GST
TRT-2025-
High court of Karnataka
Date:-16-09-25
In:-
Issue Favourable to Tax Payer ?:-
Order date: 16 July 2025
Parties: M/s NCS Pearson Inc. v. Union of India & Ors.
Facts -
- Petitioner, a U.S.-based GST-registered company, conducts computer-based tests in India, including GMAT. In 2020, AAR held Type-II tests (fully online) fall under OIDAR, but Type-III tests (involving human intervention) do not.
- On appeal, AAAR (13.11.2020) reversed AAR and held even Type-III tests are OIDAR. Petitioner challenged AAAR’s ruling before Karnataka HC in W.P. No. 3555/2021; interim relief granted.
- Despite this, DGGI issued SCN (12.02.2024) under Section 74 CGST Act alleging willful suppression and demanding tax on Type-III tests (July 2017–June 2021).
- Petitioner argued SCN lacked jurisdiction as there was no suppression and the issue was already sub judice.
Issue -
- Whether a show cause notice under Section 74 of the CGST Act can be sustained when the department already had full knowledge of the petitioners activities, and classification of services was under judicial consideration?
Order -
- The Court held that Tax authorities cannot use Section 74 to reopen classification disputes already pending in court without clear evidence of suppression or fraud.
- Since AAR/AAAR proceedings had already disclosed all facts, revenue was fully aware; hence, extended limitation under Section 74 could not be invoked.
- Issuance of SCN despite pending writ petition and interim relief was contrary to law and violative of Article 265 of the Constitution.
- The SCN dated 12.02.2024 was quashed, and related circulars/notifications were struck down to the extent found ultra vires.
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