TaxTMI 
TaxTMI 
2022 (1) TMI 554
X X X X Extracts X X X X
X X X X Extracts X X X X
....w Delhi (hereinafter referred to as the 'CBEC'), and are therefore, being considered and disposed of by this common judgment. W.P.(C) 2420/2021 2. In W.P.(C) 2420 of 2021, it is the case of the petitioner that it is engaged in the manufacturing and supply of tobacco products. It obtained GST Registration on 21.10.2019 from the jurisdictional Office situated at Gautam Buddh Nagar, Uttar Pradesh, as the petitioner's firm was registered and had its principal place of business within the jurisdiction of the said Commissionerate. 3. The petitioner commenced its commercial operations in the month of December 2019. 4. On 19.03.2020, a search was carried out at the petitioner's premises by the CGST Officers from Gautam Buddh Nagar. The petitioner alleges that no shortcomings were noticed in the said search operation. Thereafter, a Show Cause Notice dated 20.04.2020 was issued by the Assistant Commissioner, Central Tax Division-I, Gautam Buddh Nagar, Uttar Pradesh, calling upon the petitioner to show cause why its refund claim, filed for the month of February 2020 under Section 54 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the 'CGST Act'), be not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s on 01.02.2021 to the petitioner. 11. On 04.02.2021, the DGGI, Ghaziabad, also searched the premises of the petitioner. 12. The premises of the petitioner was again searched on 13.02.2021 by the DGGI, Ahmedabad Zonal Unit (in short, 'AZU'). 13. Being aggrieved of such multiple search operations and summons being issued, the petitioner has filed the present writ petition. W.P.(C) 4036/2021 14. In W.P.(C) 4036 of 2021, the petitioner contends that it is a proprietorship firm and is engaged in the manufacturing of flavouring compound under the brand 'SSM Super Strong'; 'SSM Super'; 'QM1000'; 'QM-500'; flavoured tobacco extract under the brand 'Azeem'; flavoured tobacco under the brand 'TBH-300'; 'TBH-341'; 'Revelry25'; and 'Frolic-25'. The petitioner's firm is registered with the GST Department, South Delhi Commissionerate. 15. On 04.09.2019, the Officers from the Anti-Evasion, CGST, Delhi East and South Commissionerate, carried out the search operation at the premises of the petitioner. The search warrant dated 04.09.2019 had been issued by the Joint Commissioner (AE), CGST, Delhi East Commissionerate. 16. On 27.09.2021, yet another search operation was carried ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of M/s Anmol Traders v. State of Gujarat, passed in R/Special Civil Application No. 23279 of 2019. 23. They submit that the Circular dated 05.10.2018, having been issued under Section 168 of the CGST Act, is binding on the Department. In support of their submissions, they place reliance on the following judgments: a. Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam; (2003) 5 SCC 528; b. Commissioner of Customs v. Indian Oil Corporation Ltd. & Anr., (2004) 3 SCC 488; c. Collector of Central Excise, Vadodara v. Dhiren Chemical Industries, (2002) 10 SCC 64; d. UCO Bank, Calcutta v. Commissioner of Income Tax, W.B, (1999) 4 SCC 599; and e. Catholic Syrian Bank Ltd. v. Commissioner of Income Tax, Thrissur, (2012) 3 SCC 784. 24. The learned senior counsel for the petitioners submits that the CGST Act does not, anywhere, refer to 'investigation' or to the Officers who are authorised or empowered to carry out a particular investigation. The powers under the CGST Act are conferred only on 'proper officer' defined under Section 2(91) of the CGST Act. Placing reliance on Section 6(1) of the CGST, he submits that the Officers a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e submits that Section 6 of the CGST Act carries forward the same intention, with the 'proper officer' issuing an order under one Act being empowered to issue an order under the other Act as well. 28. He submits that in terms of Section(s) 3 and 5 of the CGST Act and the SGST Act, the Central Government and the State Governments have issued notifications empowering the 'proper officers'. By the Notification No. 02 of 2017 dated 19.06.2017, issued by the CBEC, various Central Tax Officers have been appointed vesting them with jurisdiction on specified territories. They therefore, exercise limited territorial jurisdiction. Whereas, vide Notification No. 14 of 2017 dated 01.07.2017, the CBEC has appointed the Central Tax Officers with All India jurisdiction. Similarly, the State Tax Officers have been appointed by the respective State Governments giving limited territorial jurisdictions to the State Tax Officers or vesting them with jurisdiction over the whole State. As an example, he has referred to the Notification dated 23.06.2017, issued by the Government of Maharashtra, separately empowering the State Tax Officers with limited territorial jurisdictions and those having jurisdi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Inc. is one of the recipient of such fake ITC generated from such fake firms, who are found to have claimed fraudulent refund of accumulated ITC on account of such fake supplies. Accordingly, investigation against them were initiated for the specific issue of filing of fraudulent refund claims. 3. CGST, Gautam Buddha Nagar Commissionerate 07.10.2020 M/s Commodities IntertradeGSTIN 9AFTPB2263G1ZE had applied for refund of Rs. 96,12,360/- against export of services which was deviating from their normal trade business, before the CGST, Noida Commissionerate. The service was shown to have been procured from M/s Mridul Tobie Inc by M/s Commodities Inter-trade. Accordingly, the CGST Noida commissionerate has requested the GBN Commissionerate to verify the facts in this regard. In pursuance to the same the CGST GBN Commissionerate conducted the search at the premises of M/s Mridul Tobie Inc. It is pertinent to mention that later on M/s Commodities Intertrade has reversed the entire ITC amount of Rs. 96,12,360/- vide DRC -03 dated 27.01.2021. Thus, this search was conducted at the premises of M/s Mridul Tobie Inc only with reference to the refund claimed by M/s Commodities Int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pes and cigarettes", a tobacco product falling under CTH 24031910, is highly sensitive from tax evasion angle as it is subject to GST @ 28% and Compensation Cess @ 290% (Total 318%) and any fictitious paper transaction in "Smoking Mixture" is highly rewarding for availment of ITC unlawfully. The evidences available on record indicated a deeprooted conspiracy by some persons who were the masterminds behind this modus operandi to defraud the public exchequer. Investigations also revealed that the petitioner firm M/s Mridul Tobie Inc, Noida is also one of the beneficiaries of fake ITC generated in the name of some of the non-existent entities by paper transactions without corresponding supply of goods, including "smoking mixture for pipes and cigarettes". Further, investigation also includes the issue of Overvaluation and Misclassification of the product by M/s Mridul Tobie Inc. Remarks: During search operation, it was observed that the goods seized by the DGGI, Delhi Zonal Unit under panchanama dated 14.01.2021 were not available at the premises. This search was conducted by DGGI, Ahmedabad Zonal Unit with the help of DGGI, Delhi Zonal Unit so the officers of Delhi Zonal Unit were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itioner, the DGGI, AZU, vide letter dated 01.03.2021, had requested all the concerned formations of the DGGI to transfer the investigation to the DGGI, AZU. The CGST, Gautam Buddh Nagar Commissionerate was also requested, vide letter dated 30.03.2021, to transfer its investigation to the DGGI, AZU. In response to the said request, the investigation being carried out by different CGST formations have been transferred to the DGGI, AZU. In this regard, he has referred to the details provided in the form of a table in the additional-affidavit, which is reproduced herein-below: Sr.No. Name of the office Referral Letter No. Date Remarks 1 DGGI, Ahmedabad Zonal Unit DGGI/AZU/Gr-'A'/12(4)513/2020-21 Annexed as Exhibit-II 01.03.2021 DGGI, Ahmedabad Zonal Unit vide its letter dated 01.03.2021 had requested DGGI, Delhi Zonal Unit and DGGI, Lucknow Zonal Unit to transfer the investigation being conducted by them against M/s Mridul Tobie Inc. 2 DGGI, Lucknow Zonal Unit DGGI/ARU/Gr'A'/Panch/04/2021 Annexed as Exhibit-III A & III B 09.03.2021 & 30.07.2021 In reply to the letter of DGGI, Ahmedabad Zonal Unit dated 01.03.2021, DGGI Lucknow Zonal Unit vid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bie Inc. In respect of all the aspects, viz. Availment of ineligible ITC, valuation, business model etc. They have requested DGGI, AHMEDABAD ZONAL UNIT to conduct the investigation against M/s. Mridul Tobie Inc. 33. He submits that insofar as the issue of refund and freezing of the bank accounts is concerned, the CGST, Gautam Buddh Nagar Commissionerate, shall continue with the said proceedings. 34. As far as the W.P.(C) 4036 of 2021 is concerned, the learned ASG has drawn our attention to the short counter-affidavit filed by the respondent no. 1 - the Commissioner, Delhi West; and the common counter-affidavit filed by the respondent no(s). 2, 5 and 6 - the Officers of DGGI, AZU, to contend that the DGGI, AZU, had received intelligence that certain entities based in Delhi-NCR region of Domestic Tariff Area had shown supply of low-value tobacco and tobacco-related products to certain Special Economic Zone Units in Kandla Special Economic Zone at highly overvalued rates so as to avail ineligible refund of the ITC. Based on this information, search operations were carried out at various locations, including the petitioner. He further submits that the Deputy Commissioner, CGST De....
X X X X Extracts X X X X
X X X X Extracts X X X X
....posed by the Union or by such State. (2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. Explanation.-- The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of article 279A, take effect from the date recommended by the Goods and Services Tax Council." 38. The Supreme Court in VKC Footsteps India Pvt. Ltd. (supra) highlighted the changes brought about by Article 246A of the Constitution, in the following words: "34. Article 246A has brought about several changes in the constitutional scheme: (i) Firstly, Article 246A defines the source of power as well as the field of legislation (with respect to goods and services tax) obviating the need to travel to the Seventh Schedule; (ii) Secondly, the provisions of Article 246A are available both to Parliament and the State legislatures, save and except for the exclusive power of Parliament to enact GST legislation where the supply of goods or services takes place in the course of inter-State trade or co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts together are to have a weightage of two-thirds of the total votes cast. Every decision of the Council is to be taken by a majority of not less than threefourths of the weighted votes of the members present and voting. The principle of harmony does not postulate exact coincidence in all points of comparison or reference. Harmony is a postulate of cooperative federalism and is founded on the principle of mutual coexistence, deference and equality of the coexisting units." 42. Exercising power under Article 246A of the Constitution, the CGST Act, UGST Act and the IGST Act have been promulgated by the Parliament. We are informed that various State Governments have also promulgated the SGST Act, provisions of which are almost pari materia to the CGST Act. 43. Various powers, like under Section 67 (Power of inspection, search and seizure); Section 70 (power to summon persons to give evidence and produce documents); Section 73 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts); and Section 74 (Determination of tax not paid or short ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rial jurisdiction. There would also be a Central Tax Officer who would have jurisdiction over such an entity as such officer exercises pan-India jurisdiction 52. We are further informed that for administrative purposes, a taxpayer in a particular area is assigned to the Central Tax Officer or the State Tax Officers exercising jurisdiction over that particular area. For example, in the W.P.(C) 2420 of 2021, the petitioner has been assigned the SGST Commissionerate of Gautam Buddh Nagar, while in W.P.(C) 4036 of 2021, the petitioner has been assigned to SGST Commissionerate, South Delhi. 53. There would, however, also be a Central Tax Officer having territorial jurisdiction over the area where the taxable entity is located. There would also be a transaction having both CGST as also SGST component/implication. 54. To achieve the goal of harmonized goods and service tax structure and in the spirit of cooperative federalism, Section 6(1) of the CGST Act and pari materia provisions in the SGST Act provide for cross-empowerment of the Central Tax Officers and the State Tax Officers. 54. Section 6 of the CGST Act is reproduced herein below: "6. Authorisation of officer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r provisions in the reverse are contained in the various SGST Act(s), with the State Tax Officer being required to pass an order under the CGST Act while passing an order under the SGST Act, and being prohibited from initiating any proceedings on the subject matter on which the Central Tax officer has already initiated some proceeding. 59. Section 6 of the CGST Act is clearly guided by the object of providing a common national market of goods and services and to eliminate the subjection of the taxpayers to multiple jurisdictions. It aims to provide protection to the taxpayers against being subjected to multiple agencies for the same set of transactions, at the same time empowering the Officers under the CGST Act or the SGST Act or the UTGST Act to pass a comprehensive order and take action, keeping in view and extending to the other Acts. There should, therefore, be only one order insofar as the tax entity is concerned. 60. To give effect to the above intent, Section 6(2)(b) of the CGST Act states that where the proper officer under the SGST Act or the UTGST Act has initiated any proceedings on a subject matter, the Central Tax Officer shall not initiate proceedings on the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nst a taxpayer administratively assigned to the Central tax authority. 6. It is also informed that GSTN is already making changes in the IT system in this regard. With best Wishes, Your Sincerely, (Mahender Singh) To All Principal Chief Commissioners/ Chief Commissioner of Central Tax/ Principal Directors General/ Directors General" 63. The above Circular is intended to give effect to the mandate of Section 6 of the CGST Act and the pari materia provisions in the State Act(s). It states that the mandate of Section 6 shall apply even to the "intelligence based enforcement action". It clarifies that the Central Tax Officers as also the State Tax Officers are authorized to initiate intelligence based enforcement action on the entire taxpayer's base "irrespective of the administrative assignment of the taxpayer to any authority" and that the authority which initiates such action is empowered to complete the entire process of investigation, issuance of Show Cause Notice, adjudication, recover, etcetera. It further clarifies that even though the taxpayer may be administratively assigned to the other authority- State or Centre as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny between the Centre and the State in the implementation of the GST regime, with the two not jostling for jurisdiction over a taxpayer. It is, however, not intended to answer a situation where due to complexity or vastness of the inquiry or proceedings or involvement of number of taxpayers or otherwise, one authority willingly cedes jurisdiction to the other which also has jurisdiction over such inquiry/proceedings/taxpayers. 67. Neither Section 6 of the CGST Act nor the SGST Act nor the Circular dated 05.10.2018, therefore, apply to the fact situation presented by the two petitions before us as they do not operate and are not intended to operate in a situation where the 'intelligence based enforcement action' has repercussion or involvement of taxpayers beyond the territorial jurisdictional limit of the officer initiating such an action. It also does not address a situating where two or more Officers, may be Central or State or only Central or State, initiate separate 'intelligence based enforcement action' but having a common thread or involvement of multiple taxpayers, like a case of conspiracy. In the first case, the officer initiating the 'intelligence based enforcement ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cture that the GST regime seeks to bring about. 69. In the present set of writ petitions, the respondents have explained that to bring investigation under one umbrella, the DGGI AZU sought transfer of investigations being carried out by different Commissionerate(s) to itself. This was acceded to by each Commissionerate in both the writ petitions. We have not been shown any prohibition in the CGST Act or the SGST Act to such transfer of investigation. Neither it has been contended that the DGGI, AZU, would otherwise lack jurisdiction to carry out an investigation against the petitioners. It is not denied by the petitioners that the DGGI, AZU has a pan-India jurisdiction. DGGI, AZU would, as Central Tax Officer and in compliance with the mandate of Section 6 of the CGST Act and the SGST Act, have to pass comprehensive order, both under the CGST Act as also the SGST Act. 70. We, therefore, find that the Circular dated 05.10.2018 has no application to the peculiar facts in the present set of writ petitions. 71. The judgment of the High Court of Gujarat in Bhawani Textile (supra) is also not applicable to the facts in the present set of writ petitions. In fact, the said judgmen....