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2025 (5) TMI 915 - HC - GSTJurisdiction of State Goods and Services Tax (SGST) authority (DGST Department) to initiate and adjudicate proceedings - HELD THAT - In light of the rationale of Section 6 (2) (b) of the CGST Act it is clear that the DGST Department shall be required to consider the order dated 3rd April 2025 passed by the appellate authority and shall accordingly reconsider as to whether the SCN dated 27th November 2024 as also the consequent impugned order dated 27th February 2025 will sustain in view of Section 6 (2) (b) of the CGST Act. The impugned order is accordingly set aside. Let the order of the Commissioner (Appeals-I) CGST dated 3rd April 2025 be placed before the DGST Department so that the matter can be considered afresh - Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Jurisdiction of SGST Authority to Initiate Proceedings on the Same Subject Matter as CGST Authority Relevant legal framework and precedents: Section 6(2)(b) of the CGST Act, 2017 states that where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the CGST Act on the same subject matter, and vice versa. This provision is designed to avoid overlapping or parallel proceedings by central and state tax authorities. The Court referred to its earlier decision in W.P. (C) 8625/2022 (Amit Gupta v. Union of India & Ors.), which extensively interpreted Section 6(2)(b). It was held that the provision aims to ensure that taxpayers are not subjected to multiple proceedings by central and state tax officers on the same subject matter. The Court emphasized that the provision does not prohibit transfer of investigations or proceedings but prohibits initiation of parallel proceedings on the same subject matter. Court's interpretation and reasoning: The Court reasoned that the object of Section 6(2)(b) is to prevent multiplicity of proceedings, which could cause harassment and confusion for taxpayers. The provision must be read purposively to avoid overlapping jurisdiction. The Court found that since the CGST Department had already initiated and adjudicated proceedings on the subject matter, the DGST Department's initiation of separate proceedings on the same transactions was impermissible unless the DGST Department considered the earlier adjudication. Key evidence and findings: The Petitioner submitted a detailed table showing overlapping proceedings initiated by both CGST and SGST authorities, involving the same suppliers and customers, the same financial year (2020-21), and the same transactions. The CGST Department had imposed penalties and tax demands for issuance of invoices without supply and for utilization of Input Tax Credit (ITC) from cancelled dealers. The DGST Department had issued a show cause notice and order demanding tax and penalty for the same transactions, resulting in overlapping demands. Application of law to facts: The Court applied Section 6(2)(b) to the facts, concluding that the DGST Department was required to consider the CGST appellate order dated 3rd April, 2025 before proceeding. Since the CGST Department had adjudicated the matter and the appeal had been decided, the DGST Department could not proceed independently without regard to that adjudication. Treatment of competing arguments: The Petitioner argued that the DGST Department's proceedings were not sustainable due to the prior CGST adjudication. The Respondents contended that the DGST Department had independent jurisdiction. The Court rejected the Respondents' position, emphasizing the statutory bar on multiple proceedings on the same subject matter under Section 6(2)(b). Conclusions: The DGST Department's show cause notice and impugned order were set aside, and the DGST Department was directed to reconsider the matter in light of the CGST appellate order, affording the Petitioner a personal hearing. Issue 2: Validity of Tax and Penalty Demands Raised by DGST Department Relevant legal framework and precedents: The demands raised by the DGST Department related to tax and penalty under various provisions of the CGST Act, including Section 122(1)(ii) and Section 122(1)(vii), for issuance of invoices without actual supply and for utilization of ITC without receipt of goods or from cancelled dealers. Court's interpretation and reasoning: The Court observed that these demands overlapped with those already adjudicated by the CGST Department. The CGST Department had imposed penalties for similar violations involving the same suppliers and customers. The Court noted that both demands pertained to the same transactions and the same financial year, thus triggering the applicability of Section 6(2)(b). Key evidence and findings: The Petitioner demonstrated that the tax and penalty demands by both authorities related to the same transactions and that the CGST Department's demand had been paid or challenged in appeal. The DGST Department's demands were therefore duplicative. Application of law to facts: Given the statutory prohibition on multiple proceedings on the same subject matter, the DGST Department's demands could not be sustained independently. The DGST Department was required to consider the CGST appellate order and re-examine its demand. Treatment of competing arguments: The Petitioner contended that the DGST demand was untenable. The Respondents maintained the validity of their demand. The Court sided with the Petitioner, emphasizing the need to avoid double jeopardy and multiplicity of proceedings. Conclusions: The Court set aside the DGST Department's impugned order and directed reconsideration in light of the prior adjudication. Issue 3: Obligation of DGST Department to Consider CGST Appellate Order Relevant legal framework and precedents: Section 6(2)(b) and principles of administrative law require that when overlapping proceedings exist, the authority initiating subsequent proceedings must consider prior adjudications to avoid conflicting decisions and harassment. Court's interpretation and reasoning: The Court held that the DGST Department is obligated to consider the appellate order passed by the Commissioner (Appeals-I), CGST, dated 3rd April, 2025 before proceeding further. This ensures consistency and respects the finality of adjudications. Key evidence and findings: The CGST appellate order had imposed penalty on the Petitioner and had been passed prior to the DGST impugned order. The DGST Department had not considered this order. Application of law to facts: The Court directed the DGST Department to place the CGST appellate order on record and afford the Petitioner a personal hearing before reconsidering the matter. Treatment of competing arguments: The Petitioner urged consideration of the appellate order; the DGST Department had proceeded without such consideration. The Court mandated compliance with the statutory scheme. Conclusions: The DGST Department must reconsider its order in light of the CGST appellate order, ensuring procedural fairness and statutory compliance. 3. SIGNIFICANT HOLDINGS The Court held:
Core principles established include:
Final determinations on each issue:
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