“Inquiry” under section 70 and “Proceedings” the section 6(2) are different

In the matter of M/S G.K. TRADING COMPANY VERSUS UNION OF INDIA AND 4 OTHERS (Writ Tax No. – 666 of 2020 dated 2^nd December 2020), the petitioner was issued a summon under Section 70 of UPGST Act and Section 70 of CGST Act. 

The Petitioner filed an appeal before hon’ble High Court contended that once the inquiry has been initiated under Section 70 of the UP GST Act, 2017 then no proceedings can be initiated under CGST Act by virtue of provisions of Section 6(2)(b) of UP GST Act. 

In the matter, hon’ble High Court held that the word “inquiry” written under section 70 and word “proceedings” written under section 6(2) are different in meaning and cannot be intermixed. 

Further, the words “any proceeding” on the same “subject-matter” used in Section 6(2)(b) of the Act, means any proceeding on the same cause of action and for the same dispute. In the given case, no proceeding is initiated a proper officer against the petitioner on the same subject-matter referable to Section 6(2)(b) of the U.P.G.S.T. Act. It is merely an inquiry by a proper officer under Section 70 of the C.G.S.T. Act – petition dismissed.

Brief Facts of the Case

1. M/s G. K. Trading Company (“The Petitioner”) is registered under U.P. GST Act 2017 w.e.f. 01 November 2017 for trade in Iron Bars and Rods and Non-Alloy steel etc. 
2. Respondent No. 5-Assistant Commissioner (S.I.B.), UP,  issued a summon to the petitioner under Section 70 of UP GST Act requiring him to submit details of purchases and sales, list of buyers and sellers and certain other documents. 
3. Later on, the Directorate General of Goods and Services Tax Intelligence issued a summon to the petitioner under section 70 and 174 of the CGST Act, 2017 requiring the petitioner to appear in person.

Contention of the Petitioner

The petitioner contended that:

1. One the inquiry has been initiated under Section 70 of the UP GST Act, 2017 then no proceedings can be initiated under CGST Act by virtue of provisions of Section 6(2)(b) of UP GST Act.

Contention of Respondent

The respondent contended that:

1. Section 6(2)(b) of U.P. GST Act, 2017 prohibits initiation of a proceeding on the same set of facts. It does not prohibit inquiry by the authorities under U.P. Act or under Central Act.
2. Further, under Section 70 of CGST Act, the word “Inquiry” has been used. Whereas, Section 6(2)(b) of UP GST Act prohibits “Proceeding” and not “Inquiry”. In other words “Inquiry” has not been prohibited under Section 6(2)(b) of the U.P. GST. Act, 2017.
3. Jurisdiction of state authorities is limited to UP only. Whereas, jurisdiction of centre authorities is expanded to the whole India.
4. Further, state authorities have issued the notice on the basis of facts that the Input Tax Credit has been illegally taken by the petitioner on the basis of invoices of two alleged dealers. However, no such fact is mentioned in the summons issued by centre authorities. Therefore inquiry has not been initiated on the same set of facts.

Legal Extracts

Provisions of UP GST and CGST is almost pari materia. Relevant extract of UPGST Act and CGST Act is given below:

1. Section 6(2) of UP GST Act::

Section 6 (2) Subject to the conditions specified in the notification issued under sub-section (1),-

..

(b) where a proper officer under the Central Goods and Services Tax Act,2017 has initiated any proceedings on a subject-matter, no proceedings shall be initiated by the proper officer under this Act on the same subject- matter. Chapter XIV (Inspection, Search, Seizure and arrest) Section 67. Power of inspection, search and seizure- (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that––

,,,,:

2. Section 70(2) of UPGST Act:

“(2) Every such inquiry referred to in sub-section (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code (45 of 1860).”

3. Section 6(2) of CGST Act:

“…

(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”

Analysis by Hon’ble High Court

Hon’ble High Court has made the following analysis:

1. The word “Inquiry”, “Proceedings” and “Subject-matter” is not defined under either of the status. Therefore, these words have to be interpreted in the context of the aforesaid Acts.
2. The word “inquiry” in Section 70 has a specific purpose to summon any person whose can give evidence or produce a document or any other thing.It cannot be intermixed with some statutory steps which may precede or may ensure upon the making of the inquiry or conclusion of inquiry.
3. Therefore, The word Inquiry in section 70 is not synonymous with the word Proceedings in section 6(2)(b) of the U.P GST Act/ CGST Act. 
4. Provisions of Section 70 has been enacted for collecting evidence in matters involving tax evasion which may also lead to demands and recovery under Section 73 or Section 74, as the case may be. When action for assessment, demand and penalty etc.is taken, that shall amount to proceedings referable to Section 6(2)(b) of the Act but the inquiry under Section 70 is not a proceeding referable to Section 6(2)(b) of the Act.
5. Further, phrase “subject-matter”, or the phrase “on the same subject-matter”, used in Section 6(2)(b) of the Act with reference to any proceedings, means the same cause of action for the same dispute involved in a proceeding before proper officer under the both acts.

Conclusion

On the basis of above analysis, Hon’ble High Court concluded following:

1. The word “inquiry” in Section 70 has a special connotation and a specific purpose.It cannot be intermixed with some statutory steps which may precede or may ensue upon the making of the inquiry or conclusion of inquiry.
2. The word “inquiry” in Section 70 is not synonymous with the word “proceedings”, in Section 6(2)(b) of the U.P.G.S.T. Act/ C.G.S.T. Act.
3. The words “any proceeding” on the same “subject-matter” used in Section 6(2)(b) of the Act means any proceeding on the same cause of action and for the same dispute involving some adjudication proceedings. Proceedings may include assessment proceedings, proceedings for penalties etc., proceedings for demands and recovery under Section 73 and 74 etc.
4. Therefore, in the given case, no proceeding has been initiated by a proper officer against the petitioner on the same subject-matter referable to Section 6(2)(b) of the U.P.G.S.T. Act. It is merely an inquiry by a proper officer under Section 70 of the C.G.S.T. Act.

For all the afore-stated findings of the case, the Hon’ble high court held that the case was liable to be dismissed.