sought to be argued is a violation of natural justice.
10. In this regard, Mr. Sanghavi refers to our order on 11 December 2023 in Writ Petition No.15455 of 2023 instituted by the Petitioner in the earlier round.
11. In the context of show cause notice 11 August 2023, which this very Petitioner assailed, this Court had issued certain directions for furnishing certain documents to the Petitioner. Admittedly, the impugned Orders in Original, are not based upon the show cause notice dated 11 August 2023, but they are based on a different show cause notice dated 14 February 2024. Therefore, at least prima facie, by relying upon our order dated 11 December 2023, there is no question of alleging breach of natural justice. There is no question of avoiding the alternate remedy by claiming a natural justice violation based on such an allegation.
12. The arguments about the orders suffering from “vice of want of jurisdiction” or the orders being “contrary to the decisions in MDS Switchgear Ltd and Nestle India Ltd. ” can always be raised in an appeal. Based on such general and vague averments, the remedies provided under the statute cannot be so lightly bypassed.
13. In the case of Oberoi Constructions Ltd v. The Union of India Writ Petition (L) No.33260 of 2023 this Court has considered several precedents about the exhaustion of alternate remedies. This Court has also taken note of the increased tendency to bypass the statutory remedies and insist upon instituting Petition under Articles 226 and 227 of the Constitution of India. Paragraph 65 quoted above does not even indicate any financial difficulties for payment of the pre-deposit amount. According to Mr Sanghavi, the frozen bank account only has an amount of Rs. Two Crores or thereabouts. Therefore, freezing this bank account will not affect the Petitioner’s ability to institute an appeal by making a pre-deposit. By adopting the reasoning in the said decision, no case is made to interfere with the impugned order.
14. Recently, in The State of Maharashtra and Others v. Greatship (India) Limited 2022 LiveLaw (SC) 784, the Hon’ble Supreme Court, after referring to its earlier precedents on the subject, held that Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, for instance, where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up, and the prevention of public injury and the vindication of public justice require it that recourse may be had to Article 226 of the Constitution. But even then, the Court must have good and sufficient reason to bypass the alternative remedy provided by statute. The Court observed, “Surely matters involving the revenue where statutory remedies are available are not such matters”.
15. The Court, after referring to its earlier precedent in United Bank of India v. Satyawati Tondon and Others (2010) 8 SCC 110 observed that “we can also take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolong the proceedings by one device or the other The practice certainly needs to be strongly discouraged”
16. In Rattan India Power Limited v. The Union of India and Ors. WP No.3201/2021 decided on 13.03.2023, decided by a coordinate Bench on 13.03.2023, dismissed the Writ Petition by relegating the petitioner to the alternate remedy before the Appellate Tribunal. Upon an exhaustive analysis of precedents on the subject, including the precedent in Greatship (India) Limited (supra) and others, the coordinate Bench declined to entertain the Writ Petition inter alia on the ground that statutory appellate remedies were available and factual inquiry was necessary to determine whether the jurisdictional facts were established, or not. The coordinate Bench noted that even the Supreme Court had disapproved the High Court’s entertaining Writ Petitions involving classification disputes or even the applicability of exemption notification when parties had statutory alternate remedies.
17. Considering all these circumstances cumulatively, we decline to entertain this Petition, even though some artificial urgency sought to be created, and relegate the Petitioner to the alternate remedy of appeal, should the Petitioner choose to institute such appeal before the Appellate Authority.
18. At this stage, Mr. Sanghavi states that appeals will be filed within six weeks from today and prays that some directions be issued in the context of limitation.
19. If the appeals are indeed instituted within six weeks from today after complying with all the legal requirements, including pre-deposit, then the Appellate Authority should consider and dispose of such appeals on merits without referring to the limitation issue. This is because this Petition was instituted within the limitation period for instituting appeals.
20. All contentions of the parties on merits are left open.
21. The Petition is dismissed with liberty in the above terms.
22. Though this was a fit case for awarding costs, at the persuasion of Mr. Sanghavi, we refrained from imposing costs.