Facts of the Case

M/s. Kausalya Infra Projects Private Limited, formerly known as Kausalya Shelters Private Limited, approached the Telangana High Court under Article 226 of the Constitution of India challenging a show cause notice dated 29 July 2022 issued by the Additional Director, Directorate General of Goods and Services Tax Intelligence, Hyderabad Zonal Unit.

The impugned show cause notice required the petitioner to submit its reply before Respondent No. 2, namely the Additional/Joint Commissioner, Central Tax, Medchal Commissionerate, Hyderabad.

The show cause notice followed a search conducted at the petitioner’s premises and intelligence gathered by officers of the Directorate General of GST Intelligence. According to the proceedings recorded by the High Court, the allegation was that the petitioner had not discharged tax liability on services rendered to M/s. Sree Venkataraya Builders Pvt. Ltd.

The petitioner challenged not merely the substantive tax proceedings but specifically questioned the jurisdiction of Respondent No. 2 to deal with and adjudicate the matter. According to the petitioner, jurisdiction was vested with Respondent No. 3, and no notification had been issued by the Central Government under Section 6 of the Central Goods and Services Tax Act, 2017 entrusting Respondent No. 2 with competence to deal with the petitioner’s reply.

The writ petition further sought to challenge the identification of Respondent No. 2 as the adjudicating authority as allegedly contrary to Notification No. 2/2022-Central Tax dated 11 March 2022. It also sought a declaration against Circular No. 169/01/2022-GST dated 12 March 2022 on the ground that it was contrary to the said notification.

Additionally, the petitioner alleged violation of Rule 142 of the CGST Rules, 2017, contending that the mandatory notice/summary in Form GST DRC-01 had not been issued or uploaded on the portal.

The reliefs claimed in the writ petition and the order ultimately passed are reflected in the uploaded judgment.

Issues Involved

The principal issue before the Telangana High Court was whether the writ jurisdiction under Article 226 of the Constitution should be exercised to interfere with a GST show cause notice at the preliminary stage when the CGST Act provides an adequate and efficacious statutory remedy.

A further issue was whether Respondent No. 2 possessed jurisdiction to receive and deal with the petitioner’s reply and adjudicate the proceedings, particularly when the petitioner asserted that jurisdiction vested with Respondent No. 3 and that no notification under Section 6 of the CGST Act had entrusted Respondent No. 2 with such authority.

The case also involved the question whether naming/notifying Respondent No. 2 as adjudicating authority was contrary to Notification No. 2/2022-Central Tax dated 11 March 2022.

Another challenge concerned whether Circular No. 169/01/2022-GST dated 12 March 2022 was contrary to Notification No. 2/2022-Central Tax dated 11 March 2022.

The petitioner additionally raised the issue whether the show cause notice proceedings were vitiated by alleged non-compliance with Rule 142 of the CGST Rules, 2017 due to the alleged absence or non-uploading of Form GST DRC-01.

The decisive judicial question, however, remained whether such objections—including a jurisdictional objection—should be examined by the writ court immediately at the show cause notice stage or could be raised before the statutory authorities in the proceedings following the notice.

Petitioner’s Arguments

The petitioner, through learned Senior Counsel, contended that Respondent No. 2 lacked jurisdiction to hear and deal with the petitioner’s reply to the impugned show cause notice.

It was argued that the competent jurisdiction was vested with Respondent No. 3 and that no notification had been issued by the Central Government under Section 6 of the CGST Act, 2017 entrusting Respondent No. 2 with competence to deal with the petitioner’s reply.

The petitioner further questioned the show cause notice insofar as it entrusted adjudicatory responsibility to Respondent No. 2, alleging that such entrustment was without jurisdiction.

In the alternative, the petitioner sought a declaration that the show cause notice, to the extent it identified Respondent No. 2 as the adjudicating authority, was without jurisdiction and contrary to Notification No. 2/2022-Central Tax dated 11 March 2022.

The petitioner also challenged Circular No. 169/01/2022-GST dated 12 March 2022 as being contrary to Notification No. 2/2022-Central Tax dated 11 March 2022.

A separate procedural objection was raised under Rule 142 of the CGST Rules, 2017. The petitioner alleged that there was no notice/summary in Form GST DRC-01 and that the same had not been uploaded on the portal, despite the petitioner’s contention that such compliance was mandatory.

The petitioner therefore sought quashing of the impugned show cause notice and also sought protection against further proceedings arising from it. These challenges and reliefs are expressly reflected in the petition portion and the Court’s order contained in the uploaded judgment.

Respondents’ Position / Arguments

The final order does not record a detailed, separate substantive analysis of oral arguments advanced by each respondent. Accordingly, it would not be appropriate to attribute specific detailed submissions to the respondents beyond what appears in the judgment.

The record shows representation on behalf of the Central Tax authorities, the Union of India, and the State/Commercial Tax authorities. The Court ultimately proceeded on the legal principle that interference by the writ court at the stage of issuance of a show cause notice was not warranted where the statute provided an adequate and efficacious alternative remedy.

The Court also recognized that the petitioner would have an opportunity in the proceedings following the show cause notice to raise its various contentions, expressly including the question of jurisdiction of Respondent No. 2.

Court Order / Findings

The Telangana High Court held that, at the stage of issuance of a show cause notice under the provisions of the CGST Act, 2017—more particularly under Section 74(1)—the writ court would not interfere when the statute provides an adequate and efficacious alternative remedy in the event the petitioner continues to remain aggrieved by decisions taken by the statutory authorities.

The Court made a particularly significant finding that even in proceedings following the show cause notice, the petitioner would have all opportunities to raise its various contentions, including the question concerning the jurisdiction of Respondent No. 2.

Therefore, the Court did not decide the petitioner’s objections on their merits. It expressly stated that it was declining to entertain the writ petition without expressing any opinion on merits.

Accordingly, the writ petition was dismissed. Pending miscellaneous applications, if any, were ordered to stand closed, and there was no order as to costs.

Thus, the essential ratio emerging from the order is that a writ petition challenging a GST show cause notice ordinarily should not be entertained at the notice stage where an adequate and efficacious statutory mechanism is available and where the assessee can raise its objections—including an objection to the jurisdiction of the adjudicating authority—in the proceedings following the show cause notice.

Important Clarification

The High Court did not uphold the jurisdiction of Respondent No. 2 on merits. Equally, it did not reject the petitioner’s jurisdictional objection on merits.

The Court’s order was based on the stage of the proceedings and the availability of statutory remedies. The Court specifically recognized that the petitioner could raise the question of Respondent No. 2’s jurisdiction in the proceedings following the show cause notice.

Therefore, the judgment should not be interpreted as a substantive ruling that Respondent No. 2 necessarily had jurisdiction under Section 6 of the CGST Act, Notification No. 2/2022-Central Tax, or Circular No. 169/01/2022-GST.

Likewise, the Court did not finally adjudicate upon the petitioner’s challenge concerning Rule 142 of the CGST Rules or the alleged failure to issue/upload Form GST DRC-01.

The precise legal effect of the order is that the High Court declined to exercise writ jurisdiction at the show cause notice stage and left the petitioner free to raise its contentions, including jurisdictional contentions, in the statutory proceedings. This distinction is important for correctly reporting and relying upon the judgment.

Sections  Involved

Article 226 of the Constitution of India: Invoked by the petitioner for exercise of the High Court’s writ jurisdiction, including the relief of prohibition and other appropriate writ reliefs.

Section 74(1) of the Central Goods and Services Tax Act, 2017: Specifically referred to by the High Court while discussing the show cause notice stage and the Court’s reluctance to interfere where adequate and efficacious statutory remedies are available.

Section 6 of the Central Goods and Services Tax Act, 2017: Relied upon in the petitioner’s jurisdictional objection, with the contention that no Central Government notification had entrusted Respondent No. 2 with competence to deal with the petitioner’s reply.

Rule 142 of the Central Goods and Services Tax Rules, 2017: Invoked in relation to the petitioner’s allegation that the required Form GST DRC-01 had not been issued/uploaded on the portal.

Section 151 of the Code of Civil Procedure, 1908: Referred to in the interlocutory application seeking stay of further proceedings pursuant to the impugned show cause notice.

Notification No. 2/2022-Central Tax dated 11 March 2022: Relied upon by the petitioner in challenging the identification of Respondent No. 2 as adjudicating authority.

Circular No. 169/01/2022-GST dated 12 March 2022: Challenged by the petitioner as allegedly contrary to Notification No. 2/2022-Central Tax dated 11 March 2022.

 Link to download the order-https://mytaxexpert.co.in/uploads/1783154996_866compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.