Facts of the Case

The petitioner, Nektar Therapeutics (India) Pvt Ltd, a wholly owned subsidiary of Nektar Therapeutics Inc., USA, providing R&D services exclusively to its US parent, had earlier succeeded in W.P.No.15871 of 2023, where the Division Bench (order dated 23.06.2023) set aside a show cause notice dated 17.04.2023 issued by the Assistant Commissioner, on the concession that he was not the 'proper officer' as per CBIC Circular No.31/05/2018-GST, with liberty to the proper officer to issue a fresh notice after pre-show-cause consultation, and with all contentions kept open. Pursuant to this, the Additional Commissioner, Audit-II Commissionerate, Hyderabad, issued a fresh show cause notice dated 21.07.2023 seeking recovery of Rs.29,21,92,744/- as erroneously claimed IGST refund under Section 74(1) of the CGST Act read with the IGST Act, along with interest under Section 50 and penalty under Section 122(2)(b). The petitioner challenged this fresh notice as well, again on jurisdictional and procedural grounds.

Issues Involved

  1. Whether the Additional Commissioner who issued the fresh show cause notice dated 21.07.2023 was the 'proper officer' with jurisdiction to do so.
  2. Whether the mandated pre-show-cause consultation, as directed in the Court's earlier order in W.P.No.15871 of 2023, had in fact been complied with before issuing the fresh notice.

Petitioner's Arguments

  • The 5th respondent lacked jurisdiction to issue the impugned notice and had wrongly assumed jurisdiction, notwithstanding the earlier order.
  • The impugned notice was issued without considering the petitioner's reply submitted pursuant to the earlier order and contrary to the directions in W.P.No.15871 of 2023.
  • Various precedents on jurisdiction and judicial discipline were cited, including Raza Textiles, Union of India v. Adani Exports Ltd., Oveready Industries, Honda Siel Power Products, SQB Steels, and Radhasoami Satsang.

Respondent's Arguments

  • The impugned notice dated 21.07.2023 was issued by the Additional Commissioner, Audit-II Commissionerate — the proper officer as identified in the earlier order — and pre-show-cause consultation notices dated 09.02.2023 and 12.07.2023 had already been issued in compliance with the Court's directions.
  • The petitioner ought to respond to the fresh show cause notice on merits before the authority rather than repeatedly approaching the writ court.

Court Order / Findings

  • The Court noted that the fresh notice was issued by the Additional Commissioner of Central Tax, who according to the petitioner's own earlier submissions was the correct 'proper officer', so the jurisdictional objection was no longer available to the petitioner.
  • The Court held that the record showed the proper officer had issued pre-show-cause consultation notices on 09.02.2023 and 12.07.2023 in compliance with the Court's earlier directions, and accordingly found the writ petition devoid of merit, dismissing it while granting the petitioner liberty to file its reply and raise all defences before the authority.
  • The time limit for passing the order-in-original, due to expire on 01.10.2023, was extended by thirty days on the department's request, to which the petitioner raised no objection.

Important Clarification

Where a court's earlier order sets aside a GST show cause notice on jurisdictional grounds with a direction that the 'proper officer' conduct pre-show-cause consultation before issuing any fresh notice, a subsequent notice issued by the officer identified as proper, preceded by documented pre-consultation notices, will be treated as compliant — a taxpayer cannot re-agitate the same jurisdictional objection in a second writ petition without pointing to a fresh defect, and must instead respond to the notice on merits before the authority.

Sections Involved

  • Section 74(1), Central Goods and Services Tax Act, 2017 – governs recovery of erroneously refunded tax by reason of fraud, wilful misstatement or suppression of facts.
  • Section 50, Central Goods and Services Tax Act, 2017 / Section 20, Integrated Goods and Services Tax Act, 2017 – provide for interest on the erroneous refund sought to be recovered.
  • Section 122(2)(b), Central Goods and Services Tax Act, 2017 – prescribes penalty for erroneous refund obtained by fraud or wilful misstatement.
  • CBIC Circular No.31/05/2018-GST, dated 09.02.2018 – clarifies which officer is the 'proper officer' for issuing show cause notices of this nature.

Decision – In Favour of

The writ petition was dismissed as devoid of merit, with liberty to respond to the notice on merits — the outcome favours the Department at this procedural stage, without a final decision on the underlying refund-recovery merits.

Case Details

Court: High Court for the State of Telangana at Hyderabad
Case No.: Writ Petition No. 22584 of 2023
Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty
Date of Order: 03.10.2023

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