[2022] 141 taxmann.

com 207 (Karnataka)/[2022] 64 GSTL 66 (Karnataka)[28-01-

2022]

GST : Where instead of filing appeal contesting SCN demanding GST, writ jurisdiction
was invoked and on condition of furnishing bank guarantee of 25% of demand
amount, stay order was passed, petitioner could not challenge imposition of said
condition

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[2022] 141 taxmann.com 207 (Karnataka)

HIGH COURT OF KARNATAKA
Shree Renuka Sugars Ltd.
v.
Joint Commissioner of Central GST & Central Excise*
S.G. PANDIT AND ANANT RAMANATH HEGDE, JJ.
W.A. NO. 100015 OF 2022 (T-RES)
JANUARY 28, 2022

Adjudication - Exercise thereof against Show Cause Notice - Stay on SCN on furnishing Bank
Guarantee of 25 per cent of duty demanded - Sustainability - Petitioner filed writ petition
against SCN issued for demanding GST on Extra Neutral Alcohol (ENA) on ground that since
said goods were beyond ambit of GST, said SCN was beyond jurisdiction - Single Judge while
admitting petition, granted stay subject to petitioner furnishing bank guarantee of 25 per cent
of duty demand - HELD : In impugned interim order, Single Judge had rather shown
indulgence in favour of petitioner because even though alternate remedy of contesting SCN
and then filing statutory appeal was available, writ petition was admitted for decision on
merits - Discretion exercised by Single Judge in entertaining writ petition against imposition
of aforesaid condition could not be construed as erroneous - Plea that petitioner would have
been required to pay only 10 per cent as pre-deposit in appeal if he had contested SCN, not
acceptable because it was petitioner who had chosen writ petition route instead of
adjudication proceedings - Thus, without making any comments on merits of issue, which
were left to be dealt with by Single Judge, impugned order could not be interfered with
[Section 73 of Central Goods and Services Tax Act, 2017/Karnataka Goods and Services Tax
Act, 2017] - Article 226 of Constitution of India [Paras 10 to 13] [In favour of revenue]
Udaya Holla , Sr. Counsel and Shivaraj C. Bellakki, Adv. for the Appellant. Girish S. Hulamani, Shivaraj
Ballolli, Advs. and Shivaprabhu Hiremath, Govt. Adv. for the Respondent.
ORDER

S.G. Pandit, J. - Annexure-G, the demand cum show cause notice for showing cause as to why Goods and
Services Tax (for short 'GST') of Rs. 16,23,82,230/- should not be levied in respect of supply of Extra Neutral
Alcohol (for short 'ENA') is challenged in W.P. No. 104541/2021. The learned Single Judge granted interim
stay order prayed in the petition subject to the condition that the writ petitioner furnishing bank guarantee to the
extent of 25% of the amount demanded. Eight weeks time is granted to comply the interim order. The appellant
is aggrieved by the part of the interim order directing bank guarantee to be furnished by the petitioner is
questioning the interim order in this intra Court appeal invoking sec. 4 of the Karnataka High Court Act.
2. We have heard learned senior counsel Sri Udaya Holla for Sri Shivaraj C. Bellakki, learned counsel for the
appellant, Sri G.S. Hulmani, learned counsel for respondent No. 1, Sri Shivaraj Ballolli, learned counsel for
respondent No. 2 as well as Sri Shivaprabhu Hiremath, learned Government Advocate for respondent No. 3 and
perused the appeal papers.
3. The above referred show cause notice sought explanation as to why the Goods and Services Tax liability of
Rs. 16,23,82,230/-, attracting GST @ 18% for supplying ENA should not be imposed on the supply of Extra
Neutral Alcohol.
4. Learned senior counsel referring to section 9 of the Central Goods and Services Tax Act, 2017 (for short
'CGST Act, 2017') submits that CGST could be imposed only on the recommendation of the GST Council. It is
his further submission that there is no recommendation for imposing CGST on ENA supplied for human
consumption. Referring to the proceedings of the GST Council placed on record, as Annexures-E and F to the
writ petition, it is urged that in the absence of any such recommendation the GST could not have been imposed
on the material supplied by the appellant. It is also urged that the petitioner-appellant has questioned the
jurisdiction and authority to issue show cause notice. Since the impugned notice is prima facie without
jurisdiction, the learned Single Judge ought not to have imposed any condition while granting interim order of
stay of further proceedings in pursuance to impugned show cause notice.
5. It is urged that in the absence of a notification by the Government which is preceded by the recommendation
of the Council to impose GST on extra neutral alcohol (ENA) the impugned order is prima facie unsustainable.
In this behalf it is submitted that this material aspect has not been considered by the learned Single Judge while
imposing condition to furnish the bank guarantee.
6. Learned Senior Counsel for the appellant referring to sec. 107 of the GST Act, would submit that in the event
of appeal being filed challenging imposition of tax liability, the statute prescribes deposit of only 10% of the
disputed liability. It is urged that condition to furnish bank guarantee to the extent of 25% of the amount
demanded is unreasonable given the minimum statutory deposit contemplated while filing the appeal.
7. Learned senior counsel also relied upon Annexure-'A' letter dated 19-7-2017 of the Additional Chief
Secretary of State Government to say that no GST could be levied on supply of ENA for human consumption.
Therefore, it is prayed for setting aside the interim order dated 6-12-2021 in so far as it relates to directing the
appellant to furnish bank guarantee to the extent of 25% of the amount demanded under the impugned show
cause notice dated 23-9-2021 (Annexure-G).
8. On the other hand, learned counsel Sri Girish S. Hulmani appearing for the respondent No. 1 submits
referring to impugned show cause notice-Annexure-G that the appellant supplied ENA without payment of
GST claiming exemption. It is his submission that the ENA supplied contained 95% alcohol and it was not for
human consumption. ENA which contains 95% of alcohol would be only for industrial purpose which is not fit
for human consumption. The ENA which contains more than 95% of alcohol is not exempt from GST.
9. The learned Government Advocate further submits that the appellant-petitioner is before this Court
challenging the show cause notice and it is always open for the appellant-petitioner to urge all the grounds
including the ground of jurisdiction before the authority which would consider the reply to the show cause
notice and would answer each and every ground to be urged by the appellant-petitioner.
10. We have perused the records and carefully considered the contentions raised at the bar. Admittedly, the
order in question is only an interim order. Since the show cause notice indicates Rs. 16,23,82.230/- which is
said to be a tax liability, the learned Single Judge has shown indulgence in favour of the petitioner by directing
the petitioner to furnish bank guarantee to an extent of 25% of the amount shown in the show cause notice.
Despite the fact that the challenge is to the show cause notice, the writ petition is entertained. It is also noticed
that remedy of appeal is available pursuant to the order to be passed by the authority in response to the show
cause notice. Under the circumstances, the discretionary order passed by the learned Single Judge in imposing a
condition to furnish bank guarantee to an extent of 25% of the amount mentioned in the show cause notice
cannot be construed as an erroneous order to interfere in this intra court appeal on interim order.
11. The contention of the appellant that appeal requires a deposit of only 10% and the filing of appeal on
payment of 10% of the demand would automatically ensure stay of impugned order in terms of Sec.107(7) of
the GST Act does not come to the rescue of the appellant to say that the impugned order is erroneous. The
appellant has chosen to file the writ petition despite the opportunity of showing cause to the show cause notice
is available to the appellant. Moreover, the right of appeal u/s. 107 of the GST Act is available to the appellant.
Hence, this court does not find any reasons to interefere with the discretion exercised by the learned Single
Judge while considering the interim prayer.
12. We hesitate to consider the contentions raised by the appellant on merit for the simple reason that it may
amount to prejudging the issue which is pending before the learned Single Judge. This is yet another reason not
to interfere with the impugned order.
13. While granting interim order of stay, learned Single Judge has granted eight weeks time to furnish bank
guarantee and it would come to an end on 31-1-2022. As the petitioner-appellant was in appeal, the time
granted by the learned Single Judge to furnish bank guarantee is extended by another three weeks from 31-1-
2022.
Writ appeal is accordingly disposed of in the above terms.
KARTIK

* In favour of revenue.