Magicon Impex Pvt. Ltd. v. Commissioner of Central Goods and Service Tax

1. This hearing has been done through hybrid mode.

2. The present petition has been filed under Articles 226 & 227 of the Constitution of India challenging the impugned order dated 7th January, 2025 passed by the Respondent No. 2 - Assistant Commissioner of Central Goods and Service Tax under Section 74 of the Central Goods and Services Act, 2017 (hereinafter “CGST Act”).

3. Vide the impugned order various demands have been raised against the Petitioner and penalty has been imposed. The said demand is in respect of late fee and wrongful availment of input tax or short payment of tax.

4. The case of the Petitioner is that it is engaged in the business of export and import of mobile phones and other similar electronic products. The Petitioner had filed a refund claim some time in 2019 and the same was rejected as being time barred as per Section 54(1) of the CGST Act. The Petitioner at that stage had filed the Writ Petition 6556/2020 titled Megicon Impex Pvt Ltd vs. Commissioner Of Central Goods And Services Tax Delhi West & Ors. seeking processing of the refund. In the said petition, order dated 6th February, 2023 was passed directing processing of refund in the following terms:

5. It is the submission of Mr. Mahna, ld. Counsel for the Petitioner that subsequent to the above order, various audit memos were issued against the Petitioner, calling upon it to make payments. The money demanded in the said audit memos was deposited by the Petitioner on 11th January, 2024, however, a revised audit memo was again issued along with various other summons. The Petitioner was also issued a Demand-cum-Show Cause Notice on 1st August, 2024 which was again challenged by the Petitioner in W.P.(C) 11522/2024 titled Magicon Impex Pvt Ltd vs. Commissioner Of Central Goods And Services Tax. In the said writ petition, the following order was passed on 21st August, 2024:

7. The petitioner’s grievance regarding the multiple audit memo appears to be justified. In terms of Section 65(6) of the CGST Act /the DGST Act, the proper officer is required to inform the registered person about the findings of the audit, his rights and obligations and the reasons for such findings. The CGST Act / DGST Act does not provide for issuance of the multiple audit memos determining the liability of a tax payer.

8. In the present case, we find that the audit memos not only indicated the findings of the auditors, but also called upon the petitioner to pay the tax as determined, along with the interest and penalties as applicable.

9. Mr Ojha, the learned counsel appearing on behalf of the respondents has been unable to point out any statutory provision or rule, which contemplates issuance of such demand letters during the course of an audit.

10. Having stated the above, we are unable to accept that the impugned SCN is liable to be quashed for the said reason. Although, the impugned SCN may be premised on the findings of the audit report, the same is within the statutory framework. Any irregularities in issuing the audit memos does not impinge the validity of the impugned SCN.

11. In view of the above, we are unable to accept that the impugned SCN is liable to be set aside at the threshold stage. The petition is, accordingly, disposed of.

12. It is clarified that the petitioner would not be precluded from advancing such contention as advised in response to the impugned SCN. The adjudicating authority shall consider the reply of the petitioner to the impugned SCN, if filed, within a period of three weeks from date and may pass any order as consider appropriate. It is clarified that all the rights and contentions of both the parties are reserved.

13. The petition stands disposed of in the aforesaid terms. Pending applications also stand disposed of.”

6. The said Show Cause Notice then got adjudicated by the impugned order dated 7th January, 2025.