The Karnataka High Court has quashed the show cause notice issued by the DGGI under Section 74 of the CGST Act as the writ petition related to the taxability and classification of GMAT Type-III tests under ODAIR services pending before the high court.
The bench of Justice S.R.Krishna Kumar has observed that Section 74 of the CGST Act cannot be invoked in cases involving the mere omission to pay tax or the mere omission to give correct information, without there being any intention to evade tax; the allegations of wilful suppression of appropriate GST not being paid and the failure of the petitioner to mention the value of services correctly in the GSTR-5A returns and failing to apply the correct GST rate, ignores the fact that the very mens rea element of consciously or deliberately suppressing information/details for the purpose of evading the payment of tax which forms the sine qua non of Section 74 of the CGST Act, is not satisfied.
The petitioner/assessee which is duly registered under the GST Act claims to be a compliant tax payer who regularly files and pays GST every month. The petitioner has a division “Pearson Vue” which is engaged in providing computer based test administration solutions and pursuant to its contract with GMAC, USA, the petitioner conducts GMAT on behalf of GMAC for candidates in India. It is contended that on 28.07.2004, petitioner entered into a contract with human scorers through their vendor ACT Inc., to ensure that appropriate human competency and knowledge is brought to bear while carrying out human scoring for GMAT tests.
Subsequent to the GST regime coming into force in India on 01.07.2017, the petitioner filed an application before the Authority in Advance Rulings (AAR) seeking a Ruling on whether the services engaged by it would come under the ambit of online Information Data Base Access and Retrieval Services (OIDAR services) under GST Laws.
The AAR held in favour of the petitioner that while Type – II tests of the petitioner would come within the ambit of OIDAR services, but Type – III tests are outside the purview of OIDAR services, since it involved more than minimum human intervention.
The department filed an appeal before the Karnataka Appellate Authority for Advance Ruling (AAAR) on the limited question of classification of Type – III tests conducted by the petitioner. The petitioner having contested the appeal, the AAAR proceeded to pass an order allowing the appeal filed by the department.
The petitioner has preferred writ petitioner before the Division Bench of this Court which passed an interim orders directing the department not to take any precipitative action for recovery against the petitioner.
Subsequently, the DGGI issued the show cause notice demanding payment from the petitioner for the period July, 2017 to June, 2021 under Section 74 of the CGST Act on the ground of wilful suppression.
Aggrieved by the impugned show cause notice and also challenging the other Notifications, Circulars etc., issued by the department, which is challenged by the petitioner.
The court held that SCN is illegal, arbitrary and without jurisdiction or authority of law and is contrary to law and the provisions contained in Section 74 of the CGST Act and that the same deserves to be quashed.
Case Details
Case Title: M/S NCS PEARSON INC. Versus UOI
Case No.: Writ Petition No. 7635 Of 2024 (T-RES)
Date: 16/07/2025
Counsel For Petitioner: Senior Advocate Sujith Ghosh
Counsel For Respondent: CGC Timmanna Bhat
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