Sale Of Goods At Concessional Rates Alone Does Not Constitute A Sham Transaction: Jharkhand High Court Quashes SCN
The Jharkhand High Court stated that sale of goods at concessional rates alone does not constitute a sham transaction. The Division Bench of Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan observed that “notices under Section 61 have been issued to assessees and instead of pointing out discrepancies in the returns filed by assessees, the competent officer has embarked...
The Jharkhand High Court stated that sale of goods at concessional rates alone does not constitute a sham transaction.
The Division Bench of Chief Justice M.S. Ramachandra Rao and Justice Deepak Roshan observed that “notices under Section 61 have been issued to assessees and instead of pointing out discrepancies in the returns filed by assessees, the competent officer has embarked upon an exercise of comparing the price at which assessees have sold their stone-boulders/stone-chips with that of prevalent market price and, thereafter, accordingly, issued notices to assessees asking them to show cause as to why appropriate proceedings for recovery of tax and dues be not initiated against them.”
In this case, assessees/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.
Show cause notices were issued to assessees stating, in substance, inter alia, that assessees have sold stone-boulders/stone chips at a price lesser than the prevalent market price and, accordingly.
Assessees replied that the notices under Section 61 of the JGST Act read with Rule 99 of Jharkhand Goods and Services Tax Rules, 2017 is limited to the extent of discrepancy occurring in the returns, and, issuance of notices by comparing taxable value of supply disclosed by assessees in their returns with that of market price of goods, is beyond the scope of Section 61 of the Act.
Despite such reply being filed, subsequent notices in Form GST ASMT-10 were again issued.
The assessees submitted that under Section 15 of JGST Act, 2017, value of supply of goods or services is the transaction value i.e. the consideration received towards such supply, and, merely because a dealer received consideration less than prevalent market price of such goods cannot be a cause for invoking proceedings of 'scrutiny of returns under Section 61 of the Act'.
The bench observed that the notices issued comparing the particulars at which assessees have sold their goods with that of prevalent market price, is wholly without jurisdiction and beyond the scope of Section 61 of the 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, stated the bench.
In view of the above, the bench allowed the petition and quashed the notices issued under Section 61.
Case Title: M/s Sri Ram Stone Works v. State of Jharkhand
Case Number: W.P. (T) No. 5535 of 2024
Counsel for Petitioner/ Assessee: Sumeet Kumar Gadodia, Shilpi Sandil Gadodia, Ranjeet Kushwaha, Shruti Shekhar, Sanya Kumari and Nidhi Lall
Counsel for Respondent/ Department: Sachin Kumar, Ashok Kumar Yadav, Piyush Chitresh, Gauraav Raj, Aditya Kumar and Sahbaj Akhtar