2020 (3) TMI 478 - HC - GST

High Court Orders Central Tax Authority to Enforce Actions Only by Initiating Authority

The High Court directed the Central tax authority, specifically the DGGI, AZU, Ahmedabad, to ensure that enforcement actions against the writ applicant ... Intelligence based enforcement action - authority initiating investigation empowered to complete proceedings - cross-empowerment of Central and State tax authorities - search under Section 67 of the CGST Act, 2017 - prevention of undue harassment by multiple authoritiesIntelligence based enforcement action - authority initiating investigation empowered to complete proceedings - cross-empowerment of Central and State tax authorities - Clarification that the authority which initiates intelligence-based enforcement action is empowered to complete the entire process of investigation and related proceedings, and its application to the facts of the case. - HELD THAT: - The Court noted and applied the Board's letter dated 5th October 2018 which clarifies that officers of both Central and State tax administrations are authorised to initiate intelligence-based enforcement action across the taxpayer base and that the authority which initiates such action is empowered to complete investigation, issuance of show cause notice, adjudication, recovery and appeals. The Court observed that, on the materials, the search was carried out by DGGI, AZU, Ahmedabad under Section 67 of the CGST Act, 2017, and there is no record of transfer of the case by the initiating Central tax officer to the State authority. Although separate summons issued by different offices (Deputy Commissioner of State Tax and DGGI Surat) appeared on record, the Court relied on the stated administrative clarification to the effect that the initiating authority may carry the matter to its logical conclusion and that such cross-empowerment is permissible. The Court, however, refrained from expressing any opinion on the merits of the underlying investigation or liability. [Paras 5, 6]The Board's clarification governs; the initiating authority is entitled to continue the proceedings, subject to ensuring no duplication of action or harassment.Prevention of undue harassment by multiple authorities - search under Section 67 of the CGST Act, 2017 - Whether the writ applicant should be protected from harassment arising from multiple authorities pursuing the same subject-matter proceedings. - HELD THAT: - Having noted that two different offices had issued summons in relation to the same subject-matter following a search, the Court directed the DGGI, AZU, Ahmedabad to look into the matter and ensure that the writ applicant is not subjected to undue harassment by different authorities on the same subject-matter. The Court made clear that this direction was limited and that it did not express any view on the merits of the underlying case. The order was confined to preventing multiple coercive measures or duplicative enforcement steps which could cause harassment to the taxpayer while the investigation/proceedings continue. [Paras 7]Writ disposed with a direction to DGGI, AZU, Ahmedabad to ensure no undue harassment or duplicative coercive measures are taken against the writ applicant; no expression of opinion on merits.Final Conclusion: Writ petition disposed of by directing DGGI, AZU, Ahmedabad to ensure that no undue harassment or duplicative enforcement action is taken by different authorities in respect of the same subject-matter; the Court did not quash the proceedings and expressed no opinion on the merits; direct service permitted. Issues:1. Jurisdictional conflict between Central tax authority and State tax authority in enforcement actions.Analysis:The writ applicant, a proprietary concern, sought relief through a writ application under Article 226 of the Constitution of India, challenging the proceedings initiated by respondent No.4 and respondent No.6 as bad and without authority of law. The search conducted under Section 67 of the Central Goods and Services Tax Act, 2017 at the office premises of the writ applicant led to the issuance of summons by different tax authorities. The applicant responded to the summons stating that all original books of accounts and documents had been seized by the Directorate General of Goods and Services Tax Intelligence (DGGI), Ahmedabad, during the search conducted earlier. Despite this, subsequent summons were issued by different authorities, causing confusion and inconvenience to the applicant.The applicant contended that since the proceedings were initiated by the DGGI, AZU, Ahmedabad, they should be completed by the same authority without interference from other authorities. The Central Board of Excise and Customs issued a letter clarifying that officers of both Central tax and State tax are authorized to initiate intelligence-based enforcement actions on taxpayers, irrespective of administrative assignment. The initiating authority is empowered to complete the entire process of investigation, adjudication, recovery, and filing of appeals. Therefore, if a Central tax officer initiates enforcement action against a taxpayer assigned to the State tax authority, the case should be concluded by the Central tax authority.The High Court disposed of the writ application with a direction to the DGGI, AZU, Ahmedabad to ensure that no undue harassment is caused to the writ applicant by different authorities on the same subject matter. The Court clarified that it did not express any opinion on the merits of the case but emphasized the need for a coherent approach in handling enforcement actions to prevent confusion and unnecessary inconvenience to taxpayers.