Double Jeopardy Avoided: Impugned Order Set Aside Where Demand for Excess ITC Overlapped with a Prior Order Dropping the Same Liability

Double Jeopardy Avoided: Impugned Order Set Aside Where Demand for Excess ITC Overlapped with a Prior Order Dropping the Same Liability

ISSUE

Whether an assessing authority can confirm a demand for excess Input Tax Credit (ITC) for a specific tax period (2019-20) when the State Tax Officer has already passed an assessment order for the same period dropping the demand on the identical issue.

FACTS

• The Period: Tax period 2019-20.

• The Allegation: The Respondent confirmed a demand against the assessee for excess claim of ITC, along with penalty and interest.

• The Defense: The assessee contended that for the same period and on the identical issue, a Show Cause Notice had been issued earlier. In those proceedings, the State Tax Officer had examined the matter and passed an assessment order specifically dropping the demand.

• The Conflict: The assessee essentially faced two adjudications for the same liability—one favorable (dropped) and one adverse (confirmed).

DECISION

• Prima Facie Overlap: The High Court examined the impugned order alongside the previous assessment order passed by the State Tax Officer. It observed that, prima facie, there was a clear overlapping of demands.

• Parallel Proceedings: The Department cannot pursue a demand that has already been adjudicated and dropped by a competent officer for the same period, unless proper revisionary proceedings are initiated.

• Remedy: Recognizing the inconsistency, the Court set aside the impugned order.

• Verdict: The case was remitted back to the Respondent to verify the overlap and pass a fresh order on merits, ensuring no double jeopardy. [In Favour of Assessee / Matter Remanded]

KEY TAKEAWAYS

• Doctrine of Res Judicata: While strict Res Judicata doesn’t always apply in tax, the principle of consistency and judicial discipline prevents multiple officers from adjudicating the same SCN/issue for the same year. If one officer drops it, another cannot pick it up randomly.

• Cross-Empowerment Issues: This often happens when both Central and State officers initiate action on the same taxpayer (Audit vs. Intelligence vs. Range). Under GST, if one authority is seized of the matter, the other must keep hands off (Section 6(2)(b)).

• Defense Strategy: Always maintain a “Master File” of all SCNs and Orders year-wise. If you receive a new notice, check if that specific month/issue was covered in a previous audit or ASMT-10. If yes, produce that order immediately to quash the new proceeding.