The Madras High Court has held that the Directorate General of GST Intelligence (DGGI) had sufficient foundational facts to invoke the extended limitation period for alleged tax evasion and that disputed factual issues must be decided during adjudication rather than in writ proceedings.
The bench of Justice C. Saravanan dismissed three writ petitions challenging GST show cause notices relating to the company’s operations in Gujarat, Tamil Nadu, and Andhra Pradesh and directed the petitioners to submit detailed replies to the notices within 30 days, after which the adjudicating authority shall pass final orders.
The petitioner/assessee challenged three show cause notices dated June 25, 2025, issued under Section 74 of the CGST Act, contending that the notices were time-barred, without jurisdiction, and issued in the absence of the foundational facts necessary to invoke the extended limitation period applicable in cases involving fraud, suppression of facts, or wilful misstatement. The notices covered different tax periods in Gujarat, Tamil Nadu and Andhra Pradesh involving substantial GST demands.
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The proceedings arose from a pan-India investigation conducted by the Directorate General of GST Intelligence (DGGI) into Siemens Gamesa’s execution of composite supply contracts involving the supply, erection and commissioning of wind turbine generators (WTGs). According to the department, the company had adopted incorrect valuation methodologies and had improperly reduced GST liability through credit notes issued beyond the statutory time limit prescribed under Section 34 of the CGST Act.
The petitioner argued that it had executed composite supply contracts for supplying WTGs in semi-knocked-down (SKD) condition along with installation and commissioning services, and that there was no suppression of facts warranting invocation of Section 74.
The company also contended that It had regularly furnished information sought by the department. Earlier proceedings had already been initiated under Section 73 concerning similar issues. The impugned notices lacked foundational facts to invoke the extended limitation period. Multiple proceedings on overlapping issues amounted to jurisdictional overreach.
The DGGI investigation alleged two principal violations: Short payment of GST due to adoption of incorrect valuation of supplies involving wind turbine projects across multiple States. Wrongful reduction of GST liability through issuance of credit notes beyond the limitation period prescribed under Section 34 of the CGST Act.
The Court noted that the impugned notices were preceded by DRC-01A intimations, replies from the taxpayer, investigation under Section 67, voluntary statements of company officials and customers, and detailed analysis of the petitioner’s business model.
Rejecting the petitioner’s challenge, Justice Saravanan observed that invocation of Section 74 necessarily requires the existence of foundational facts, but held that such facts were clearly available in the present case.
The Court found that the show cause notices comprehensively recorded the nature of the company’s business operations, the investigation conducted by DGGI, voluntary statements recorded during investigation, allegations regarding incorrect valuation, allegations concerning inadmissible credit note adjustments, and the legal provisions allegedly violated.
Accordingly, the Court held that the jurisdictional requirements for invoking Section 74 had been satisfied.
The High Court also rejected Siemens Gamesa’s argument that earlier departmental audits or proceedings barred the DGGI investigation.
It held that the scope of an audit under Section 65 is fundamentally different from a pan-India intelligence-based investigation conducted by DGGI. While audits are confined to jurisdictional records and documents produced by taxpayers, DGGI investigations operate on nationwide intelligence, data analytics and centralized investigation mechanisms.
Therefore, earlier audit proceedings did not prevent DGGI from initiating fresh proceedings where separate issues of alleged tax evasion emerged.
Addressing the contention regarding overlapping investigations, the Court observed that Section 74 does not prohibit multiple proceedings where different forms of tax evasion are alleged.
The Court noted that although some tax periods overlapped with earlier notices, the subsequent proceedings involved distinct allegations concerning valuation and improper reduction of tax liability through credit notes. Consequently, initiation of fresh proceedings was legally permissible.
The High Court emphasized that the petition involved numerous disputed factual issues relating to valuation, classification, credit notes and tax computation.
Such questions, the Court held, require detailed examination by the adjudicating authority and cannot be adjudicated under Article 226 of the Constitution at the show cause notice stage.
The Court therefore declined to interfere with the notices and directed the company to participate in the adjudication process by filing comprehensive replies.
The Madras High Court dismissed all three writ petitions, upheld the validity of the impugned show cause notices issued under Section 74 of the CGST Act, and directed Siemens Gamesa Renewable Power Private Limited to file replies within 30 days, after which the adjudicating authority shall proceed to pass appropriate orders in accordance with law.
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