The Jharkhand High Court, while disposing the writ application, directed the State Goods and Services Tax ( GST ) authorities to continue with proceedings on wrong Input Tax Credit (ITC) availment despite the summons issued by the Preventive Wing and Directorate General of GST Intelligence (DGGI) Wing of the Central Goods and Services Tax ( CGST )
The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan opined thet the “Preventive Wing of the CGST and DGGI Wing of the CGST (Respondent 5), shall forward all their investigation carried out as against the petitioner and inter-related transaction to the State Authorities, who shall continue with the proceedings from the same stage.”
The petitioner is engaged in the trading of Iron & Steels and Cements since the fiscal year 2017-18. According to the statements provided in the writ petition, the purchases and sales are accurately documented in the GST returns submitted by the petitioner, with the outward tax liability being offset against the available ITC.
The Intelligence Bureau of the State Goods & Service Tax conducted an inspection, resulting in the issuance of GST INS-01. Subsequently, the GST Officers set a date for the petitioner to submit their books of accounts after concluding the inspection. During this process, the petitioner made deposits of Rs.34.00 lakhs from their Cash ledger and Rs.06.00 lakhs from the proprietorship firm of his wife.
However, the Preventive Branch of Central Goods & Services Tax, Ranchi, served the petitioner a notice, directing them to reverse the ITC along with interest and penalty due to alleged purchases from a non-existent entity.
Concurrently, the DGGI Branch of CGST conducted a search on 06.06.2023, followed by various notices and summonses.
The petitioner, facing summons from three GST departments, approached the court seeking a declaration that the authority initiating proceedings first should be the sole authority to carry them out.
The petitioner argued against ‘cross empowerment’ under Section 6(2)(b) GST Act and related notifications and clarifications.
Mr. Ratnesh Kumar, Sr. Standing Counsel has tried to distinguish the initiation of proceedings by the State Authorities and the proceedings before the DGGI and much has been said by the DGGI upon bursting of gang at Noida operating in issuance of fake bills, without supply of goods. The counsel for the State has tried to justify that the proceedings by the State GST Officers do not overlap with that of the proceedings by the CGST or the DGGI.
Despite arguments from the state authorities justifying their proceedings, the court found that the State Authorities had initiated the proceedings first and should continue, as all the proceedings were interrelated under Section 6(2)(b) and related clarifications.
The court stated that “Even if, we accept the submission of the Respondent No. 5 that the proceedings initiated by the Respondent No. 5 is on the basis of an information received from Noida; in that event also, we are at loss to say that the DGGI is raising a question about credibility and competence of the State GST Authorities, in carrying out the investigation concerning wrong/inadmissible availment of Input Tax Credit, inasmuch as, the officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities.”
The bench clearly expressed its hesitation to accept the argument that the DGGI had special powers compared to State GST Authorities, as both were engaged in investigating the same issues. The court emphasized that the state proceedings, based on ‘Search & Seizure,’ were initiated prior in point of time, reinforcing the petitioner’s request.
As a result, the bench instructed the Preventive Wing and DGGI to transfer all the investigations conducted to date to the State GST authorities. The State GST authorities will then proceed further against the petitioner in accordance with the law.
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