J&K HC: Cross-Empowerment is Automatic, Intelligence-Based Enforcement is Valid

J&K HC: Cross-Empowerment is Automatic, Intelligence-Based Enforcement is Valid

Issue: To challenge the jurisdiction and competence of a Central Goods and Services Tax (CGST) officer to issue Show Cause Notices (SCNs) against a taxpayer who may be assigned to a State GST authority, particularly in intelligence-based enforcement actions involving allegations of massive fraud.

Facts:

• The petitioner, R.K. Ispat Ltd. (and related firms), contested SCNs issued by the Joint Commissioner, CGST Jammu, accusing them of fraudulent availment of bogus Input Tax Credit (ITC) through paper transactions.
• The petitioner argued that CGST officers lacked jurisdiction because the taxpayer was assigned to the State tax authorities.
• The petitioner also claimed that the Joint Commissioner lacked competence because the monetary amount involved was below ₹1 crore, as per a 2018 Central government circular.

Decision:

The Jammu and Kashmir and Ladakh High Court dismissed the writ petitions and upheld the validity of the SCNs. The Court ruled that cross-empowerment under Section 6 is automatic, and intelligence-based enforcement actions are valid regardless of taxpayer assignment.

Key TakeDowns:

• Automatic Cross-Empowerment (Section 6): The Court ruled that Section 6 of the CGST Act confers automatic cross-empowerment of officers between Central and State GST authorities. A separate government notification is only required to impose conditions, not to grant the underlying power.
• Intelligence-Based Action is Concurrent: The concurrent powers retained by both State and Central authorities allow for intelligence-based enforcement actions over the entire value chain, irrespective of the taxpayer’s administrative allocation. * Monetary Limits are Administrative: The Court held that a Joint Commissioner is competent to issue SCNs even when the monetary amount involved is below ₹1 crore. The monetary limits specified in administrative circulars are for work allocation purposes only and do not act as a bar on the officer’s statutory jurisdiction.
• Bunching of SCNs: The Court maintained an open stance on the petitioner’s argument that the bunching of five years’ assessments in one SCN under Section 74 was impermissible, noting that this procedural challenge can be decided during the final adjudication stage.