2024 (1) TMI 809 - HC - GST

Authority to complete GST investigation: State GST to continue probe; CGST and DGGI to transfer investigations and review bank attachments.

Where state GST authorities initiated intelligence-based proceedings, the initiating authority principle requires that the same authority complete the ... Cross-empowerment under Section 6 - Priority of prior-initiated proceedings - Initiation and continuation of intelligence-based enforcement action by the authority which initiates it - Transfer of investigation between Central and State GST authorities - Attachment of bank accounts-preliminary seizure and excess of jurisdictionCross-empowerment under Section 6 - Initiation and continuation of intelligence-based enforcement action by the authority which initiates it - Application of cross-empowerment: whether the authority which first initiated enquiry/investigation should continue and other wings must not proceed in parallel in respect of the same interrelated transactions. - HELD THAT: - The Court examined Section 6(2)(b) read with the Clarification dated 05.10.2018 and the communication dated 22.06.2020 and held that the proceedings initiated by different wings are interrelated and, where the State Authority's search and seizure and related proceedings are prior in point of time, those proceedings should be allowed to continue. The Court rejected any suggestion that the Directorate General of GST Intelligence or the Preventive Wing enjoys superior powers vis-a -vis State GST officers; the statutory cross-empowerment does not confer special privilege on DGGI over State authorities. Applying these materials to the facts, the Court found the State Authorities had initiated the proceeding earlier (inspection dated 16.03.2023) and some action had followed, and therefore Section 6(2)(b) and the clarifications support continuity of the State-initiated proceedings. [Paras 14, 15]Held that the State Authorities, being prior in point of time in initiating the enquiry, should continue with the proceedings and parallel action by other wings is not permissible in the circumstances.Transfer of investigation between Central and State GST authorities - Priority of prior-initiated proceedings - Whether investigations and materials gathered by the Preventive Wing of CGST and DGGI should be made over to the State GST authority to enable the State to continue proceedings. - HELD THAT: - Noting that the inquiries are interrelated and that the State Authorities had earlier initiated action, the Court directed the Preventive Wing of the CGST and the DGGI to forward all investigations and inter-related transaction materials to the State Authority so that the State may continue proceedings from the same stage. The direction implements the Court's view on cross-empowerment and the priority of earlier-initiated investigations, thereby avoiding multiplicity and overlapping jurisdiction. [Paras 16, 17]Directed Respondent Nos. 4 and 5 to make over the entire investigations to Respondent No. 3, who shall carry forward the proceedings in accordance with law.Attachment of bank accounts-preliminary seizure and excess of jurisdiction - Validity of attachment (freezing) of the petitioner's bank accounts by issuance of Form GST DRC-22 prior to any adjudication of liability. - HELD THAT: - The Court observed that attachment of bank accounts before any determination of liability, particularly when multiple authorities are issuing overlapping summons and notices, appears to be an excessive exercise of power and may constitute an 'arm-twisting' method to coerce the assessee. Given the factual matrix that proceedings were at an initial stage and that the State Authorities were prior-initiators, the Court found the attachment incomprehensible and directed the State Authority to take immediate decision regarding de-freezing of the bank accounts in terms of the Court's observations. [Paras 15, 18]Directed Respondent No. 3 to take immediate decision with regard to de-freezing the petitioner's bank accounts.Final Conclusion: Writ petition disposed directing the Preventive Wing of CGST and the DGGI to hand over all investigation records to the State GST authority which had earlier initiated the enquiry; the State authority to continue proceedings and to take immediate decision on de-freezing the petitioner's bank accounts; pending interlocutory application closed. Issues Involved:1. Authority to complete GST investigation.2. Validity of notices issued by different GST wings.3. Attachment of bank accounts.Summary:1. Authority to Complete GST Investigation:The petitioner sought a declaration that under Section 6 of the Central Goods and Services Tax Act, 2017, and corresponding state provisions, the authority that initiated the proceedings is empowered to complete the entire process. The petitioner argued that the State Goods and Services Tax (SGST) should complete the investigation initiated by them, not the Central Goods & Services Tax (CGST) or the Directorate General of Goods & Services Tax Intelligence (DGGI). The court clarified that officers of both Central and State tax are authorized to initiate and complete intelligence-based enforcement actions, as per Notification No. 39/2017-Central Tax and Clarifications dated 05.10.2018 and 22.06.2020.2. Validity of Notices Issued by Different GST Wings:The petitioner challenged multiple notices from different GST wings, arguing that once the State GST initiated proceedings, further notices from CGST and DGGI were invalid. The court emphasized that Section 6(2)(b) of the CGST Act, read with the clarifications, indicates that the authority which initiates action should complete it. The court found that the State GST had initiated proceedings earlier and should continue the investigation, directing the CGST and DGGI to transfer their investigations to the State GST.3. Attachment of Bank Accounts:The petitioner contested the attachment of their bank accounts by the DGGI under Section 83 of the CGST Act, arguing it was premature and excessive. The court observed that the attachment seemed like an 'arm twisting method' and was not justified without a determination of liability. The court directed the State GST to take over the investigation and make an immediate decision regarding the de-freezing of the bank accounts.Conclusion:The court ruled that the State GST, having initiated the proceedings first, should continue and complete the investigation. The CGST and DGGI were directed to transfer all related investigations to the State GST. The court also ordered the State GST to review the attachment of the petitioner's bank accounts promptly. The writ application was disposed of accordingly.