Both DGGI and State GST Authority proceedings could not be carried on simultaneously.

Summary in Key Points:

Issue: Could parallel proceedings be conducted by the Directorate General of GST Intelligence (DGGI) and State GST authorities for the same period?
Facts: The DGGI issued a show cause notice for FY 2017-18 and 2018-19. State GST authorities also initiated separate proceedings with their own show cause notices for the same period. The petitioner argued that the State GST authorities could not conduct parallel investigations or pass assessment orders once the DGGI had initiated an investigation.
Decision: Citing the DLF Home Developers Ltd. case, the court held that simultaneous proceedings by both authorities are impermissible. The impugned orders and show cause notices issued by the State GST authorities were quashed.

Important Note: This decision reinforces the principle that parallel proceedings by different GST authorities for the same period and subject matter are not allowed. It clarifies that once the DGGI initiates an investigation, State GST authorities are precluded from conducting their own parallel inquiries. This prevents duplication of efforts, potential conflicting decisions, and undue harassment of taxpayers. It ensures a more streamlined and efficient tax administration process.

HIGH COURT OF DELHI

Metalax Industries

GST Officer Ward 66

Yashwant Varma and Dharmesh Sharma, JJ.

W.P.(C) No.4710 and 6915 of 2024
CM APPL. No.19286 and 28763 of 2024 (Interim Relief)

NOVEMBER 26, 2024

Ms. Vibhooti Malhotra, Bhuvesh Satija, Udit Sharma and Aniket, Advs. for the Petitioner. Rajeev Aggarwal, ASC, Shubham Goel, Ms. Suhani Mathur, Advs. and Harpreet Singh, SSC for the Respondent.

ORDER

1. These two writ petitions which pertain to Financial Years 2017-18 and 2018-19 impugn the proceedings initiated by the State Goods and Service Tax authorities by issuance of the Show Cause Notices which are impugned before us as also the final orders passed upon the culmination of those SCN proceedings.

2. The challenge essentially proceeds on the basis of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 in light of the SCN dated 31 August 2022 pertaining to the subject period and thus it being contended that once the said authority had commenced an investigation, it would be impermissible for the State GST authorities to examine the said period or to pass any order of assessment pursuant thereto.

3. Our attention was also drawn to the view that we had expressed in DLF Home Developers Limited v. Sales Tax Officer Class II Avato Ward 107 Special Zone 12 Delhi & Anr. W.P.(C) 11052/2024 on 04 September 2024 and which came to be reiterated in DLF Home Developers Limited v. Sales Tax Officer Class II W.P.(C) 11037/2024.

4. We had while construing the provisions of Section 6(2)(b), in DLF Home Developers held as follows:-

“2. The present petition is confined only to the demand in respect of ITC to be reversed on non-business transactions and exempt supplies. The petitioner’s challenge to the said demand is premised on the basis that the Directorate General of GST Intelligence (hereafter the DGGI) has also issued a show cause notice dated 02.02.2024 for the tax period 01.07.2017 to 31.03.2021, which also includes the demand proposed on the aforesaid issue. It is the petitioner’s case that two authorities cannot proceed simultaneously in respect of the same issue.

3. The impugned order indicates that respondent no.1 is also fully conscious of the same and therefore, it has proceeded to confirm the demand without adjudicating the same. The relevant extract of the impugned order is set out below :-

“………..

On ITC to be reversed on non-business transactions & exempt supplies: The taxpayer has informed that the proceeding under the subject has already been taken up by DGGI (HQ), New Delhi had referred section 6(2)(b) of CGST Act 2017 and stated that parallel proceeding cannot be started. Deputy Director Investigation (INV-DGGI (HQ) New Delhi vide letter no DGGI/INV/GST/2722-2023/INV/o/o/Pr.OGG(HQ)/2028 dated 20.12.2023DGGI (HQ) has acknowledge the fact. Since the proceeding on the issue at being executed by DGGI (HQ), New Delhi, the demand raised through DRC01 sands as it is.”

4. We find merit in the contention that respondent no.1 cannot adjudicate a demand, which is also the subject matter of other proceedings. Since, the period covered under the impugned order is also subsumed in the show cause notice issued by the DGGI, both the proceedings cannot be carried on simultaneously.

5. Mr. Rajeev Aggarwal, the learned counsel appearing for respondent no.1 states, on instructions, that the demand, in respect of ITC to be reversed on non-business transactions and exempt supplies, be set aside as the same would be adjudicated by the DGGI.

6. In view of the above, the impugned demand is required to be set aside to the extent as noted above. It is so directed.

7. It is clarified that the concerned Authority shall adjudicate the said issue pursuant to a show cause notice dated 02.02.2024 issued by the DGGI.

8. The present petition is allowed in the aforesaid terms. The pending application is also disposed of.”

5. Consequently, and in view of the above, we allow the present writ petitions and quash the impugned orders dated 29 December 2023 [W.P.(C) 4710/2024] and 30 April 2024 [W.P.(C) 6915/2024] as well as the impugned SCN dated 31 August 2022 issued for F.Y. 2017-18 [W.P.(C) 4710/2024] and F.Y. 2018-19 [W.P.(C) 6915/2024].

6. The aforesaid direction shall be subject to the final outcome of the investigation that is being undertaken by the Directorate General of Goods and Services Tax Intelligence. It shall thus be open for the State GST authorities to review the steps liable to be taken upon culmination of those proceedings.

7. All rights and contentions of respective parties on merits are kept open.