2025 (5) TMI 457 - HC - GST

Parallel/multiple proceedings - initiating and passing an order u/s 74(9) of the Bihar Goods and Services Tax Act 2005 (BGST Act) despite the existence of an ongoing investigation by the Central Agency (DGGI) into the same subject matter - violation of provisions of Section 6(2)(b) of the CGST/BGST Act 2017 - principles of natural justice - HELD THAT - So far as the challenge to the impugned order (Annexure- 5 ) is concerned it is liable to fail for the reason that this order has not been passed during pendency of any proceeding on the same subject matter with the central agency. The order (Annexure- 5 ) has been passed upon scrutiny in terms of Section 61(1) of the CGST/BGST Act 2017 read with Rule 99(1). The assessing authority/Proper Officer has categorically mentioned in the impugned order that notice Online ASMT-10 Reminder-1 and Reminder-2 were issued but despite lapse of time the registered dealer did not submit its reply in GST ASMT-11. The dealer did not reverse the ineligible Input Tax Credit. These facts mentioned in the impugned order have not been contested by the petitioner. The submission of learned Senior Counsel for the petitioner that the basis of initiation of the proceedings and passing of order as contained in Annexure- 5 is the investigation and the materials which were sought for by issuing summons contained in Annexures- 1 2 and 4 by the central agency cannot be accepted on the face of the statement present in Annexure- 5 which have not been contested. In the present case there is no denial of the facts mentioned in the impugned order (Annexure- 5 ) that the petitioner was issued a demand-cum-show cause notice in terms of sub-section (1) of Section 74 of the CGST Act 2017. The fact remains that service of the demand-cum-show cause notice under sub-section (1) of Section 74 has also not been questioned and contested by the petitioner. It is also evident that in the show cause notice issued under sub-section (1) of Section 74 the petitioner was duly informed that he may appear before the authority for personal hearing either in person or through authorized representative - This Court therefore finds that there was proper compliance with the principles of natural justice before passing of the impugned order as contained in Annexure- 5 to the writ application. There are no jurisdictional error on the part of the State Authority (Respondent No. 2) in passing of the impugned order. The writ application is not fit to be entertained. Conclusion - The validity of the State Authority s order under Section 74(9) of the BGST Act upheld rejecting the petitioner s contention that parallel proceedings by the Central Agency barred such action. Application disposed off.

Summary

The core legal questions considered by the Court in these writ applications are:

1. Whether the State Authority was justified in initiating and passing an order under Section 74(9) of the Bihar Goods and Services Tax Act, 2005 (BGST Act) despite the existence of an ongoing investigation by the Central Agency (DGGI) into the same subject matter.

2. Whether the impugned order violated the provisions of Section 6(2)(b) of the CGST/BGST Act, 2017, which prohibits initiation of multiple proceedings on the same subject matter by different authorities.

3. Whether the impugned order complied with the mandatory procedural requirements under sub-section (4) of Section 75 of the CGST/BGST Act, 2017, specifically regarding the opportunity of hearing before passing an adverse order.

4. Whether the petitioner was denied principles of natural justice in the passing of the impugned order.

5. Whether the petitioner's challenge to the impugned order is maintainable given the availability of alternative statutory remedies and the issue of limitation in filing the writ petition.

Issue 1: Validity of State Authority's initiation of proceedings despite Central Agency's investigation

The legal framework relevant to this issue includes Section 6(2)(b) of the CGST/BGST Act, 2017, which provides 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 proceeding on a subject matter, no proceeding shall be initiated by the Proper Officer under this Act on the same subject matter. Additionally, the CBIC circular dated 05.10.2018 (Annexure-6) guides intelligence-based enforcement actions, emphasizing that the authority initiating such action should complete the entire process without parallel proceedings.

The petitioner contended that since the Central Agency (DGGI) had already initiated an investigation into the affairs of M/S D.S. Bitumix (a non-existent firm), the State Authority's initiation of proceedings was impermissible and contrary to the CBIC circular and statutory provisions.

The Court's reasoning, however, focused on the chronology of events. It was found that the impugned order by the State Authority (Annexure-5) was passed on 28.06.2022, whereas the Central Agency initiated its proceeding by issuing a demand-cum-show cause notice only on 24.03.2023 (Annexure-P9). Hence, at the time of the State Authority's order, no proceeding had been initiated by the Central Agency against the petitioner.

The Court distinguished between the information obtained from the Central Agency and initiation of a formal proceeding. The State Authority's order was passed pursuant to scrutiny of returns under Section 61(1) of the BGST Act and Rule 99(1), not on the basis of the Central Agency's investigation. The petitioner's failure to respond to notices issued by the State Authority was also noted.

The Court rejected the petitioner's argument that the State Authority's order was based on investigation materials from the Central Agency, emphasizing that the impugned order itself stated that it was passed after scrutiny and non-response from the petitioner.

Thus, the Court concluded that there was no violation of Section 6(2)(b) or the CBIC circular since no parallel proceedings existed at the relevant time.

Issue 2: Compliance with procedural requirements under Section 75(4) of the CGST/BGST Act

Section 75(4) mandates that an opportunity of hearing shall be granted where a request is received from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. The petitioner relied on a recent coordinate Bench decision (Tata Projects Limited) which held that failure to issue a show cause notice and provide an opportunity of hearing violates this provision.

The Court examined the impugned order and found that the petitioner was issued a demand-cum-show cause notice under Section 74(1) of the CGST Act, which deals with determination of tax not paid or input tax credit wrongly availed by reason of fraud or suppression of facts. The petitioner was informed of the liability to pay tax, interest, and penalty, and was given a date for personal hearing (31.08.2021). The petitioner did not respond or appear.

Therefore, the Court held that the principles of natural justice were complied with, and there was no violation of Section 75(4). The facts were distinguished from the Tata Projects Limited case, where no show cause notice had been issued.

Issue 3: Whether the impugned order was passed without jurisdictional error

The Court noted that the impugned order was passed under Section 61(1) of the BGST Act, which empowers scrutiny of returns and verification of correctness. Upon noticing discrepancies and non-response, the Proper Officer is empowered to initiate further action including under Section 74.

The petitioner did not contest the facts stated in the impugned order regarding issuance of notices and non-submission of replies. The Court found no jurisdictional error in the passing of the order.

Issue 4: Availability of alternative statutory remedies and limitation

The petitioner filed the writ petition approximately seven months after the impugned order. The State contended that a blanket condonation of delay for filing statutory appeal should not be granted.

The Court left the question of limitation open for the Appellate Authority to decide, noting that the petitioner was pursuing remedies before the writ Court under bona fide belief and legal advice. The Court directed the Appellate Authority to consider this while deciding on limitation.

Significant holdings and core principles:

"The order (Annexure- '5') has been passed upon scrutiny in terms of Section 61(1) of the CGST/BGST Act, 2017 read with Rule 99(1). The assessing authority/Proper Officer has categorically mentioned in the impugned order that notice Online ASMT-10, Reminder-1 and Reminder-2 were issued but despite lapse of time, the registered dealer did not submit its reply in GST ASMT-11."

"The clarificatory circular as contained in Annexure- '6' to the writ application would become irrelevant for the purpose of the present case as the proceeding initiated by the Central Agency was subsequent to the order passed by the State Authority."

"There was proper compliance with the principles of natural justice before passing of the impugned order as contained in Annexure- '5' to the writ application."

"The facts of the present case are completely distinguishable from that of Tata Projects Limited. In the present case, there is no contest on fact that a demand-cum-show cause notice was issued to the petitioner even at the stage of Section 74 but the petitioner did not respond to the said notice."

"Having regard to the aforementioned discussions, we find no jurisdictional error on the part of the State Authority (Respondent No. 2) in passing of the impugned order."

"We leave it open for the parties to contest the issue of limitation before the Appellate Authority, which shall consider that the petitioner was pursuing his remedy in the Writ Court under some bonafide belief and legal advice."

In conclusion, the Court upheld the validity of the State Authority's order under Section 74(9) of the BGST Act, rejecting the petitioner's contention that parallel proceedings by the Central Agency barred such action. The Court found that procedural safeguards including issuance of show cause notice and opportunity of hearing were complied with. The writ petitions were dismissed, leaving open the question of limitation for the appellate forum to decide.