Cyclo Pharma Chem Vs Union of India
Date: November 30, 2023
Subject Matter
Challenge against the 2nd proviso to Section 16(2) shall not impede the ongoing proceedings
Summary
The petitioner, represented by learned advocate Mr. Avinash Poddar, has filed a petition challenging the constitutionality of the 2nd proviso to Section 16(2) of the CGST Act, 2017, claiming it to be arbitrary and in violation of Articles 14, 19(1)(g), and 300A of the Constitution of India. The petition also contests a show cause notice dated May 26, 2023, regarding tax liability under Section 74(1) and applicable penalties. The court has issued a rule returnable on February 12, 2024, allowing the petitioner to raise concerns in the adjudication process but clarifying that the challenge against the proviso will not impede the ongoing proceedings. Furthermore, the court emphasized its reluctance to stay the show cause notice, reinforcing the principle that such notices are usually bound to be adjudicated. 3. Suggested Title for the Case Law: "Challenge to the Constitutionality of Section 16(2) of the CGST Act: Adjudication Proceedings upheld"
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr.Avinash Poddar for the petitioner.
2. By the first prayer in the petition, the petitioner has prayed to declare the 2nd proviso to Section 16(2) of the CGST Act, 2017 as ultra vires and dehors the provisions of the Indian Contract Act, 1972 and also in violative of Articles 14, 19(1)(g) and 300A of the Constitution of India.
3. In respect of the prayer (a) in the petition which is reproduced hereunder challenging the vires of the provision, there shall be Rule, returnable on 12th February, 2024. Notice to the Attorney General of India be issued as the vires of the provision is under challenge:
“(a)Issue appropriate writ/ order/ direction to the effect declaring the 2nd proviso to Sec. 16(2) of the CGST Act, 2017 being arbitrary. unreasonable & violative of Article 14, 19(1)(g) and Article 300A of the Constitution of India and also dehors the provision of the Indian Contract Act.”
4. The other prayers in the petition read as under :
b) Issue appropriate writ/ order/ direction to quash and set aside the demand cum show cause notices dated 26.05.2023 issued by respondent no.03.
c) Issue appropriate writ/ order/ direction directing the respondent, as an ad-interim relief, to stay proceeding initiated vide demand cum show cause notices and to not take any coercive action against the petitioner till the final disposal of this petition;
d) To issue order(s), direction(s), writ(s) or any other relief(s) as this Hon’ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;
e) To award Costs of and incidental to this application be paid by the Respondents.”
5. The bare reading of the above prayer indicates that the petitioner has challenged show cause notice dated 26.05.2023 issued by the respondent No.3 which is in the nature of intimation of tax payable under Section 74(1) read with Section 50 of the CGST Act, 2017 and applicable penalty under Section 74(1) read with Section 122(2)(b) of the CGST Act, 2017 and corresponding provisions of Gujarat GST Act, 2017 read with Section 20 of the IGST Act, 2017 read with Rule 142(1).
6. There is no gain saying that by said show cause notice, the authorities have initiated the adjudicatory proceedings to ascertain the tax liability of the petitioner.
7. It is trite that the Court in exercise of its writ jurisdiction, would be disinclined to set aside, much less to stay the show cause notice, more particularly when the impugned show cause notice are adjudication bound.
8. It will be open for the petitioner to raise all contentions in respect of the show cause notice. It is clarified, while issuing rule as above in respect of the first prayer, that the authority shall proceed with the adjudication proceedings pursuant to the show cause notice.
9. It is also clarified that the challenge to the vires of the aforesaid provisions in the nature of second provision to Section 16(2) of the Act and the rule issued in this matter, shall neither be a ground for the petitioner to be raised to oppose the show cause notice and the adjudication proceedings, nor shall be an aspect to weigh with the authorities in the proceedings with the merits.