April 11, 2021

Simultaneous investigation by Central and State GST Authorities for same period is not allowed

In the matter of ANURAG SURI VERSUS THE DIRECTOR GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE AND OTHERS (W. P. ( C ) No. 158 of 2020), the DGGSTI (“Central GST Authority”) initiated the search at the premises of the petitioner and documents were seized and summon was issued under CGST Act. During the proceeding under CGST Act, State GST Authority also issued the SCN and order for payment of incorrect availment of ITC under Odisha GST Act.

The petitioner challenged the validity of SCN issued by State GST Authority under D.O. dated 5th October, 2018 as the investigation was still pending before DGGSTI. The respondent contended that State GST Authority were not aware about the pendency of matter under CGST Act.

Hon’ble High Court mentioned that the Central Authority initiated the proceedings for the period of July, 2017 to June, 2018 and State authority covered the period of March, 2018. Since, period of was overlapping, Hon’ble high court of Orissa quashed the SCN and Order issued by State GST Authority.

1. Brief facts of the case

M/s. Sai Marketing (“Petitioner”) is registered under GST and is engaged in the trading of iron and scraps.
The business of petitioner was commandeered/seized by Director General of Goods and Services Tax Intelligence (“DGGSTI”) and search was undertaken under Section 67 of CGST Act, 2017.
During the course of search, documents were seized and a summon was issued to the petitioner under section 70 of CGST Act, 2017. The petitioner participated in such proceedings and it is still pending.
Further, a separate show cause notice was also issued to the petitioner by Additional CT and GST Officer (“State GST Authority”) under section 74 of Odisha Goods and Service Tax Act (OGST Act) alleging non payment of taxes or short payment of taxes or wrong availment of ITC.
Vide show cause notice, The petitioner was asked to pay OGST, CGST, interest, penalty to the tune of ₹ 1,14,15,935.94 by State GST Authority.
Petitioner contended before State GST Authority that all documents are seized by DGGSTI and proceedings are still pending there. Therefore, the State Authority should keep their proceedings in abeyance till proceedings of DGGSTI are concluded.
Despite the above contention, state GST authority passed an order under section 74 of OGST Act on the basis of wrong availment of ITC and asked him to pay a sum of INR 1,25,57,922.80.
Therefore, the Petitioner filed a petition before Orissa High Court challenging validity of SCN and order issued by the state GST Authority.

2. Legal Extracts from the case

Relevant extract of D.O. letter dated 5th October, 2018 written by the Central Board of Excise and Customs (CGST) to all the GST authorities is reiterated below:

“3. It is accordingly clarified that the officers of both Central tax and State tax are authorized to initiate intelligence based enforcement action on the entire taxpayer’s base irrespective of the administrative assignment of the taxpayer to any authority. The authority which initiates such action is empowered to complete the entire process of investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action.

4. In other words, if an officer of the Central tax authority initiates intelligence based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of Central tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its logical conclusions.

5. Similar position would remain in case of intelligence based enforcement action initiated by officers of State tax authorities against a taxpayer administratively assigned to the Central tax authority.”

3. Contention of the Petitioner

Based on D.O. letter, The petitioner questioned the validity of SCN and order issued by the state GST authority as Investigation was initiated by Central Tax authority under CGST Act and the same were still pending.

4. Contention of the respondent

Central tax authority contended that state tax authority was not aware of the fact on date of issuance of SCN that Central tax authority has initiated search proceedings against the petitioners.
Therefore, the state GST Authority has not violated the provisions of D.O. dated 5th October, 2018.

5. Analysis by Hon’ble High Court and Decision

State GST Authority and Central GST Authority have not disputed the provisions of D.O. dated 5th October, 2018.
Further, The State GST authority were aware of the fact that investigation is pending with central GST authority as petitioner has himself informed about it during proceedings.
Also, period of enquiry covered by the Central GST Authority has been between July 2017 to June 2018. On the other hand, State GST Authority issued the show cause notice for March 2018. Therefore, there is an overlapping of the period.
Therefore, Hon’ble High Court quashed the SCN and order issued by the State GST Authority.
And it is order that simultaneous investigation by Central and State GST Authorities for same period is not allowed

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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