In a significant ruling, the Jharkhand High Court has firmly restricted the scope of scrutiny under Section 61 of the Jharkhand Goods and Services Tax (JGST) Act, 2017. The Court ruled that GST authorities cannot compare declared transaction values with market prices during return scrutiny, reaffirming the primacy of transaction value under GST law.
Case Title: Sri Ram Stone Works vs State of Jharkhand
Court: Jharkhand High Court
Citation: W.P. (T) No. 5535 of 2024
Date of Judgment: 09 May 2025
Key Issue
Whether a GST officer, during scrutiny under Section 61, can question the declared transaction value based on a perceived difference with the prevailing market price?
Legal Framework
- Section 61 – Scrutiny of Returns
- Section 15 – Valuation of Supply
- Sections 73/74 – Demand and Recovery (Adjudication Mechanism)
- Rule 99 – Scrutiny Procedure (via Form GST ASMT-10)
Court’s Findings
The Jharkhand High Court held that:
- Section 61 is confined to arithmetical or return-based discrepancies, and does not authorize officers to conduct valuation exercises.
- Comparing transaction values declared in GSTR-1 or GSTR-3B with an external “market price” goes beyond the statutory limits of Section 61.
- Any dispute over valuation must follow proper audit or adjudication processes under Sections 65, 66, 73, or 74.
As a result, all ASMT-10 notices issued solely on the basis of market value comparisons were quashed.
Conclusion
The judgment clarifies that Section 61 cannot be used for value assessment or price benchmarking. Officers must restrict scrutiny to mismatches within the return data. If valuation is to be questioned, the department must resort to a proper adjudicatory mechanism, ensuring taxpayers’ rights are protected under due process.
Impact of the Judgment
- Reinforces the statutory boundaries of GST return scrutiny.
- Prevents misuse of Form GST ASMT-10 for valuation disputes.
- Reaffirms the transaction value principle under Section 15 of the GST law.
- Promotes transparency and accountability in GST enforcement.
Takeaway for Taxpayers and Practitioners
Taxpayers facing scrutiny notices involving alleged market value discrepancies can rely on this landmark ruling to challenge any overreach. GST officers must now adhere strictly to the legal framework when issuing notices under Section 61.