Kiran Raj

The Kerala High Court has held that writ petitions challenging show cause notices issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act) and the State Goods and Services Tax Act, 2017 (SGST Act) are generally not maintainable unless there is a complete lack of jurisdiction. The court ruled that adjudication under the GST framework must proceed as a whole, rather than in stages, and set aside a Single Judge's order directing the tax authorities to consider preliminary objections before completing adjudication. Instead, it directed the authorities to issue a final order within the statutory timeframe.

The case concerns an appeal filed by the State of Kerala and the Deputy Commissioner (Intelligence), SGST Department, against a judgment of a Single Judge in WP(C) No. 40226 of 2024. The writ petitioner, Minimol Sabu, engaged in the business of selling gold, silver, and diamond ornaments, had challenged a show cause notice issued under Section 74 of the CGST/SGST Act. The tax authorities had conducted a search at the petitioner’s premises on May 25, 2023, and collected data from the billing software “Gold Mine.” Based on this data, the authorities issued a show cause notice alleging suppression of outward supply and seeking payment of ₹4,88,56,298 in tax and ₹11,85,843 as flood cess for the period 2017–18 to 2023–24.

The petitioner argued that a portion of the alleged suppressed turnover belonged to a separate entity registered under her late husband’s name, which had a distinct GST registration. She filed a writ petition seeking to quash the show cause notice, contending that Section 74 was improperly invoked against her. The Single Judge ruled in favor of the petitioner, directing the tax authorities to first consider this preliminary issue before proceeding further with adjudication.

The State of Kerala challenged this ruling, asserting that the CGST/SGST Act does not provide for adjudication in stages and that such directions would interfere with the statutory process. The State argued that the Single Judge’s order effectively created an obligation that was not contemplated by the statute, which mandates a complete adjudication of the tax liability rather than piecemeal determinations.

A division bench comprising Dr. Justice A.K. Jayasankaran Nambiar and Justice Easwaran S. agreed with the State, ruling that the CGST/SGST Act does not allow for adjudication in stages. The court stated: “There is no provision enabling either the assessee to claim adjudication in stages nor has any power been conferred upon the proper officer to adjudicate the lis in stages.”

The bench held that requests for partial adjudication must be scrutinized carefully, stating: “When a request is made by the assessee to have their lis adjudicated in part, the authority or the court should ask whether such part adjudication is necessary and whether it will not lead to other drastic consequences.” The court also highlighted that fragmented adjudication could disrupt the statutory scheme and cause avoidable complications.

The High Court further ruled that writ petitions against show cause notices under Section 74 should not be entertained unless there is a jurisdictional defect. The court stated: “As a general rule, a writ petition against the issuance of a show cause notice under Section 74 of the CGST Act/SGST Act cannot be entertained.” It clarified that only in cases where the notice is issued entirely without jurisdiction could the High Court intervene under Article 226 of the Constitution.

Citing D.P. Maheswari v. Delhi Administration, (1983) 4 SCC 293, the court reiterated that preliminary issues should not be used to delay adjudication. It held: “The jurisdiction of the High Court under Article 226 of the Constitution of India cannot be allowed to be exploited by those who can afford to wait to the detriment of those who cannot.” The court observed that allowing such petitions would disrupt the tax adjudication process and create unnecessary delays.

The court also observed that allowing partial adjudication could harm both the assessee and the revenue department. The judgment stated: “It is rather in the interest of the assessee that a complete adjudication of the issue is done by the proper officer under Section 74 of the CGST Act/SGST Act because of the accumulation of the interest factor on the tax that may be ultimately found due from him.”

In light of the statutory deadline for adjudication, the court directed the assessee to appear before the adjudicating officer on February 10, 2025. It further ordered the tax authorities to complete the hearing on the same day and issue a final order by February 15, 2025. The court stated that the proceedings had been delayed due to an interim stay granted in the writ petition but clarified that the Revenue would receive an equivalent extension to complete the adjudication process.

Accordingly, the court allowed the appeal, modified the Single Judge’s order, and upheld the validity of the show cause notice.

Case Title: The Deputy Commissioner (Intelligence) & Anr. vs. Minimol Sabu
Case Number: WA No. 238 of 2025
Bench: Dr. Justice A.K. Jayasankaran Nambiar and Justice Easwaran S.

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