Karnataka High Court Quashes GST Show Cause Notice Against NCS Pearson Inc.

The court rules the notice issued under Section 74 of the CGST Act as illegal and without jurisdiction due to lack of 'wilful suppression' evidence.

News Report:  

In a significant judgment, the Karnataka High Court has quashed a show cause notice issued by the Directorate General of GST Intelligence against M/S NCS Pearson Inc., asserting it was issued without satisfying jurisdictional facts required under Section 74 of the Central Goods and Services Tax (CGST) Act, 2017. The notice accused the company of 'wilful suppression' to evade taxes on its Type-III tests, demanding GST payment for the period from July 2017 to June 2021.

Justice S.R. Krishna Kumar, delivering the judgment on July 16, 2025, emphasized that the foundational jurisdictional facts necessary to invoke Section 74, specifically the intent of 'wilful suppression' to evade tax, were not satisfied. The court highlighted that the Revenue Department was already aware of the transactions concerning Type-III tests through its participation in prior proceedings before the Authority for Advance Rulings (AAR) and the Appellate Authority for Advance Ruling (AAAR). 

NCS Pearson Inc., represented by Senior Advocate Sri. Sujith Ghosh, argued that the notice lacked jurisdiction as the proper officer for issuing such notices was not identified correctly, and the foundational facts were not established. The petitioner's contention was upheld by the court, which found no evidence of deliberate non-declaration or suppression of facts by the petitioner.

Moreover, the court noted the ongoing litigation over the classification and taxability of Type-III tests, which was still sub-judice, rendering the issuance of the show cause notice impermissible. The interim orders in related proceedings further supported the petitioner’s stance.

The ruling is seen as a reaffirmation of procedural adherence and jurisdictional correctness in tax matters, underscoring the necessity for tax authorities to ensure the presence of jurisdictional facts before taking action under the extended limitation period provided by Section 74.

Legal experts view this judgment as a significant precedent in GST litigation, particularly concerning allegations of 'wilful suppression' and the invocation of the extended limitation period for tax demands.

Bottom Line:

Goods and Services Tax (GST) - Jurisdictional facts under Section 74 of the CGST Act, 2017 - Allegation of 'wilful suppression' requires satisfaction of jurisdictional facts - The show cause notice issued without satisfying the jurisdictional facts under Section 74 is illegal and without authority of law. 

Statutory provision(s): Section 74 of the CGST Act, 2017

M/S NCS Pearson Inc. v. Union of India, (Karnataka) : Law Finder Doc Id # 2780079