Facts of the Case

The petitioner, a proprietary concern engaged in manufacture and sale of profile roofing sheets, was investigated by the Directorate General of GST Intelligence (DGGI), Kochi, for alleged clandestine removal of excisable goods manufactured without obtaining Central Excise registration for the period 2014-15 to 2017-18. A show cause notice (Ext.P1) alleged evasion of Rs.1,23,19,965/-, and the adjudicating authority (Ext.P3 order) confirmed a demand of Rs.1,21,88,900/- under Section 11A(10) of the Central Excise Act, 1944, with interest under Section 11AA and a 100% penalty, besides a further Rs.5,000/- penalty under Rule 27 of the Central Excise Rules. An earlier writ petition against the show cause notice itself (W.P.(C) No.34242/2019) had been dismissed in 2019 without prejudice to adjudication, with a pending writ appeal (W.A. No.578/2020) undecided. In the present petition, the petitioner sought to have Section 174(2) of the Central Goods and Services Tax Act, 2017 — the transitional savings clause preserving pre-GST liabilities and proceedings — declared ultra vires the Constitution as amended by the 101st Constitutional Amendment, and consequently to quash the show cause notice and the Ext.P3 order.

Issues Involved

  1. Whether Section 174(2) of the CGST Act, which saves pending proceedings and liabilities under repealed enactments such as the Central Excise Act despite the introduction of GST, is ultra vires the Constitution.
  2. Whether the Ext.P3 order confirming the Central Excise demand could be independently quashed as unconstitutional in this writ petition.

Petitioner's Arguments

  • The petitioner sought a declaration that Section 174(2) of the CGST Act was ultra vires, or in the alternative should be read down to be intra vires the Constitution as amended by the 101st Amendment.
  • It was contended that the Ext.P3 order confirming the Central Excise demand and the Ext.P1 show cause notice ought to be quashed as flowing from an unconstitutional saving provision.

Respondent's Arguments

The order does not record a separate substantive defence from the respondents beyond relying on the binding effect of the Division Bench's earlier ruling upholding Section 174(2) and the availability of the statutory remedy against the Ext.P3 order.

Court Order / Findings

  • The Court noted that the constitutional challenge to Section 174(2) had already attained finality by a Division Bench judgment dated 30.11.2022 in W.A. No.747/2019 and connected appeals, which repelled an identical challenge and upheld the Single Judge's dismissal of the writ petitions.
  • The Court held that, following that binding Division Bench ruling, there was no substance in the present constitutional challenge to Section 174(2), and the writ petition was accordingly dismissed.
  • The Court noted that the Division Bench's earlier ruling had itself granted liberty to aggrieved dealers to avail statutory remedies of reply/appeal/revision within eight weeks without the delay of the writ proceedings being held against them, and directed authorities to decide such remedies on merits.
  • The Court clarified that it could not adjudicate the merits of the Ext.P3 order in the present proceedings and left the petitioner to pursue the statutory remedy, if any, available under law.

Important Clarification

  • The constitutional validity of Section 174(2) of the CGST Act (the transitional savings clause preserving proceedings and liabilities under repealed enactments like the Central Excise Act) stands settled against the taxpayer by binding Division Bench authority; repeated challenges to the same provision will not succeed.
  • A taxpayer whose pre-GST (Central Excise/Service Tax) liability survives under Section 174(2) must pursue the ordinary statutory appellate remedy against the adjudication order rather than seek to reopen it through a fresh constitutional challenge to the savings clause.

Sections Involved

  • Section 174(2), Central Goods and Services Tax Act, 2017 – the transitional savings clause preserving pending proceedings, liabilities and rights under repealed enactments notwithstanding the introduction of GST; upheld as constitutional here.
  • Section 11A(10), Central Excise Act, 1944 – the substantive provision under which the underlying Central Excise duty demand was confirmed.

Decision – In Favour of

The decision is in favour of the Department — the constitutional challenge was dismissed and the petitioner relegated to the statutory remedy against the Central Excise demand.

Case Details

Court: High Court of Kerala at Ernakulam
Case No.: WP(C) No.29325 of 2023
Coram: Justice Dinesh Kumar Singh
Date of Order: 07.11.2023

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