2024 (10) TMI 201 - HC - GST

Dual GST Penalty Proceedings Struck Down: Authorities Barred from Parallel Tax Enforcement Actions Under Sections 6 and 74

HC ruled that initiating parallel penalty proceedings under CGST and State GST Acts is legally impermissible. The court quashed the show cause notice, ... Bar on initiating penalty proceedings under CGST Act after proceedings initiated by State GST Authorities. Karnataka State GST Authorities initiated proceedings by invoking Section 70 of the KGST Act against the petitioner, which ultimately culminated in the adjudication order dated 09.11.2022 under Section 73 (1) of the KGST Act - In the meanwhile, respondent Nos. 1 and 2/CGST Authorities also initiated penalty proceedings under Section 122 of the CGST Act in relation to the very same subject matter comprising of the transactions between the petitioner and one M/s. Crystal Hardware. HELD THAT:- A perusal of the material on record in particular Annexure-C dated 15.09.2022 issued by CGST authorities and adjudication order dated 09.11.2022 at Annexure-D is sufficient to come to the conclusion that the both relates to the same subject matter in relation to the transaction between petitioner and M/s Crystal Hardware. Once proceedings are initiated under Sections 73 or 74, penalty proceedings under Section 122 are deemed to have been concluded and on this ground also, the impugned Show Cause Notice which purports under Section 122 of the CGST Act is clearly illegal and arbitrary and without jurisdiction or authority of law and contrary to the aforesaid provisions of law, warranting interference by this Court. The impugned show cause notice dated 15.09.2022 issued by respondent No.1 at Annexure-C is hereby quashed - Petition allowed. Issues:1. Bar on initiating penalty proceedings under CGST Act after proceedings initiated by State GST Authorities.2. Interpretation of Sections 6 and 74 of the CGST Act.3. Legality of the impugned show cause notice under Section 122 of the CGST Act.Analysis:The petitioner sought to set aside a show cause notice issued by the 1st respondent under Section 122 of the GST Act, arguing that the penalty proceedings initiated by the CGST authorities after proceedings by the Karnataka State GST Authorities are barred under Section 6 (2) (b) of the CGST Act and Section 74 of the CGST Act. The petitioner contended that the impugned notice and subsequent proceedings should be quashed. The respondent, however, argued that the proceedings by the two authorities are different and there is no merit in quashing the notice. The court examined the material on record and noted that both the show cause notice and the adjudication order related to the same subject matter involving transactions between the petitioner and another party.The court referred to Section 6 of the CGST Act, which authorizes officers appointed under the State GST Act as proper officers for the CGST Act. It specifically highlighted that when proceedings have been initiated under the State GST Act, parallel proceedings under the CGST Act are impermissible. The court emphasized that initiating dual proceedings under both Acts is legally barred. Additionally, the court referenced Section 74 (11) of the CGST Act, which states that once proceedings under Sections 73 or 74 are initiated, penalty proceedings under Section 122 are deemed concluded. The court found that the impugned show cause notice under Section 122 of the CGST Act was illegal, arbitrary, and without jurisdiction, warranting interference.In conclusion, the court allowed the writ petition and quashed the impugned show cause notice dated 15.09.2022 issued by the 1st respondent. The judgment highlighted the legal restrictions on initiating penalty proceedings under the CGST Act after proceedings initiated by State GST Authorities, the interpretation of Sections 6 and 74 of the CGST Act, and the legality of the impugned show cause notice under Section 122 of the CGST Act.