Mahavir Enterprise VS Assistant Commissioner Of State Tax

This writ application under Article 226 of the Constitution of India has been filed by a proprietary concern, represented by its proprietor, seeking several reliefs. These include quashing a show cause notice dated November 30, 2019, challenging the constitutional validity of Rule 142(1)(a) of the CGST/GGST Rules, and requesting interim relief from coercive action until the matter is resolved.

The show cause notice in question, issued by the respondent No. 1 under Section 122(1) of the Central Goods and Services Tax Act, 2017, demands an amount of Rs. 6,87,68,821 for alleged contravention of the Act and the Rules. The notice alleges involvement in bogus billing transactions without physical movement of goods.

At present, the show cause notice is pending adjudication, prompting the writ applicant to approach the court seeking its quashing. Additionally, there’s a challenge to the constitutional validity of Rule 142(1)(a) of the CGST Rules, contending that it exceeds the provisions of the Act and constitutes excessive delegation of powers.

The application lays out the factual background and the legal basis for the challenge, highlighting the need for judicial intervention to address the issues raised.

In the writ application filed under Article 226 of the Constitution of India, the petitioner, a proprietary concern represented by its proprietor, seeks several reliefs, including quashing a show cause notice dated November 30, 2019, issued by the respondent under Section 122(1) of the Central Goods and Services Tax Act, 2017 (CGST Act). The notice demands a substantial sum for alleged contravention of the Act and Rules. The petitioner also challenges the constitutional validity of Rule 142(1)(a) of the CGST Rules, arguing that it exceeds the Act’s provisions and constitutes excessive delegation of powers.

Mr. Avinash Poddar, representing the petitioner, vehemently contests the validity of the show cause notice, asserting that Section 122 of the CGST Act does not authorize its issuance. He contends that if the department suspects fraud or suppression, a show cause notice under Section 74 of the Act should be issued for determining tax liability. Additionally, Mr. Poddar criticizes the penalty imposition, which includes both outward supply and input tax credit, deeming it contrary to the scheme of the CGST Act, particularly Section 74.

Mr. Poddar also argues that Rule 142(1)(a) of the CGST Rules goes beyond the Act’s provisions since Section 122 does not permit the issuance of a show cause notice. He suggests that this rule should be declared ultra vires due to excessive delegation of powers.

On the other hand, Ms. Manisha Lavkumar Shah, representing the State, opposes the writ application, arguing that challenging the legality of the show cause notice isn’t maintainable since it hasn’t been adjudicated yet. She emphasizes the need for the writ applicant to respond to the notice and substantiate their case before seeking its discharge.

In response to the writ application under Article 226 of the Constitution of India, Ms. Manisha Lavkumar Shah, representing the State as the Government Pleader, along with Mr. Dharmesh Devnani, vehemently opposed the petition. She argued that challenging the legality and validity of a show cause notice is premature since the notice hasn’t been adjudicated yet. According to her, the writ applicant must respond to the notice and present their case instead of seeking its discharge without due process.

Ms. Shah further contended that the challenge to the constitutional validity of Rule 142(1)(a) of the Rules lacks foundation. She referred to Section 164 of the Act, which empowers the Government to make rules based on recommendations, and emphasized that Rule 142(1)(a) is valid and within the Act’s provisions, dismissing claims of excessive delegation of power.

In light of these arguments, Ms. Shah urged the court to reject the writ application, citing its lack of merit.

After considering the arguments from both sides and reviewing the evidence, the court deliberated on two key questions:
1. Whether the impugned show cause notice should be quashed and set aside as requested by the writ applicant?
2. Whether Rule 142(1)(a) of the Rules 2017 exceeds the provisions of the parent Act, the GST Act, 2017, rendering it ultra vires

Download PDF:

For Reference Visit:

Read Another Case Law:

GST Case Law: