In a recent case, the Delhi high court had disposed of a petition on parallel Agri Urea diversion and Input Tax Claim (ITC) claim investigations conducted by the Jurisdictional Commissionerate and Directorate General of GST Intelligence (DGGI).
The writ petition was filed in opposition to the numerous investigations being carried out by various authorities concerning the petitioner’s receipt and production of commodities from July 2017 to March 2022.
Petitioner, Amit Gupta carries on business in trading of urea in the name of his sole proprietorship concerns, namely, M/s Shyam Trading Company and M/s Garg Trading Company. Both the sole proprietorship concerns are registered as separate tax entities under the Central Goods & Services Tax Act.
The CGST Commissionerate , Delhi North (the Jurisdictional Commissionerate) conducted an investigation regarding the availability of ineligible Input Tax Credit (ITC) and issued summons to assessee and collected an amount of ₹50,12,000/-.
Thereafter the officers of DGGI conducted searches in the petitioner’s principal places of business, his residence, and the godown due to diversion of agricultural grade urea for industrial use without paying any GST .
The assessee challenged the parallel investigation conducted by the both state and central officers. Nonetheless, the court recommends that the investigations be combined because it is obvious that there would be related topics.
Singla counsel for the CGST Commissionerate submitted that parallel investigations was resolved and that he had instructions to state that the investigation conducted by CGST Commissionerate would be transferred to the DGGI and its officers would continue the investigations from the same stage as obtaining before the Jurisdictional Commissionerate
Counsel for the petitioner argued that DGGI has no jurisdiction to carry out any investigation in terms of Section 6(2)(b) of the Central Goods & Services Tax Act as CGST Commissionerate had already initiated the proceedings first by issuing summons on 03.03.2022.
It was observed by the court that the objective of the investigation being started by the Jurisdictional Commissionerate differs slightly from that of the DGGI. The diversion of agricultural grade urea is not being looked into by the Jurisdictional Commissionerate. It is undeniable, nonetheless, that the inquiry into the ITC’s utilization is shared by the investigations carried out by both agencies.
Anjali Jha Manish, counsel appearing for the petitioner contended that the DGGI could not proceed with the investigation in view of Section 6(2)(b) of the Act. Thus as per the circular dated 05.10.2018 issued by the Ministry of Finance argued that it was not permissible to transfer the investigation by one authority to another. She submitted that there is no express provision under the Act for affecting any such transfer.
The court determined that there is no dispute that both the officers of the DGGI as well as the Jurisdictional Commissionerate possess the necessary jurisdiction to conduct the investigations.
Further provisions of Section 6(2)(b) of the Act did not prescribe the transfer of investigations or proceedings as is contended on behalf of the petitioner. The object of Section 6(2)(b) of the Act is to avoid multiple proceedings by State Tax Officers and Central Tax Officers on the same subject matter.
After analyzing the facts and arguments of the both parties, the division bench of Justice Vibhu Bakhru and Justice Amit Mahajan observed that the focus of investigation by the DGGI was in respect of the diversion of agricultural urea for sale as technical grade urea. The issue regarding wrongful availment of the ITC is also inextricably linked with the subject matter of investigation by CGST Commissionerate.
The bench observed that the petitioner’s insistence on the authority which should conduct the investigation is unjustified. The petitioner’s complaint concerned the way in which concurrent procedures were handled. Thus , the DGGI was allowed to continue the investigation from the point where it had obtained prior to the CGST Commissionerate’s agreement to end the aforementioned grievance.
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