Parallel tax orders by Central and State authorities challenged, State order set aside with conditional deposit requirement

The Madras HC addressed a challenge to parallel orders passed by Central Authority (05.12.2023) and State Authority (20.02.2024). The court referenced its earlier decision in Tvl.Varadhan Infrastructure case, which balanced assessee and revenue interests by directing fresh proceedings while excluding limitation period. However, this precedent was stayed by the Division Bench and Kerala HC took a contrary view. The court held that even if petitioner's appeal against the Central Authority order succeeds, proceedings by the assessing State Authority cannot be challenged on jurisdictional grounds. The impugned State Authority order dated 20.02.2024 was set aside conditionally, requiring petitioner to deposit 15% of disputed tax (in addition to 10% already deposited for the earlier appeal). The petition was disposed of on these terms.

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ISSUES:

• Whether two separate orders for the same assessment year, one by the Central Authority and another by the State Authority, can be validly passed.
• Whether the proceedings initiated by the State Authority can be challenged on the ground of jurisdiction after an appeal is filed against the Central Authority's order for the same period.
• Appropriate conditions for quashing the impugned order passed by the State Authority.
• Timeframe and procedural directions for disposal of appeals and fresh proceedings in GST assessment matters.

RULINGS / HOLDINGS:

• The Court held that there is "no justification in passing two orders" by both Central and State Authorities for the same assessment period, implying such dual orders are impermissible.
• Proceedings initiated by the State Authority cannot be challenged on the ground of jurisdiction even if the appeal against the Central Authority's order is allowed.
• The impugned order dated 20.02.2024 passed by the State Authority is set aside on the condition that the petitioner deposits 15% of the disputed tax, considering the petitioner has already deposited 10% at the time of filing appeal against the Central Authority's order.
• The impugned order shall be treated as a corrigendum to the notice in Form GST DRC 01, and the petitioner is directed to file a reply within 30 days along with the pre-deposit.
• The respondent is directed to pass a fresh order on merits and in accordance with law within three months after hearing the petitioner.
• The appeal filed by the petitioner against the Central Authority's order is also directed to be disposed of within three months from the date of receipt of the Court's order.

RATIONALE:

• The Court applied the principles laid down in a prior batch of cases balancing the interest of the assessee and revenue, referencing a cautious order that mandated initiation of fresh proceedings "strictly in accordance with the provisions of the respective GST Enactments and GST Enactments Rules and Circular issued thereunder."
• The Court acknowledged the stay on the prior order by the Division Bench and noted differing views from other High Courts, indicating ongoing judicial divergence on the issue.
• The decision reflects a pragmatic approach to avoid multiplicity of proceedings and to ensure fair opportunity to the petitioner while safeguarding revenue interests through conditional pre-deposit requirements.
• The directions for expeditious disposal of appeals and fresh proceedings underscore the Court's intent to reduce prolonged litigation and ensure timely resolution in GST assessment disputes.

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