State & Centre cannot Initiate GST Proceedings on Same Issue: Chhattisgarh HC Upholds ₹120 Cr CGST RCM Demand on SECL [Read Order]
The High Court noted that although the SGST Department had issued earlier show cause notices, the proceedings were eventually dropped without any adjudication on merits.
Chhattisgarh HC - Taxscan
Chhattisgarh HC - Taxscan
The Chhattisgarh High Court recently reaffirmed that the State and Central authorities of the Goods and Services Tax (GST) Department cannot simultaneously initiate proceedings on the same subject matter, as barred by Section 6(2)(b) of the Central Goods and Services Tax Act, 2017.
The Court upheld a ₹120.09 crore demand issued by Central GST authorities under the Reverse Charge Mechanism (RCM) against South Eastern Coalfields Limited (SECL) - a mining company which is the largest coal producing company in India.
SECL had approached a Division Bench of the Chhattisgarh High Court against an order passed by a single-judge bench of the same court. The single-judge dismissed SECL’s writ petition challenging a show cause notice issued by the Additional Commissioner (Preventive), Central GST, Raipur, under Section 73 of the CGST Act.
The dispute pertained to non-payment of GST under RCM on Development Cess and Environment Cess for the period between July 2017 and August 2021.
SECL had earlier been issued multiple show cause notices by the State GST Department, to which it submitted replies, however these proceedings were later closed.
The present issue surrounds a SCN dated 16.01.2023 issued by the Additional Commissioner (Preventive), along with summons and the statement of an Abhishek Anand, Manager (Finance), which was earlier challenged in a writ petition that was dismissed by the Single Judge, leading to the present appeal.
Rajeev Agrawal, Sanjay Dixit, and Rakshit Tiwari appearing for SECL contended that the show cause notice dated 16.01.2023 issued by the Central GST authorities was barred under Section 6(2)(b) of the CGST Act, since earlier proceedings initiated by the State GST authorities had already been closed by orders dated 27.04.2022 and 13.06.2022.
Meanwhile the Central GST Authorities were represented by Ashutosh Singh Kachhawaha, while the State GST authorities were represented by Prafull N. Bharat along with Rahul Tamaskar.
Counsel for the State GST authorities submitted that the inspection by the Central GST Department was conducted on 27 August 2021, before the issuance of DRC-01 by the State authorities, and hence, there was no simultaneous initiation of proceedings by both departments.
He further contended that mere issuance of DRC-01 without DRC-01A when it was mandatory would not constitute valid initiation of proceedings to attract the bar under Section 6(2)(b) of the CGST Act.
Additionally, he argued that the proceedings by the State GST department were closed without any adjudication on merits, and thus the Central GST was well within its jurisdiction to initiate and pursue the matter.
The Division Bench of Justice Sanjay K. Agrawal and Justice Sachin Singh Rajput examined the sequence of events and observed that the first substantive action was taken by the Central GST Department on 27 August 2021 through an inspection under Section 67(1) of the CGST Act.
The CGST subsequently issued a memo dated 30.08.2021 for the payment of CGST demand of ₹1,20,09,15,450 through RCM.
The High Court noted that although the State GST Department had issued earlier show cause notices, the proceedings were eventually dropped without any adjudication on merits and no assessment, penalty or recovery actions were undertaken under Sections 73 or 74.
In such an event, the action of the Central GST would not be barred under Section 6(2)(b).
Concluding that the Central GST authority was the first to validly initiate proceedings on the matter, the Chhattisgarh High Court refused to interfere with the decision of the Single Judge and dismissed the appeal.
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