Central authorities stayed from proceeding with fake input tax credit case due to overlapping State investigations under Section 6(2) CGST Act

The HC challenged a Show Cause cum Demand Notice dated 07.08.2024 regarding alleged fake input tax credit. The petitioner argued that respondent no. 4 was conducting parallel proceedings overlapping with State Excise Authorities' investigations, violating CBEC circular preventing multiplicity of proceedings. The Court noted that despite different seller firms being investigated, both State and Central authorities were examining similar facts. Citing Section 6(2)(a) and (b) of CGST Act 2017, which prohibits concurrent proceedings by Central authorities when State authorities have initiated proceedings on the same subject matter, the Court stayed further proceedings under the impugned notice until October 14, 2024, pending respondent no. 4's instructions on transferring proceedings to State Excise Tax Authorities.

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Issues:
1. Challenge to Show Cause cum Demand Notice dated 07.08.2024.
2. Parallel proceedings by respondent no. 4 concerning alleged fake input tax credit.
3. Overlapping investigation periods by State Excise Authorities and respondent no. 4.
4. Circular by CBEC on avoidance of multiplicity of proceedings.
5. Transfer of cases to State authorities.
6. Interpretation of provisions of Section 6(2)(a) and (b) of the Central Goods and Services Tax Act 2017.

Analysis:
The petitioner in this case seeks to challenge a Show Cause cum Demand Notice issued by respondent no. 4, alleging fake input tax credit. It is argued that respondent no. 4 is conducting parallel proceedings overlapping with investigations by the State Excise Authorities. The petitioner points out that the Circular issued by CBEC aims to prevent multiple investigations by State and Central Tax Authorities. The respondent no. 4 contends that since the seller firms under investigation are different and not examined by State authorities, the Central Tax Authorities can continue with the investigation. However, the Court notes that despite differences in alleged fake enterprises, the investigations by State and Central Authorities are based on similar if not the same facts.

The Court is made aware of Section 6(2)(a) and (b) of the Central Goods and Services Tax Act 2017, which states that if proceedings are initiated by a proper officer under the State Goods and Services Tax Act on a subject matter, no proceedings shall be initiated by the proper officer under the Central Act on the same subject matter. The Court finds the situation requires further examination and issues a notice to the concerned parties. The respondent no. 4 agrees to provide instructions on whether the proceedings covered by the impugned Show Cause cum Demand Notice can be transferred to the State Excise Tax Authorities. The Court schedules the next hearing for October 14, 2024, and stays further proceedings pursuant to the impugned Notice until then.

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