2025 (8) TMI 1129 - HC - GST

Parallel DGGI probe no bar to State tax Section 73 CGST demand; writ dismissed, appeal remedy open

HC dismissed the writ petition challenging the order-in-original confirming demand of tax, interest and penalty for wrongful availment of ITC on invoices ... Availment of Input Tax Credit (ITC) - credit availed on invoices, without receipt of goods or services from certain suppliers - HELD THAT:- On a mere perusal of the letter dated 13.02.2024, addressed by the Additional Director, DGGI, to the Principal Commissioner, Hyderabad CGST Commissionerate, in respect of the investigation conducted against the petitioner for availment of ITC based on invoices without receipt of goods or services from the main suppliers, it would appear that part payment of the tax, penalty and interest under DRT-03 has been made from 23.11.2021 onwards till 06.01.2024. This Court, in exercise of writ jurisdiction, is not required to scrutinize whether the proceedings under the show cause notice dated 04.08.2022, were overlapping the proceedings under the investigation conducted by Additional Director, DGGI. It was the duty of the petitioner to appear and file his reply before the assessing authority, respondent No.2, questioning the same. Even otherwise, letter dated 13.02.2024, of the Additional Director, DGGI, clearly mentioned at para 3 quoted above, that conclusion of the case proceedings in the said case is limited to the ITC received from the above mentioned suppliers and that too, for the above mentioned amount only. With regard to the ITC availed on the basis of other invoices from other suppliers, the jurisdictional officers may take action as deemed fit in case of any irregularities. The conclusion recorded by the Additional Director, DGGI, was without prejudice to any action against the petitioner for his liability under the CGST Act or TGST Act or any other Act in force. In the present case, the investigation undertaken by the Additional Director, DGGI, did not amount to commencement of proceedings. Moreover, the petitioner/assessee was required to inform the same, in writing, to the authority that has initiated the subsequent inquiry or investigation - In the instant case, a show cause notice for initiation of proceedings under Section 73 of the CGST Act were issued by the State Tax authority, where the petitioner ought to have appeared and explained its position, which it has failed to do. There are no reason to interfere with the impugned order-in-original dated 28.02.2025 passed by respondent No.2. However, the petitioner may be at liberty to avail the appellate remedy as is permissible under law - petition dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether uploading a show cause notice on the common GST portal constitutes valid service under the CGST Act. 2. Whether conclusion of an investigation by a central investigative authority under Sections 74(5)-74(6) of the CGST Act precludes subsequent adjudication by the State tax authority for overlapping tax periods or invoices. 3. Whether parallel or prior investigative action by one tax authority amounts to 'initiation of proceedings' so as to bar another tax authority from issuing a show cause notice under Section 6(2) and related principles. 4. Whether failure to participate before the assessing authority, and availability of statutory appellate remedy, justifies refusal of writ relief on merits or on grounds of alternative remedy. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of service by uploading on the common GST portal Legal framework: Section 169(1)(d)-(3) of the CGST Act (service methods) provides that decisions, orders, summons, notices or other communications may be served by specified modes including making them available on the common portal; subsection (2) deems such communications served on the date tendered/published/affixed and subsection (3) deems receipt after a normal postal transit period unless contrary is proved. Precedent treatment: The Court accepted the statutory text and its deeming provisions as authoritative for service by electronic publication on the portal. Interpretation and reasoning: The Court held that uploading the show cause notice on the GSTIN portal satisfied the statutory modes of service; the deeming provisions remove the need for physical posting or separate email where the statute prescribes portal publication. The petitioner's assertion of not having actual notice did not negate the statutory presumption of service, absent proof to rebut the statutory deeming. Ratio vs. Obiter: Ratio - postal/electronic publication on the common portal is a valid mode of service under the CGST Act and is deemed served per statutory provisions; a taxpayer bears the burden to rebut the statutory presumption. Conclusion: Service by uploading on the common portal was valid and the petitioner's non-receipt claim did not invalidate service in absence of rebuttal. Issue 2: Effect of closure of investigation under Sections 74(5)/(6) on subsequent State adjudication Legal framework: Sections 74(5)-(6) permit a central investigative authority to conclude proceedings in specific matters; those conclusions may be limited in scope and may be expressed to be without prejudice to other action under the CGST/TGST Acts. Precedent treatment: The Court relied on the content of the investigative authority's closure communication and applied its plain terms rather than treating it as an absolute bar to further action. Interpretation and reasoning: The closure letter expressly limited its conclusion to ITC received from specified suppliers and to a specified amount, and further stated that it was without prejudice to any other action the taxpayer may be liable for under the CGST/TGST Acts. The Court reasoned that such a limited closure does not automatically oust jurisdiction of the State authority to adjudicate alleged irregularities relating to other invoices, suppliers or tax periods. Whether the invoices investigated overlap with the tax period subject to the State show cause notice was a matter for the assessing officer and required the taxpayer's participation to raise and establish overlap; absent participation, the Court would not undertake that fact-intensive scrutiny in writ jurisdiction. Ratio vs. Obiter: Ratio - a limited closure by an investigative authority, especially when expressed to be without prejudice and limited in scope, does not preclude subsequent adjudication by another tax authority on other invoices/periods; questions of overlap are to be addressed in the adjudicatory process. Conclusion: The investigatory closure did not bar the State authority from issuing the show cause notice or adjudicating alleged liabilities outside the narrow scope recorded by the investigative authority. Issue 3: Whether investigative action equates to 'initiation of proceedings' and duty to inform under parallel-proceedings guidance Legal framework: Section 6(2) allocates jurisdiction between Central and State tax administrations; guidance from the Apex Court (as cited by the Court) clarifies that 'initiation of any proceedings' refers to formal commencement of adjudicatory proceedings by issuance of a show cause notice and does not include issuance of summons, searches or seizures. The guidance also prescribes that an assessee informed of overlapping inquiries must notify the later-initiating authority in writing. Precedent treatment: The Court followed the Apex Court's interpretation distinguishing investigative acts from formal initiation of adjudicatory proceedings and the ancillary guideline imposing a duty on taxpayers to inform a subsequently acting authority if already subject to inquiry. Interpretation and reasoning: Applying that principle, the Court held that the DGGI's investigation did not amount to the formal initiation of adjudicatory proceedings that would prohibit the State authority from issuing a show cause notice. Further, the taxpayer had a duty, upon awareness of parallel inquiries, to inform the authority initiating subsequent inquiry in writing; failure to do so weighed against the taxpayer's contention that the State action was barred. Ratio vs. Obiter: Ratio - investigative steps by one authority are not equivalent to formal initiation of adjudication under Section 6(2); an assessee must notify authorities in writing when parallel proceedings exist, and failure to do so undermines claims of being precluded from contesting subsequent adjudication. Conclusion: The DGGI's investigation did not preclude State adjudication; the taxpayer's failure to notify the State authority of the prior investigation was a procedural omission that did not invalidate the show cause notice. Issue 4: Availability of statutory appellate remedy and appropriate use of writ jurisdiction Legal framework: The TGST scheme provides a statutory appellate remedy (Section 107 equivalent) to challenge assessment and penalty orders; writ jurisdiction is discretionary and not to supplant efficacious statutory remedies. Precedent treatment: The Court adhered to the well-established principle that where an effective alternative statutory remedy exists, relief in writ jurisdiction is not warranted absent extraordinary circumstances. Interpretation and reasoning: The assessing order was challenged in writ without the petitioner first availing the statutory appeal. The Court observed the absence of participation at the adjudicatory stage and found no exceptional circumstances to bypass statutory appellate process; fact-intensive disputes (such as alleged overlap with earlier investigation) should be ventilated before the adjudicatory and appellate fora, not resolved by the writ court. The Court expressly refrained from adjudicating merits. Ratio vs. Obiter: Ratio - when an effective statutory appeal exists, and no exceptional circumstances are shown, the writ jurisdiction will not ordinarily intervene to set aside assessment orders; taxpayers should avail statutory remedies and participate in adjudication. Conclusion: Writ relief was refused; the petitioner was directed to pursue available appellate remedies and the writ petition was dismissed without adjudication on merits.