No Central Proceedings Initiated When State Issued Assessment Order: Patna HC Finds No Procedural Error [Read Order]

In a recent judgment, the Patna High Court upheld a GST assessment order issued by the State Tax Authority, ruling that no procedural or jurisdictional error occurred as no proceedings had been initiated by the Central agency at the time the State order was passed.

CTS Industries Limited, a company based in Begusarai, Bihar, filed two writ petitions challenging assessment orders dated 28.06.2022 issued by the Assistant Commissioner of State Tax, Begusarai Circle. These orders raised demands under Section 74(9) of the Bihar Goods and Services Tax Act, 2017, based on alleged wrongful availment of Input Tax Credit (ITC) related to purchases from D.S. Bitumix, a firm subsequently found to be non-existent.

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The petitioner argued that the Directorate General of GST Intelligence (DGGI), a Central agency, had already commenced an investigation into the same transactions and precluding the State authority from acting independently. Citing Section 6(2)(b) of the CGST Act and a CBIC circular dated 05.10.2018, the petitioner claimed that only the agency initiating an investigation could complete the adjudication process.

In response, the State’s counsel argued that the State authority had issued the assessment order in June 2022 based on scrutiny of GST returns under Section 61, and not directly on the DGGI’s findings. He pointed out that the DGGI only issued its demand-cum-show cause notice in March 2023, nine months after the State’s order. The bar under Section 6(2)(b) did not apply.

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A division bench comprising Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey held that there was no violation of jurisdictional provisions, as the State’s action preceded the Central agency’s proceedings. The court also found no breach of natural justice and that the petitioner was served with a show cause notice under Section 74, informed of the hearing date, and failed to appear or respond.

The court ruled that the assessment order passed by the State authority was valid, and the writ petitions were dismissed. The court permitted the petitioner to file a statutory appeal and directed that any delay in doing so be considered leniently by the appellate authority, taking into account the petitioner’s bona fide belief in pursuing a writ remedy.

To Read the full text of the Order CLICK HERE

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