M/s Britannia Industries Limited vs. Union of
India & Ors. (W.P.A.
24534 of 2024 Dated 23.12.2024)
By Yogesh Verma (CS/LLB) / 2 min read / GST Case Law
Introduction
The Calcutta High Court’s judgment in the case of M/s Britannia Industries
Limited vs. Union of India & Ors. has significant implications for
businesses facing Show Cause Notices (SCNs) under the Central Goods and
Services Tax (CGST) Act, 2017. Delivered on December 23, 2024, the judgment
clarifies the limits of judicial intervention in SCN proceedings and
underscores the importance of following statutory remedies for addressing
grievances. The court dismissed the petitioner’s writ petition, emphasizing
that complex questions of fact and law must be resolved within the framework of
the CGST Act.
Case Background
M/s Britannia Industries Limited, a leading manufacturer of
bakery and dairy products, was subject to a search by the Directorate General
of GST Intelligence (DGGI) on December 16, 2021. The DGGI issued an SCN on
August 3, 2024, demanding ₹1,05,11,99,662 in tax, along with interest under
Section 50 and penalties under Section 74(1) of the CGST Act. The SCN alleged
multiple violations, including misclassification of goods, misuse of Input Tax
Credit (ITC), and improper use of credit notes.
Allegations in the SCN
1.
Misclassification
of Goods:
o The petitioner allegedly misclassified "Kulcha" as
"bread," claiming a tax exemption under Notification No.
02/2017-Central Tax (Rate).
2.
ITC Misuse:
o The SCN alleged non-reversal of ITC on inputs used for
manufacturing destroyed goods and goods given as free samples, in violation of
Section 17(5)(h) of the CGST Act.
3.
Improper
Use of Credit Notes:
o The petitioner was accused of reducing outward tax liability
using credit notes without corresponding ITC reversals by suppliers or
recipients, contrary to Section 34.
The petitioner challenged the SCN, arguing that it was
issued without jurisdiction, involved procedural lapses, and misused the
extended limitation period under Section 74 of the CGST Act.
Key Legal Provisions
Section 74 of the CGST Act
This section applies to tax evasion cases involving fraud,
willful misstatement, or suppression of facts. It allows authorities to issue
SCNs within five years from the date of filing the annual return for the
relevant financial year.
Section 34 of the CGST Act
Governs the use of credit notes, requiring adjustments in
ITC for deficiencies in goods or services.
Section 17(5)(h) of the CGST Act
Prohibits ITC on goods lost, stolen, destroyed, or used for
personal consumption.
Rule 142(1A) of the CGST Rules
Mandates issuance of pre-SCN intimation (Form GST DRC-01A)
before initiating proceedings under Section 74.
Issues Raised
The case presented the following critical issues:
1.
Jurisdiction: Whether the SCN was issued without jurisdiction due to the
absence of evidence of fraud or suppression.
2.
Extended
Limitation: Whether invoking the extended
limitation period under Section 74 was justified.
3.
Procedural
Lapses: Whether the omission of Form GST
DRC-01A rendered the SCN invalid.
Submissions by the Parties
Petitioner’s Arguments
1.
Lack of
Jurisdiction:
o The petitioner contended that the SCN failed to substantiate
allegations of fraud or suppression, which are prerequisites for invoking
Section 74.
2.
Procedural
Deficiencies:
o The absence of pre-SCN intimation (Form GST DRC-01A)
violated Rule 142(1A), making the SCN procedurally defective.
3.
Misclassification
of Goods:
o The classification of "Kulcha" as
"bread" was disclosed to the authorities during the investigation,
negating allegations of suppression.
4.
Improper
Invocation of Extended Limitation:
o The extended limitation period applies only in cases of
fraud or willful misstatement, which were not established.
Respondents’ Arguments
1.
Justification
for Extended Limitation:
o The SCN was based on a detailed investigation, and
allegations of misclassification and ITC misuse justified invoking Section 74.
2.
Jurisdictional
Validity:
o The SCN alleged deliberate misclassification and suppression
of facts, which are sufficient grounds for invoking Section 74.
3.
Procedural
Compliance:
o The omission of Form GST DRC-01A was discretionary and did
not invalidate the SCN.
4.
Statutory
Remedies:
o The respondents emphasized that the petitioner must exhaust
statutory remedies instead of seeking judicial intervention.
Findings of the Court
1.
On
Jurisdiction:
o The court held that the allegations in the SCN warranted factual
adjudication by the GST authorities. It emphasized that writ jurisdiction
should not interfere in such matters unless the SCN is patently without
jurisdiction.
2.
On
Extended Limitation:
o The court ruled that the extended limitation period under
Section 74 was lawfully invoked, as the SCN alleged misclassification and
suppression of facts.
3.
On
Procedural Lapses:
o The omission of Form GST DRC-01A did not render the SCN
invalid. The court clarified that pre-SCN intimations are discretionary and do
not affect the validity of the SCN.
4.
Role of
Writ Jurisdiction:
o The court emphasized that writ jurisdiction is not a
substitute for statutory remedies. Complex questions of fact and law must be
resolved through adjudication and appellate processes under the CGST Act.
Judgment
The Calcutta High Court dismissed the writ petition,
directing the petitioner to:
1.
Respond to the SCN and participate
in the adjudication process.
2.
Exhaust appellate remedies under the
CGST Act if dissatisfied with the outcome.
The court refrained from expressing any opinion on the
merits of the petitioner’s claims, directing the adjudicating authority to
decide independently based on evidence.
Analysis
Reinforcement of Statutory
Mechanisms
The judgment reinforces the importance of statutory
mechanisms under the CGST Act for addressing grievances. It discourages
premature judicial intervention, ensuring that disputes are resolved within the
statutory framework.
Balancing Procedural Deficiencies
and Substantive Justice
While acknowledging procedural deficiencies, the court
prioritized substantive adjudication over invalidating the SCN on technical
grounds.
Clarification on Extended Limitation
The ruling clarifies that extended limitation under Section
74 requires prima facie evidence of fraud or suppression. The court’s decision
reflects a balanced approach, allowing adjudication to address the petitioner’s
claims.
Implications
1.
For
Businesses:
o Businesses must meticulously address SCNs and utilize
statutory remedies for resolving disputes. Procedural lapses, such as omitting
Form GST DRC-01A, may not suffice to invalidate SCNs.
2.
For GST
Authorities:
o The judgment underscores the need for substantiating
allegations in SCNs and adhering to procedural requirements to avoid
challenges.
3.
For
Judicial Intervention:
o The decision reaffirms the judiciary’s reluctance to
interfere in ongoing adjudication unless exceptional circumstances, such as
lack of jurisdiction, are demonstrated.
Conclusion
The Calcutta High Court’s ruling in M/s Britannia
Industries Limited vs. Union of India highlights the judiciary’s deference
to statutory processes in GST disputes. By emphasizing the importance of
adjudication and appellate mechanisms, the judgment ensures that complex
questions of fact and law are resolved through statutory forums. It serves as a
reminder for businesses to meticulously comply with GST requirements and
proactively address SCNs.
Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
Find the Attachment (Press on Click Here )
Click here
