The State GST ( Goods and Services Tax ) proceedings are valid even after the search conducted by the Central GST department if the quantum of amount and period of demand is different from the Central GST’s, ruled the Madras High Court.
Justice Krishnan Ramasamy observed that “Though the issue raised by the Central Authorities and State Authorities is similar, the quantum of amount demanded by them are entirely different and the period of demand also differs. Thus, the question of cross-empowerment would not arise.”
Complete Draft Replies of GST ITC Related Notices, Click Here
The petition was filed by Skanthaguru Innovations in connection with GST proceedings. The matter began with the Central Authorities conducting a search at the petitioner’s business premises on March 13, 2024.
The next day, March 14, 2024, a statement was recorded from one of the directors, Arun Balaji. According to the Central Authorities, the petitioner had wrongfully availed Input Tax Credit (ITC) amounting to ₹6.33 crore up to March 31, 2024.
Following this, Arun Balaji was arrested on March 15, 2024, and the taxpayer’s bank account was frozen on March 18, 2024, under Section 83 of the GST Act, 2017. Subsequently, on May 23, 2024, the taxpayer paid ₹1.3 crore to the authorities. Following this, the State Authorities initiated further actions.
Complete Draft Replies of GST ITC Related Notices, Click Here
have issued Form GST ASMT-10 on 26.09.2024 for wrongful availment of ITC for a sum of Rs.13.10 Crores.
The court observed that the search conducted by the Central Authorities was related to an alleged wrongful ITC claim of ₹6.33 crore, while the State Authorities’ jurisdiction involved a demand of ₹13.10 crore.
Additionally, the court noted that the demand periods under the State GST differed from those under the Central GST. Consequently, the issue of cross-empowerment did not arise in this case.
The court ruled that, considering the differences in the quantum and period of demand, the State Authorities have the jurisdiction to issue Form ASMT-10. Consequently, the State Authorities are also empowered to initiate further prosecution for matters not addressed by the Central Authorities.
Complete Draft Replies of GST ITC Related Notices, Click Here
The bench clarified that when the State Authorities issued ASMT-10 on 26.09.2024, the Central Authorities had only conducted a search and had not issued any notice regarding the wrongful availment of ₹13.10 crore. Therefore, cross-empowerment against the State Authorities could not be presumed at that stage.
However, with the issuance of Form GST DRC-01A by the Central Authorities on 08.10.2024 for the same amount up to September 2024, the State Authorities cannot proceed based on ASMT-10.
In the absence of further orders, it is premature to determine whether the State Authorities are barred by cross-empowerment. Nevertheless, the blocking of ITC remains within the State Authorities’ jurisdiction, as the petitioner is registered under their domain, a fact acknowledged by the Central Authorities.
The Madras High Court observed that the State Authorities acted within their jurisdiction in this case, and it is premature to determine whether the principle of cross-empowerment applies.
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