The Orissa High Court, in W.P.(C) No. 5332 of 2022, examined whether a writ petition challenging a show cause notice under Section 74 of the CGST/OGST Act, 2017 could be entertained before the petitioner had even filed a reply before the Proper Officer.

Facts of the Case

The Petitioner, Sri Rajendra Narayan Mohanty, was served a show cause notice dated 25.01.2022 by the CT and GST Officer, Cuttack-I East Circle, under Section 74 of the CGST/OGST Act, 2017, proposing recovery of tax short paid along with interest and penalty. The Department's case was that the Petitioner had received TDS during October 2018 to March 2019 (Financial Year 2018-19) but had disclosed "Nil" liability while filing FORM GSTR-3B. The Petitioner countered that correct figures were disclosed in the Annual Return filed on 20.12.2020, and challenged the jurisdiction of the Proper Officer to invoke Section 74, relying on the instructions appended to FORM GSTR-9 as substituted by the CGST (Fourteenth Amendment) Rules, 2018. Without filing any reply to the notice, the Petitioner approached the High Court directly.

Issues Involved

  1. Whether the Proper Officer lacked jurisdiction to invoke Section 74 in view of the GSTR-9 instructions restricting utilisation of the electronic credit ledger.
  2. Whether a writ against a Section 74 notice is maintainable where no reply has been filed and the facts are disputed.
  3. Whether GSTR-9 instructions can override the substantive provisions of the CGST/OGST Act.

Petitioner's Arguments

  • The Proper Officer had no jurisdiction to invoke Section 74 given the GSTR-9 instructions restricting the Petitioner's ability to avail credit from the electronic credit ledger.
  • Administrative instructions annexed to a return form cannot override statutory provisions.
  • Correct figures for FY 2018-19 were disclosed in the Annual Return filed on 20.12.2020, contrary to the Department's claim of suppression.

Respondent's Arguments

  • The Petitioner had received TDS for five months in FY 2018-19 but disclosed "Nil" liability in FORM GSTR-3B, failing to discharge the corresponding tax.
  • The impugned notice quantified tax short paid, interest and penalty, and afforded the Petitioner an opportunity to respond.

Court Order / Findings

  • The Petitioner approached the Court without filing any reply or objection to the show cause notice; the Court was therefore not inclined to entertain the writ at that stage.
  • The contentions were disputed questions of fact requiring adjudication on documents and evidence before the Proper Officer, not the writ court.
  • Relying on Union of India v. Coastal Container Transporters Association (SC), the Court reiterated that a writ ought not to be entertained merely questioning a show cause notice when the statutory remedy of responding to it exists.
  • The Petitioner admitted, during hearing, to having adjusted tax liability against ITC in the electronic credit ledger without paying interest on the delayed adjustment — reinforcing that disputed facts remained for the Proper Officer to verify.
  • Since the reply period had lapsed during pendency of the writ, the Court granted liberty to file reply/objections, including the jurisdictional issue, within 15 days, and directed the Proper Officer to deal with each objection and pass a reasoned order.

Important Clarification

  • A jurisdictional objection to Section 74 — including reliance on GSTR-9 instructions — is not by itself a ground to bypass adjudication before the Proper Officer; it must first be raised in reply to the notice.
  • Writ courts will ordinarily decline to interfere with a Section 74 notice where the assessee has not even filed a reply, applying the alternative-remedy principle from Coastal Container Transporters Association.
  • Where limitation to reply lapses during pendency of a writ, courts commonly extend a short window with a direction for a reasoned order, preserving objections for adjudication rather than deciding them in writ jurisdiction.

Sections Involved

  • Section 74, CGST/OGST Act, 2017 — determination of tax not paid, short paid or erroneously refunded, or ITC wrongly availed, by reason of fraud, wilful misstatement or suppression of facts.
  • FORM GSTR-9 instructions (as substituted by the CGST (Fourteenth Amendment) Rules, 2018) — annual return instructions cited by the Petitioner as restricting utilisation of electronic credit ledger balances.

Decision – In Favour of

Disposed of with directions; not decided on merits. The Court declined interim relief and upheld the Department's stand that the writ was premature, while granting the Petitioner liberty to raise all objections, including jurisdiction, before the Proper Officer within 15 days.

Related Case Laws

Case Details

  • Court: High Court of Orissa at Cuttack
  • Case No.: W.P.(C) No. 5332 of 2022
  • Coram: Justice Jaswant Singh and Justice M.S. Raman
  • Date of Order: 24.02.2022

Link to Download the Order

https://mytaxexpert.co.in/uploads/1787078590_4655compressed.pdf

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