Introduction:

The Kerala High Court in The Deputy Commissioner (Intelligence) v. Minimol Sabu (WA No. 238 of 2025) ruled that a writ petition under Article 226 of the Constitution cannot be entertained against a show cause notice issued under Section 74 of the Central Goods and Services Tax (CGST) Act at a preliminary stage. The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S. emphasized that the High Court’s extraordinary jurisdiction cannot be used to intervene in taxation matters at an intermediate stage. The case arose when the department issued a show cause notice to the respondent, requiring her to explain why Rs. 4.88 crores should not be assessed as short-paid tax due to alleged suppression of outward supply for the period between 2017-18 and 2023-24. Additionally, a flood cess of Rs. 11.85 lakhs was sought. The respondent challenged the notice through a writ petition, leading to an order by the Single Judge directing the tax authorities to consider her preliminary objections regarding ownership and registration of the alleged suppressed turnover. Aggrieved, the department filed an appeal, arguing that the CGST Act does not permit adjudication in stages and that such intervention by the High Court is unwarranted.

Arguments of Both Sides:

The appellant, represented by counsel Resmitha Ramachandran, contended that the Single Judge’s order was beyond the statutory scheme of the CGST Act, which does not provide for separate orders on preliminary issues. The department asserted that allowing such fragmentation of proceedings would undermine the adjudication process prescribed under Section 74. They argued that a show cause notice itself does not cause any prejudice to the assessee, as there exists a complete framework within the Act for responding and appealing against any adverse findings. Further, they submitted that judicial interference at this stage would set a precedent where every taxpayer would challenge notices at their inception, leading to unnecessary litigation and delay in revenue collection.

On the other hand, the respondent, represented by counsel Akhil Suresh, defended the writ petition by arguing that the show cause notice was issued without proper jurisdiction and failed to consider that a part of the alleged suppressed turnover belonged to a separate entity owned by her husband, which was registered independently under GST. She claimed that entertaining her writ petition was justified as she was raising a fundamental jurisdictional challenge, rather than contesting the merits of the notice. The respondent emphasized that defending against an unwarranted tax liability would cause unnecessary financial and reputational harm. Additionally, she asserted that requiring her to engage in lengthy adjudication before the tax authorities without first resolving this jurisdictional issue would be an undue burden.

Court’s Judgment:

The Division Bench, after analyzing the statutory scheme of the CGST Act, categorically held that the Act does not envisage an adjudication process in stages, and there is no provision allowing an assessee to demand separate consideration of preliminary issues. The court observed that High Courts must be cautious in exercising their writ jurisdiction in taxation matters, as it should not be used to delay or disrupt the statutory adjudication process. The bench further clarified that a challenge to a show cause notice should only be entertained in exceptional cases where a total lack of jurisdiction is evident. The judges noted that Article 226 cannot be invoked as a tool to fragment the adjudication process, as doing so would enable taxpayers with resources to exploit the system, thereby delaying genuine tax assessments and harming overall compliance. Consequently, the bench allowed the department’s appeal, setting aside the Single Judge’s order and directing the assessee to respond to the show cause notice within the statutory framework.