By, Mr.Rachit Agarwal, CA Kolkata, Email- ca.rachitagarwal@yahoo.com
2021 (11) TMI 157 – Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. Versus Union of India and Ors.
Allegation against the Petitioner “
availed inadmissible transitional credit amounting to ₹ 3,83,43,693/- [Ed Cess: ₹ 1,46,47,191/-, S.H. Ed Cess: ₹ 71,77,464/- & PLA: ₹ 1,65,19,038/-] in their Trans-1 filed on December 26, 2017”.
Petitioner Pleadings
Without the amendments introduced in Explanations 1 and 2 to Section 140 being brought into force, the respondent no.3 merely on the basis of Explanation 3, as introduced and brought into force, could not have issued the impugned show cause notice and since the same suffers from a gross jurisdictional error, the petitioner is under no obligation to respond thereto.
Hon’ble Court Observations
Explanation 3 seeks to clarify that the expression ‘eligible duties and taxes’, as distinguished from ‘eligible duties’, excludes any cess not specified in Explanations 1 and 2 and any cess collected as additional duty of customs. The expression ‘eligible duties and taxes’ appears in sub-section (5) of Section 140, whereas the expression used in subsection (1) thereof is ‘of eligible duties’
Mr. Hidayatullah seems to be right in his contention that mere introduction of Explanation 3 to Section 140 of the CGST Act, and making it operational with effect from February 1, 2019, would not clothe the respondent no.3 with the power to issue a show-cause notice on the premise that Education Cess, Higher Secondary Education Cess and Personal Account Amounts are not included in Explanations 1 and 2.
amendments in Explanations 1 and 2 to Section 140 of the CGST Act sought to be introduced by sub-clauses (1) each of clauses (b) and (c) of Section 28 of the Amending Act are yet to be brought into force.
For sustaining the validity and/or legality of the impugned show-cause notice, the respondent no.3 could not have relied upon Explanation 3 exclusively to contend that cess is not included in ‘eligible duties and taxes’.
Perusal of the impugned show-cause notice would reveal assumption of jurisdiction by the respondent no.3 based on introduction of Explanation 3 to Section 140 of the CGST Act read with Explanations 1 and 2 thereof without showing application of mind as to whether the amended Explanations 1 and 2 have been made operational or not as well as whether Explanation 3 would at all apply to sub-section (1) of Section 140 of the CGST Act.
Hon’ble Court Relief
Impugned show-cause notice suffers from an error going to the root of the jurisdiction of the respondent no.3 in assuming jurisdiction and is, accordingly, indefensible and liable to be set aside.
On grounds other than the one assigned therein, it shall be at liberty to issue a fresh show-cause notice to the petitioner and if such notice is issued, the petitioner will be free to respond to the same and take all possible defences available to it in law.
By, Mr.Rachit Agarwal, CA Kolkata, Email- ca.rachitagarwal@yahoo.com
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