The Jharkhand High Court has quashed the Goods and Service Tax (GST) notice and held that concessional sale price cannot be considered as sham transactions.
The bench of Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan has observed that notices issued comparing the particulars at which Petitioners have sold their goods with that of prevalent market price, is wholly without jurisdiction and beyond the scope of Section 61 of the GST Act. Unless transactions of sale are shown to be sham transactions or the mere fact that the goods were sold at a concessional rate/rate less than market price would not entitle the Revenue to assess the difference between the market price and the price paid by the purchaser as transaction value.
The issue raised was whether GST-ASMT-10 notices issued by Respondents purporting to invoke power under Section 61 of Jharkhand Goods and Services Tax Act, 2017 (JGST Act) by alleging that Petitioners, in their returns filed under the Act, quoted lower market price than the actual market price and asking the Petitioners to explain the same, are wholly without jurisdiction and beyond the scope of Section 61 of the Act since the issue raised does not relate any discrepancy in the returns filed by Petitioners.
Petitioners are mining lessees/dealers engaged in the business of sale of stone boulders, stone-chips, etc. to various customers and are registered under the provisions of Jharkhand Goods and Services Tax Act, 2017.
In exercise of powers under Section 61 of JGST Act, 2017, notices were issued to Petitioners stating, in substance, inter alia, that Petitioners have sold stone-boulders/stone chips at a price lesser than the prevalent market price and, accordingly, Petitioners were directed to show cause as to why proceeding under Section 73/74 be not initiated against them.
Some of Petitioners replied to notices and contended that notices under Section 61 of the JGST Act read with Rule 99 of Jharkhand Goods and Services Tax Rules, 2017 (JGST Rules) is limited to the extent of discrepancy occurring in the returns, and, issuance of notices by comparing taxable value of supply disclosed by Petitioners in their returns with that of market price of goods, is beyond the scope of Section 61 of the Act.
Despite a reply being filed, in some cases, subsequent notices in Form GST ASMT-10 were again issued and all such notices are under challenge in the writ petitions.
The petitioner contended that very issuance of notices i.e. GST-ASMT-10 under Section 61 of the JGST Act read with Rule 99 of JGST Rules, are wholly without jurisdiction and Respondent-authorities have exceeded their jurisdiction in issuing the notices, as said notices do not relate to any of the discrepancies in the returns filed by Petitioners, but, on the contrary, relies upon the returns filed by Petitioners and, records that in the returns filed by Petitioners, taxable supply of goods have been reflected at a price lesser than the prevalent market price.
Bare perusal of Section 61 of the GST Act would reveal that proper officer may scrutinize the returns and related particulars furnished thereto and verify correctness of such returns and inform discrepancies occurring in the returns and said provisions of Section 61 cannot be invoked merely because a dealer has sold its goods at a price lesser than the prevalent market price of goods.
The department contended that from bare perusal of the notices, it is evident that although, initially, notices were issued to Petitioners comparing taxable value of goods reflected in returns of Petitioners by comparing the same with market value, but, in subsequent notices issued to some of writ petitioners, other issues relating to discrepancy in returns were also highlighted.
Section 61 of JGST Act, competent authority can, at the time of verification of correctness of returns, inform the dealer the discrepancies noticed in its returns and require the dealer to correct the same. In the event, dealer fails to correct the discrepancy, further proceedings under Sections 65, 66 or 67 of JGST Act can be initiated, or, the competent authority can proceed to issue show cause notice for determination of tax and other dues under Sections 73 and 74 of JGST Act.
The court quashed the notices issued under Section 61 calling it without jurisdiction.
The court clarified that in the notices, there are certain overlapping facts relating to alleged discrepancy occurring in returns of various writ petitioners apart from alleged discrepancy relating to market value of goods. We are not commenting upon aforesaid discrepancy as mentioned in the notices vis-à-vis returns, and the Assessing Officer would be at liberty to issue fresh notices relating to discrepancies in the returns, if any, with respect to individual writ petitioners.
Case Details
Case Title: M/s. Sri Ram Stone Works Versus State of Jharkhand
Case No.: W.P. (T) No. 5535 of 2024
Date: 09/05/2025
Counsel For Petitioner: Sumeet Kumar Gadodia
Counsel For Respondent: Sachin Kumar
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