Wrongful Input Tax Credit investigation: transfer to central enforcement quashed; State tax authority ordered to continue proceedings.

Wrongful availment of input tax credit (approximately Rs. 23.77 crores) was investigated; the High Court held that once a proper officer initiates proceedings no other officer may initiate proceedings on the same subject matter, interpreting Section 6(2)(B) to bar parallel or subsequent initiation. The court quashed the administrative transfer of proceedings to a central enforcement unit and directed the State Tax Officer to continue and conclude proceedings under the relevant Act. The decision stresses that administrative transfers between State and Central GST authorities are impermissible where initial proceedings are already pending, to avoid multiplicity and jurisdictional conflict.

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Issues Involved:
1. Wrongful availment of Input Tax Credit (ITC).
2. Jurisdiction and authority of State vs. Central tax officers.
3. Transfer of proceedings between State and Central authorities.
4. Validity of multiple proceedings on the same subject matter.
5. Interpretation of Section 6(2)(B) of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Wrongful Availment of Input Tax Credit (ITC):
The petitioner, a manufacturer of lead alloys, was investigated by the Haryana State Tax Department and multiple DGGI Zonal Units for wrongful availment of ITC. The Director General of Goods and Services Tax Intelligence (DGGI) conducted search and seizure operations and found that records/documents had already been seized by the State Government authorities. Investigations revealed that the petitioner was involved with a mastermind, Anant Rastogi, who created fake firms to facilitate fraudulent ITC availment. The petitioner was found to have availed fraudulent ITC amounting to Rs. 23.77 crores involving taxable supplies of Rs. 132.05 crores.

2. Jurisdiction and Authority of State vs. Central Tax Officers:
The petitioner challenged the transfer of proceedings from the State Tax Officer to the DGGI, Meerut Zonal Unit, arguing it violated Section 6(2)(B) of the HGST Act. The petitioner contended that the proper officer under Section 74(2) of the Act should continue the proceedings and that multiple proceedings cannot be allowed. The court examined Section 6(2)(B) of the CGST Act, which states that once a proper officer initiates proceedings, no other officer can initiate proceedings on the same subject matter.

3. Transfer of Proceedings Between State and Central Authorities:
The petitioner argued that there is no provision under the CGST/HGST Acts for transferring proceedings between State and Central authorities, unlike other tax statutes like the Income Tax Act. The court found that the GST Act does not provide for transferring proceedings from one proper officer to another and that such transfers are not permissible. The court quashed the transfer of proceedings to the DGGI, Meerut Zonal Unit, and directed the State Tax Officer to continue the proceedings.

4. Validity of Multiple Proceedings on the Same Subject Matter:
The court held that once proceedings are initiated by a proper officer, no other officer can initiate proceedings on the same subject matter. The court emphasized that the GST Act empowers both State and Central authorities equally, and judicial proceedings cannot be transferred by administrative actions. The court found that multiple proceedings would lead to complications and multiplicity, which is contrary to the provisions of the GST Act.

5. Interpretation of Section 6(2)(B) of the CGST Act, 2017:
The court interpreted Section 6(2)(B) of the CGST Act to mean that once a proper officer initiates proceedings, no other officer can initiate proceedings on the same subject matter. The court held that the term "subject matter" refers to the nature of the proceedings, which in this case was the wrongful availment of ITC. The court concluded that the DGGI cannot initiate proceedings for the same subject matter for a different period if the State authorities have already initiated proceedings.

Conclusion:
The court quashed the transfer of proceedings from the State Tax Officer to the DGGI, Meerut Zonal Unit, and directed the State Tax Officer to continue and conclude the proceedings under Section 74(1) of the HGST Act. The court emphasized the need for cooperation between State and Central authorities in a federal structure and held that the State Tax Officer has the jurisdiction to examine all aspects related to the evasion of tax or availment of ITC after 22.07.2019. All pending applications were disposed of, and no costs were awarded.

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