Parallel Central vs State GST investigations over same tax dispute u/s6(2)(b); writ refused, objections allowed in reply

The dominant issue was whether Central GST authorities could initiate and continue proceedings, including summons and a show cause-cum-demand notice, when State GST authorities had already initiated proceedings, in view of the statutory bar under s. 6(2)(b) CGST/OGST Act against parallel proceedings on the same "subject matter" (equated with cause of action and relief). The HC held that the bar operates only where the subject matter is identical; if the cause of action differs, maintainability is not barred. However, given the dispute on whether both investigations concerned the same subject matter and since a show cause-cum-demand notice had already been issued, the HC declined writ interference and disposed of the petitions, granting liberty to reply to the notice and raise the s. 6(2)(b) objection before the appropriate forum.

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Issues Involved:
1. Legality of the summons issued u/s 70 of the CGST Act.
2. Jurisdictional conflict between Central and State GST authorities.
3. Validity of the show cause-cum-demand notice issued on 29.12.2023.

Summary:

Legality of the Summons Issued u/s 70 of the CGST Act:

The petitioner, a registered dealer under the GST Act, challenged the summons issued by the Senior Intelligence Officer, Directorate General of Goods and Service Tax (DGGI), Zonal Unit, Bhubaneswar, u/s 70 of the CGST Act. The petitioner argued that the summons was issued for financial years 2017 to 2021-2022, but the accounts for the year 2021-2022 were not due for submission. The petitioner also objected to the summons through counsel and registered post, but the objections were not honored. The petitioner contended that the action of the DGGI was in violation of a circular dated 05.10.2018 issued by the Central Board of Excise and Customs (CBEC), which mandates coordination between Central and State Tax authorities.

Jurisdictional Conflict Between Central and State GST Authorities:

The petitioner argued that the DGGI should not have initiated proceedings as a verification proceeding was already pending before the State Government. The petitioner relied on Section 6(2)(b) of the CGST/OGST Act, which bars the initiation of proceedings by a Central authority if a State authority has already initiated proceedings on the same subject matter. The opposite parties contended that the investigations by the Central and State authorities were on different issues. The DGGI was investigating clandestine supply by the petitioner during March 2022, while the State authority was investigating receipt of materials from a supplier, M/s. Anamika Enterprises. The court noted that the subject matter of the proceedings must be the same for Section 6(2)(b) to apply, and in this case, the subject matters were different.

Validity of the Show Cause-cum-Demand Notice Issued on 29.12.2023:

The petitioner also challenged the show cause-cum-demand notice dated 29.12.2023, issued pursuant to the disputed summons. The court observed that the petitioner should have responded to the summons and raised the plea that it was barred by Section 6(2)(b) of the CGST/OGST Act. Given that a show cause-cum-demand notice had already been issued, the court declined to interfere at this stage. The petitioner was granted the liberty to respond to the show cause-cum-demand notice and take appropriate recourse to the provisions of the CGST Act. The court refrained from expressing any definite opinion on whether the case was covered by Section 6(2)(b) of the CGST/OGST Act, leaving it open for the petitioner to take the plea before the appropriate forum.

Conclusion:

The writ petitions were disposed of with the liberty for the petitioner to respond to the show cause-cum-demand notice and take appropriate legal recourse.

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