Calcutta High Court (Appellete Side)
M/S. Britannia Industries Limited vs Union Of India & Ors on 23 December, 2024
Author: Rajarshi Bharadwaj
Bench: Rajarshi Bharadwaj
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
(Appellate Side)
Present: THE HON'BLE JUSTICE RAJARSHI BHARADWAJ
W.P.A 24534 of 2024
Reserved on : 09.12.2024
Pronounced on: 23.12.2024
M/s. Britannia Industries Limited
...Petitioner
-Vs-
Union of India & Ors.
...Respondents
Present:-
Mr. Abhratosh Majumder, Sr. Adv.
Mr. Pratyush Jhunjhunwala
Mr. Rahul Tangri
Ms. Taniya Roy
… for the petitioner
Mr. Vipul Kundalia
Mr. Tapan Bhanja
Mr. Anindya Kanan
Mr. Dhirodatto Chaudhuri
Mr. Jasajeet Mukherjee
… … for the respondentsRajarshi Bharadwaj, J:
1. The Petitioner is engaged in the manufacture and supply of various food
items, including bakery products such as biscuits, bread, cakes, and rusks,
along with dairy products. These products are distributed to customers and
dealers through the Petitioner’s multiple units located across India.
-JWPA 24534 of 2024 -2- – –
2. On December 16, 2021, the officers of the Directorate General of GST
Intelligence (DGGI), Delhi Zonal Unit herein respondent no. 3, conducted a
search at the Petitioner’s premises in Delhi. During the proceedings, several
summonses were issued, statements were recorded and various documents
and information were sought from the Petitioner. The Petitioner duly complied
with all the requirements during these proceedings.
3. Subsequently, Respondent No. 3 issued a Show Cause Notice
(hereinafter referred to as ‘SCN’) dated August 3, 2024, under Section 74(1) of
the CGST Act, 2017, read with Section 20 of the Integrated Goods and
Services Tax (IGST) Act, 2017. The SCN sought recovery of ₹1,05,11,99,662 in
GST, along with interest under Section 50 and an equivalent penalty under
Section 74(1) of the CGST Act, 2017.
4. The SCN contains several allegations against the Petitioner. First, it
accuses the Petitioner of wrongfully availing the benefit of an exemption on the
supply of “Kulcha” by misclassifying it as “bread” under S. No. 97 of
Notification No. 02/2017 – Central Tax (Rate) dated June 28, 2017.
5. Additionally, the SCN denies the reduction of the Petitioner’s outward
tax liability based on credit notes issued for deficient services and destroyed
goods. This denial is grounded on the claim that the corresponding Input Tax
Credit (ITC) was not reversed by the suppliers or recipients of such goods, as
required under Section 34 of the CGST Act.
6. Further, the SCN alleges non-reversal of ineligible ITC by the Petitioner.
Specifically, it points to inputs used in the manufacture of destroyed goods
and inputs used for manufacturing sample free goods, both of which fall
under the ambit of Section 17(5)(h) of the CGST Act.
7. The Petitioner has filed the present writ petition before this Hon’ble High
Court, challenging the SCN. The Petitioner contends that the SCN is without
-JWPA 24534 of 2024 -3- – –
jurisdiction and has been issued in gross violation of the principles of natural
justice.
8. The Learned Counsel appearing on behalf of the petitioner submits that
the SCN invoking the extended period of limitation under Section 74 of
the Act is wholly without jurisdiction. The extended period of limitation of
five years under Section 74 is applicable only in cases where fraud, collusion,
wilful misstatement, suppression of facts or contravention of provisions with
the intent to evade payment of tax is established. Each of these elements
necessitates intent to evade duty, as laid down by the Hon’ble Supreme Court
in Gopal Zarda Udhyog v. Commissioner of Central Excise reported in
2005 (188) ELT 251 (SC). Furthermore, proving fraud or wilful misstatement
requires a positive act done with mala fide intent by the assessee, as clarified
under Explanation 2 to Section 74 and reiterated by the Supreme Court in
Uniworth Textiles Ltd. v. CCE reported in 2013 (288) ELT 161 (SC).
9. The impugned SCN failed to substantiate allegations of fraud,
suppression or wilful misstatement with evidence. This lack of proof violates
established principles, as held in Pushpam Pharmaceuticals Company v.
Collector of Central Excise reported in 1995 (78) ELT 401 (SC) and
subsequent decisions in Associated Pigments Ltd. v. Superintendent of
Central Excise reported in 1993 (68) ELT 514 (Cal.) and Cosmic Dye
Chemical v. CCE reported in 1995 (75) ELT 721 (SC).
10. Moreover, the SCN is devoid of allegations demonstrating mala fide
intent on the petitioner’s part. For instance, the classification issue concerning
Kulcha fails to demonstrate a deliberate intention to evade tax. The extended
period of limitation invoked under Section 74 is thus without jurisdiction.
11. Further, the petitioner had disclosed exemption claims on Kulcha to the
department through a letter dated December 21, 2021, shortly after the
Respondent no.3’s visit on December 16, 2021. Despite this, the SCN was
-JWPA 24534 of 2024 -4- – –
issued on August 03, 2024, after the normal limitation period had expired for
FY 2017-18 to FY 2019-20. Such delay has been condemned by the Hon’ble
Supreme Court in Commissioner of C. Ex., Mangalore v. Pals
Microsystems Ltd. reported in 2011 (270) ELT 305 (SC).
12. Moreover, the absence of pre-SCN intimation in Form GST DRC-01A
renders the proceedings procedurally defective. Rule 142(1A) of the CGST
Rules mandates issuance of DRC-01A before initiating proceedings under
Section 74. The omission of this step vitiates the validity of the SCN, as held in
M/s New Morning Star Travels v. The Deputy Commissioner (S.T.) & Ors.
reported in 2023 (79) G.S.T.L. 430 (A.P.).
13. The extended limitation period in the SCN pertains solely to the
classification of Kulcha and does not extend to issues related to credit notes.
The demand raised regarding credit notes hinges on the alleged non-
compliance with a circular dated June 26, 2024, which imposes additional
requirements beyond the statutory provisions of Section 34. This
interpretation is incorrect as Section 34 does not mandate proof of ITC
reversal by the recipient. The Hon’ble Supreme Court in Suchitra
Components v. CCE reported in 2007 (208) ELT 321 (SC) held that
oppressive circulars imposing additional restrictions cannot be applied
retrospectively.
14. Additionally, the department’s insistence on the petitioner verifying ITC
reversals is untenable, especially when mechanisms under Section 43 and
Rule 73 to Rule 75 of the CGST Rules were non-operational. The Hon’ble
Supreme Court in Superintendent of Taxes, Dhubri & Ors. v. M/s
Onkarmal Nathmal Trust reported in 1976 (1) SCC 766 emphasized that
the State cannot benefit from its own lapses.
15. It has been further submitted that the petitioner uses goods exclusively
for organoleptic testing by employees to evaluate quality, taste and durability.
-JWPA 24534 of 2024 -5- – –
These goods are not distributed as free samples to customers. Therefore, the
restriction on ITC under Section 17(5)(h) of the CGST Act is inapplicable. The
SCN erroneously categorizes such goods as free samples, disregarding the
distinction between inputs used for internal testing and those distributed for
promotional purposes.
16. The SCN combines demands for six financial years (FY 2017-18 to FY
2022-23), violating the CGST Act, which mandates year-wise determination.
Reliance has been placed on the decision in Titan Company Ltd. v. The
Joint Commissioner of GST & Central Excise reported in 2024 (1) TMI 619
(Mad) by the petitioner in the present case, where such bunching was held
impermissible.
17. Submissions of the Learned Counsel for the respondents no. 1,2 and 4
is that the invocation of the extended limitation period under Section 74 of the
CGST Act, 2017 is legally valid. The SCN pertains to the financial years 2017-
18 to 2022-23. Section 74(10) of the CGST Act, 2017 allows the proper officer
to issue an SCN within five years from the date of furnishing the annual
return for the relevant financial year where tax was not paid, short-paid or
input tax credit (ITC) was wrongly availed or utilized. Moreover, the Central
Government, through notifications issued under Section 168A of the Act, has
periodically extended the time limits for furnishing annual returns for the
financial years 2017-18 to 2019-20. The extended limitation period applies in
cases of fraud, wilful misstatement or suppression of facts, leading to tax
short payment, erroneous refunds or wrongful ITC utilization. In the present
case, the petitioner wilfully misclassified their goods and availed ineligible ITC
with mala fide intent to evade tax. Thus, the extended period of limitation has
been correctly invoked by Respondent No. 3 as per the law.
18. The issues of limitation, exemption and classification are mixed
questions of law and fact that fall under the jurisdiction of the adjudicating
-JWPA 24534 of 2024 -6- – –
authority. In this regard, reliance has been placed by the respondent
authorities on several judgments. In Aloke Bhowmick v. Additional
Commissioner, CGST & CX Kolkata South Commissionerate in (MAT No.
298 of 2022), it was held by the Hon’ble Calcutta High Court that
determining whether an SCN is time-barred or involves suppression is a
factual issue requiring adjudication by the issuing authority. Similarly, in J.S
Pigments Pvt. Ltd v. Commissioner of CGST and Central Tax, Howrah
reported in (2022) 381 ELT 45 (Cal.), the Court reiterated that extended
limitation under Section 11A of the Act involves mixed questions of law and
fact. Further, in D.C.L. Polyester Ltd v. Collector of Central Excise and
Customs, Nagpur reported in (2005) 181 ELT 190 (SC), it was held that
determining whether a product falls within a tariff entry is also a mixed
question of law and fact.
19. The petitioner’s reliance on various judicial precedents to challenge the
invocation of the extended limitation period is misplaced and factually
distinguishable. In Gopal Zarda Udyog (supra) the case dealt with a scenario
where there was no intent to evade tax. This is different from the present case,
where the petitioner suppressed facts with mala fide intent. Similarly, in
Uniworth Textile (supra), the ambiguity was addressed to the Development
Commissioner, unlike the present case, where the petitioner knowingly
misclassified products. Furthermore, in Pushpam Pharmaceuticals
Company (supra), the case involved known facts between parties, unlike the
present case, where intentional suppression was unearthed during
investigation.
20. It is further submitted that contrary to the petitioner’s claim, the
mention of “Discussion and Finding” in the SCN does not reflect prejudgment
but rather outlines the investigation’s outcome. The SCN merely proposes
-JWPA 24534 of 2024 -7- – –
charges and provides the petitioner with an opportunity to contest them before
an adjudicating authority, distinct from the issuing authority.
21. Section 74(1) of the CGST Act permits the issuance of an SCN in cases
of tax evasion due to fraud, wilful misstatement or suppression of facts. The
petitioner failed to disclose critical facts even after investigations commenced,
reinforcing the invocation of the extended limitation period. The classification
of ‘Kulcha’ as ‘Bread’ under HSN Code 19059090 and subsequent claims for
exemption under Notification No. 2/2017-Central Tariff (Rate) constitute wilful
misstatement. Chapter 19 of the HSN and related entries clearly exclude such
products from exemption. The ‘Common Parlance Test’ as held in Signature
International Foods India Pvt. Ltd reported in (2019) 20 GSTL 640 (AAR-
GST) confirms that products like ‘Kulcha’ do not fall under the definition of
‘Bread’ for exemption purposes.
22. The Hon’ble Supreme Court in Commissioner of Customs v. Dilip
Kumar and Co. reported in (2018) 361 ELT 577 (SC) held that the burden of
proof for claiming tax exemption lies on the assessee. Ambiguity in exemption
notifications must be resolved in favour of revenue. Further, the issuance of
Form GST DRC-01A is discretionary and does not prejudice the petitioner,
especially when they dispute the entire demand.
23. The respondents submit that the SCN has been issued lawfully and all
allegations, including wilful misclassification and suppression of facts, have
been substantiated through a thorough investigation. The extended period of
limitation is applicable and the proceedings must continue as per the CGST
Act, 2017.
24. Upon a thorough examination of the documents presented to the Court
and taking into account the arguments put forth by the parties, this Court
finds that the writ petition is not maintainable. This Court shall refrain from
adjudicating or delving into the merits of the case as the issues raised in the
-JWPA 24534 of 2024 -8- – –
present writ petition pertain to complex questions of fact and law that are
squarely within the jurisdiction of the adjudicating authority under the
Central Goods and Services Tax (CGST) Act, 2017. The petitioner’s grievances
primarily relate to the invocation of the extended period of limitation,
allegations of misclassification of goods and denial of Input Tax Credit (ITC).
Each of these issues necessitates a detailed factual inquiry, which is outside
the purview of this Court in its writ jurisdiction.
25. In Aloke Bhowmick (supra) it was held:
“2. The issue as to whether the show cause notice is barred by time and
whether there is no allegation of suppression or mis- statement is a factual
issue and is not purely a legal question. Secondly, whether the type of service
rendered by the appellant was an exempted service is also a factual matter,
which needs to be adjudicated by the appropriate authority, who has issued the
show cause notice.”
26. In Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and
others reported in (1998) 8 SCC 1, the Hon’ble Supreme Court explained that
writ petitions may be entertained against show cause notices where the
petitioners seek enforcement of any fundamental rights, where there is a
violation of principles of natural justice or where the order or proceedings are
wholly without jurisdiction or where the vires of the Act is itself challenged.
None of these circumstances are made out in the present petition. Simply
alleging that the impugned SNC are without jurisdiction because, according to
the petitioners’ perception, the exemption covers them, or the nil tax rate
notification is insufficient. The usual adjudicatory process, where such a
matter can be effectively adjudicated upon, cannot be scuttled by rushing to
the writ court and securing stays on the adjudicatory process.
27. It is well-settled that writ courts do not interfere in cases where
statutory remedies are available unless there is a clear violation of
fundamental rights, lack of jurisdiction, or procedural perversity leading to
manifest injustice. The petitioner has not demonstrated any such exceptional
circumstances warranting this Court’s intervention. Instead, the statutory
-JWPA 24534 of 2024 -9- – –
framework under the CGST Act provides adequate mechanisms for addressing
the petitioner’s concerns, including responding to the SCN, participating in
adjudication proceedings and availing appellate remedies if dissatisfied with
the outcome.
28. This Court emphasizes that this decision should not be construed as
expressing any opinion on the merits of the petitioner’s claims. The
adjudicating authority is directed to independently and impartially decide the
matter based on the evidence and submissions presented before it.
29. For the foregoing reasons, the writ petition is dismissed. The petitioner
is advised to exhaust the statutory remedies provided under the CGST Act,
2017 including submitting a detailed response to the SCN. This Court
reiterates that it shall not interfere in matters requiring fact-finding and
adjudication, which fall squarely within the statutory domain.
30. All pending applications are accordingly disposed of.
31. There shall be no order as to costs.
32. Urgent Photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfilment of requisite formalities.
(RAJARSHI BHARADWAJ, J)
Later:-
After pronouncement of this judgment, the Advocate appearing for the
petitioner prays stay of operation of this judgment.
The prayer for stay is considered and rejected.
(RAJARSHI BHARADWAJ, J)
Kolkata
23.12.2024
PA (BS)