We have heard extensive arguments of learned counsel for both the parties when the matter comes up for admission as also on the prayer for grant of interim relief.

Challenge to issuance of show cause notice dated 18.01.2022 is essentially on the submission that the issuance of notice itself is without jurisdiction because under the division of jurisdiction of taxation authorities, issuance of notice by the respondents-authorities when the assessment in relation to the petitioner-assessee is assigned to Central Taxation Authority, is not permissible in law.

An issue of cross empowerment has been raised referring to provisions contained in Section 6 of the Rajasthan Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act of 2017’) stating that in the absence of proper notification in that regard, the State authorities could not have issued show cause notice undertaking the assessment for imposition of taxes under the Act of 2017.

Learned counsel for the petitioner would argue that in any case, cross empowerment as envisaged under Section 6 of the Act of 2017 is for the limited purpose of refund and not for initiating assessment proceedings. His next submission is that the issuance of impugned notice under Section 73 of the Act of 2017 is without compliance of mandatory provisions contained in Section 73 of the Act of 2017 and is otherwise in violation of the mandatory provisions contained in Section 73 (3) of the Act of 2017. When proceedings and notices were issued earlier prior to issuance of show cause notice impugned, the authority confined the subject matter solely with reference to tax liability on the logistic and handling charges and the assessee had replied to that limited aspect only. But later on, when impugned notice was issued, apart from the aforesaid limited issue, the impugned notice also disclosed for the first time discrepancies in the Input Tax Credit as available in GSTR-2A and claimed Input Tax Credit in yearly GSTR-3B, which was never included in the earlier proceedings prior to issuance of impugned show cause notice. It is also argued that the Rule 71 of the Central/State Goods and Services Tax Rules, 2017 (hereinafter referred to as ‘the Rules of 2017’) obliged the respondents to first notify discrepancy to the petitioner (recipient of service), but that was also not notified prior to issuance of show cause notice and as this fact has not been disputed in the return, it becomes an admitted position. Referring to the decision of the Hon’ble Supreme Court in the case of Hukam Chand Shyam Lal Versus Union of India and Others, (1976) 2 Supreme Court Cases 128, it is contended that when proceedings have been drawn other than the manner provided under the law, this would amount to violation of principles of natural justice. It has also been argued that even provisions contained in Rule 142(1)(a) as also Rule 142(1A) of the Rules of 2017 having not been complied with, comparison of pre show cause notice (Annexure-P/7) and impugned show cause notice (Annexure-P/4) would reveal that the issue with regard to discrepancy in the Input Tax Credit form was not raised. He would submit that post legislation GST Council had issued Circular dated 20.09.2017 (Annexure-P/13) clarifying the issue, but the authorities have acted erroneously once division of jurisdiction was notified vide Annexure-P/14 and petitioner’s assessment assigned to Central Taxation Authorities, in view of the order of the Hon’ble Supreme Court in the case of Union of India & Anr. Versus M/s Mohit Minerals Pvt. Ltd. through Director, 2022 (5) TMI 968 Supreme Court, the action of the authority is per se without jurisdiction, violative of statutory principles as also statutory provisions and in violation of the principles of natural justice. In support of his submission on the issue of jurisdiction, reliance has been placed on the order of the Allahabad High Court in the case of Ajay Verma Versus Union of India and Ors., (2022) 102 GSTR 13 (All).

Further submission has been made that the respondents-authorities have prejudged the issue and at the same time, an argument has also been raised that the show cause notice is not clear and vague and, therefore, on this ground, the writ petition may be entertained, it being a case of exception to general rule that normally at the stage of show cause notice, Court may not entertain.

Per-contra, learned counsel for the respondents/revenue would argue that the respondents-authorities are empowered under the law to draw proceedings under Section 73 of the Act of 2017 and at present, the writ-petitioner has been given a show cause notice, which he may suitably reply on various grounds, which have been raised in the petition, but in any case, it is argued, in view of the order passed by the Division Bench of this Court in the case of Sanganeriya Spinning Mills Ltd. Versus Union of India, 2019 (28) G.S.T.L. 442 (Raj.), the issue of jurisdiction of the authority has no merit. He would submit that this has also been considered and decided by the Madras High Court in the case of Kuppan Gounder P.G. Natarajan Versus Directorate General of GST Intelligence, New Delhi, 2022 (58) G.S.T.L. 292 (Mad.).

Learned counsel for the respondents/revenue would further submit that provisions contained in Section 73 (3) of the Act of 2017 are not mandatory and only on that count, show cause notice cannot be said to be without jurisdiction. He would further submit that legal submissions are being made contrary to the pleadings made in the writ petition in para 4(a)(b)(c) and (d) where the petitioner itself has stated regarding intimation in DRC-01A dated 22.06.2021, on the basis of difference in rate of tax charged on logistic and handling charges as also that show cause notice has been issued for all four years under consideration in the form DRC-01. Therefore, it is not a case of violation of provisions contained in Rule 142 of the Rules of 2017. It is also brought to the notice of the Court that the argument on alleged violation of Rule 142 (1A) of the Rules of 2017 itself is based on unamended provisions because later on, the aforesaid rule has been amended, communications of the details of any tax, interest & penalty as ascertained in Part A Form GST DRC-01A is not mandatory and the word ‘shall’ has been substituted by ‘may’. He has also drawn attention of this Court to the clarification dated 05.10.2018.

Learned counsel for the respondents/revenue would further submit that the alleged statutory violation itself is a matter of consideration on disputed facts of the case and cannot be said to be a case based on undisputed facts and, therefore, the petitioner’s remedy is to seek adjudication by the authority rather than rushing to this Court against the show cause notice.

Learned counsel for the petitioner would argue that the decisions of the Madras High Court in the case of Kuppan Gounder P.G. Natarajan Versus Directorate General of GST Intelligence, New Delhi (supra) as relied upon by the learned counsel for the respondents/revenue are per-incuriam.

It is well settled that ordinarily, against show cause notice, Writ Court would not interfere unless it is a case of exceptional nature.

In the case of Union of India and Others Versus Coastal Container Transporters Association and Others, (2019) 20 Supreme Court Cases 446, the law governing limited scope of interference against show cause notice was declared by Their Lordships in the Hon’ble Supreme Court as below:-

“30. On the other hand, we find force in the contention of the learned senior Counsel, Sri Radhakrishnan, appearing for the appellants that the High Court has committed error in entertaining the writ petition under Article 226 of Constitution of India at the stage of show-cause notices. Though there is no bar as such for entertaining the writ petitions at the stage of show-cause notice, but it is settled by a number of decisions of this Court, where writ petitions can be entertained at the show-cause notice stage. Neither it is a case of lack of jurisdiction nor any violation of principles of natural justice is alleged so as to entertain the writ petition at the stage of notice. The High Court ought not to have entertained the writ petition, more so, when against the final orders appeal lies to this Court.

31. The judgment of this Court in Union of India v. Guwahati Carbon Ltd. (2012) 11 SCC 651, relied on by the learned Senior Counsel for the appellants also supports their case. In the aforesaid judgment, arising out of Central Excise Act, 1944, this Court has held that excise law is a complete code in order to seek redress in excise matters and held that entertaining writ petition is not proper where alternative remedy under statute is available. When there is a serious dispute with regard to classification of service, the respondents ought to have responded to the show-cause notices by placing material in support of their stand but at the same time, there is no reason to approach the High Court questioning the very show-cause notices. Further, as held by the High Court, it cannot be said that even from the contents of show-cause notices there are no factual disputes.

32. Further, the judgment of this Court in Malladi Drugs & Pharma Ltd. v. Union of India (2020) 12 SCC 808, relied on by the learned Senior Counsel for the appellants also supports their case where this Court has upheld the judgment of the High Court which refused to interfere at show-cause notice stage.”

The Hon’ble Supreme Court in the case of Union of India and Another Versus Vicco Laboratories, (2007) 13 Supreme Court Cases 270 held as below:-

“31. Normally, the writ court should not interfere at the stage of issuance of show-cause notice by the authorities. In such a case, the parties get ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities concerned about the absence of case for proceeding against the person against whom the show-cause notices have been issued. Abstinence from interference at the stage of issuance of show-cause notice in order to relegate the parties to the proceedings before the authorities concerned is the normal rule. However, the said rule is not without exceptions. Where a show-cause notice is issued either without jurisdiction or in an abuse of process of law, certainly in that case, the writ court would not hesitate to interfere even at the stage of issuance of show cause-notice. The interference at the show-cause notice stage should be rare and not in a routine manner. Mere assertion by the writ petitioner that notice was without jurisdiction and/or abuse of process of law would not suffice. It should be prima facie established to be so. Where factual adjudication would be necessary, interference is ruled out.”

The Hon’ble Supreme Court in the case of Union of India and Another Versus Kunisetty Satyanarayana , (2006) 12 Supreme Court Cases 28 held as below:-

13. It is well settled by a series of decisions of this Court that ordinarily no writ lies against a charge-sheet or showcause notice vide Executive Engineer, Bihar State Housing Board v. Ramesh Kumar Singh (1996) 1 SCC 327, Special Director v. Mohd. Ghulam Ghouse (2004) 3 SCC 440, Ulagappa v. Divisional Commr., Mysore 2001 (10) SCC 639, State of U.P. v. Brahm Datt Sharma (1987) 2 SCC 179, etc.

14. The reason why ordinarily a writ petition should not be entertained against a mere show-cause notice or chargesheet is that at that stage the writ petition may be held to be premature. A mere charge-sheet or show-cause notice does not give rise to any cause of action, because it does not amount to an adverse order which affects the rights of any party unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the show-cause notice or after holding an enquiry the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ lies when some right of any party is infringed. A mere show-cause notice or charge-sheet does not infringe the right of any one. It is only when a final order imposing some punishment or otherwise adversely affecting a party is passed, that the said party can be said to have any grievance.

15. Writ jurisdiction is discretionary jurisdiction and hence such discretion under Article 226 should not ordinarily be exercised by quashing a show-cause notice or chargesheet.

No doubt, in some very rare and exceptional cases the High Court can quash a charge-sheet or show-cause notice if it is found to be wholly without jurisdiction or for some other reason if it is wholly illegal. However, ordinarily the High Court should not interfere in such a matter.”

In the present case, the petitioner has sought to assail the show cause notice on the issue of jurisdiction that once the assessment matter of the writ-petitioner was assigned to Central Taxation Authorities, the State Authority does not have jurisdiction to initiate proceedings under Section 73 of the Act of 2017 and for this purpose, the petitioner has relied upon the decision of the Allahabad High Court in the case of Ajay Verma Versus Union of India and Ors. (supra).

However, a Division Bench of this Court in the case of Sanganeriya Spinning Mills Ltd. Versus Union of India (Supra), while repelling challenge to constitutional validity of Section 6 (1) of the Act of 2017 held as below:-

“The petitioner challenges the vires of Section (6)(1) of the Goods and Services Tax Act, 2017. The said provision reads as follows:-

“6. Authorisation of officers of State tax or Union territory tax as prope.- officer in certain circumstances.-(1) without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify.”

2. Arguing that in this case the GST Council had delineated jurisdiction of the State and Central authorities by Notification dated 20-09-2017 (No.1 of 2017), it is submitted that the State authority lacks jurisdiction to investigate and bring to assessment any amounts having regard to the peculiar circumstances of the case.

3. The State’s arguments while resisting challenge to the proceedings initiated is that pursuant to the decision of the CST Council, the enquiry was only with respect to the enforcement action. As far as the components of claim towards the credit under the Central Sales Tax Act (CST) and State Value Added Tax (VAT) are concerned, it was submitted that having regard to the investigation and orders made pursuant to the TRAN-01 claims for credit under Section 140(3) of the GST Act, which was limited in character, even in terms of Circular 1 of 2017, which the petitioner relies again by way of investigation and intelligence gathering is not precluded.

4. The basic ground on which Section 6 has been challenged is that Section 6(1) is arbitrary. It is contended that the provisions curtail and severely limit the rights to claim the input credit and transitional credit. In this regard, the learned Counsel also submitted that the show cause notice in this case transgressed the provisions of law, especially Section 6 and 73.

5. This Court is of the opinion that challenge to the provisions i.e. Section 6(1), has not been made at all. The GST Act, which was enacted pursuant to 101st amendment to the Constitution, completely changed the tax structure in the country and unified the tax levied by the Centre and State for the first time, in terms of principles of taxation as well as the common provisions. The constitutional authority such as the Goods and Services Tax (GST) Council was created, to lay down the policy which are binding on all States and the Union, which are authorised to collect the levies under the GST. The Act also unifies levies, such as Central Excise Service Tax and State VAT Enactments under one regime. Naturally, to cater to such a complex structure, common principles in the form of mechanism and authorities were deviced. It was in these circumstances that Section 6 was enacted, which enables such Officers appointed under the State Act and the Union Territories Act and also authorised the proper Officers for the purpose-subject to certain conditions prescribed by the Central Government. Section 6(2) – much like Section 9(2) of the CST Act empowers the State Goods and Services Tax Act and the authorised Officers to act commonly on behalf of the Centre and the State having regard to the long standing statutory precedent in the form of Section 9(2). The formation of a mechanism convenient for the purpose of assessment and collection by Section 6(1) cannot be charactersied as per se arbitrary.

6. So far as the challenge to the circular and the show cause notice is concerned, the Court is of the opinion that the circular merely works out the authorisation under Section 6(1). It is also a matter of policy. Furthermore, the Court was informed that assessment has been completed pursuant to the show cause notice on 22-3-2019.

7. In these circumstances, it is not appropriate for the Court, to consider the validity or otherwise of the show cause notice having regard to the fact that an alternative remedy by way of an appeal exists in favour of the petitioner. In case, if so advised, the petitioner prefers such an appeal, the same shall be decided on merits.

8. The writ petition is accordingly dismissed.”

Other argument, which has been raised by the learned counsel for the petitioner to seek indulgence of this Court at the stage of show cause notice itself is based on alleged violation of certain statutory provisions, which have been opposed by the learned counsel for the respondents/revenue and whether or not it is a case of statutory violation itself will depend upon consideration of various factual aspects of the case. Violation of provisions contained in Rule 142 of the Rules of 2017 as alleged by the petitioner, has been repelled by the respondents by stating that the petitioner has relied upon unamended provisions.

Petitioner seems to be aggrieved by the issuance of show cause notice insofar as it is proposing imposition of tax based on discrepancy in the Input Tax Credit details in GSTR-02A and GSTR-03B is concerned. It is not the case of the petitioner that there is no discrepancy at all. Therefore, in our opinion, the petitioner instead of challenging the show cause notice at this stage should workout its remedy. At present, only show cause notice has been issued. The petitioner may raise various grounds, except the issue of jurisdiction, which has been raised in the writ petition and the same are required to be considered by the authority. In the event, the petitioner suffers any orders prejudicial to its interest, it is open for the petitioner to take such remedy as may be available to it under the law.

Consequently, the writ petition is dismissed.