GST Authority Not Bound To Seek Additional Documents: Supreme Court Refuses To Interfere With Delhi HC Order

The Supreme Court on Thursday dismissed an appeal against the Delhi High Court's order holding that a GST adjudicating authority is not bound to seek additional documents or clarifications from a taxpayer before passing an order merely because it finds the material already furnished insufficient.

The case arose from a plea by Sodexo India Services Private Limited challenging the GST adjudication order.

The High Court dismissed its challenge to a GST demand of around ₹8.75 crore under Section 74 of the CGST Act, holding that the dispute could be pursued before the appellate authority under Section 107 of the CGST Act.

It therefore declined to exercise its writ jurisdiction while granting Sodexo liberty to avail the statutory remedy.

A bench of Justices J.B. Pardiwala and K. Vinod Chandran, after hearing the parties, refused to interfere with the High Court's order.

Appearing for Sodexo, Senior Advocate Arvind Datar argued that the High Court had dismissed the writ petition without considering the basic issue of composite supply. He submitted that Sodexo's treatment of its canteen supplies had been consistently followed across the country.

“The whole issue is this particular show cause notice ignores composite supply. 95% of my sale is from canteen, which is liable to 5% duty. 5% is on kiosk machine, vending machine, which is subject to 18% duty.”, Datar said. 

Datar argued that the department had sought to apply the 18% rate applicable to vending machine supplies to Sodexo's industrial canteen supplies merely because input tax credit had been taken in relation to the vending-machine component.

“Suddenly, one show cause notice is that in the vending machine, where you're supplying goods, you are taken credit. Therefore, I will tax you an industrial canteen also at 18%.”

He further contended that the adjudicating authority had failed to consider documents furnished by the company.

“I furnished all the documents. High Court has not considered a single document.”, Datar submitted. 

The Supreme Court, however, indicated its disinclination to interfere with the High Court's approach and left Sodexo to pursue the statutory appellate remedy. It dismissed the special leave petition. 

Background

The case arose from a writ petition filed by Sodexo India challenging a GST demand of around ₹8.75 crore confirmed under Section 74 of the CGST Act. The demand followed audit proceedings in which the adjudicating authority identified 11 issues, including the classification of catering services and sale of pre-packaged food products as a composite supply taxable at 18%.

Sodexo contended that although it had submitted replies, agreements, invoices, reconciliations, the adjudicating authority should have sought further documents or clarifications if it considered the material insufficient. It argued that failure to do so violated the principles of natural justice.

The Delhi High Court rejected the contention, holding that an adjudicating authority is not under an inflexible obligation to seek additional documents merely because it finds the material produced insufficient. The Court noted that Sodexo had participated throughout the proceedings, responded to the audit and show-cause notices and was also given personal hearings.

It therefore dismissed the petition while leaving Sodexo free to pursue the statutory appeal.