2021 (9) TMI 713 - HC - GST

Jurisdiction of Summons issued by the respondent - search and seizure - Section 70 of the Central Goods and Services Tax Act, 2017 - HELD THAT - The ambiguity with regard to the initiation of enforcement action by the State and the Central authorities has been lingering for quite some time and the matter having been brought to the notice of the GST Council, in its meeting held during January 2017, it was decided that both the Central and State tax administrations have the power to take intelligence-based enforcement action in respect of the entire value chain. Based on such decision of the GST Council, the CBEC issued clarification dated 05.10.2018 - this puts an end to the ambiguity and it is clear from the said clarification that if an intelligence-based enforcement action is taken against a taxpayer, which is assigned to State tax authority, the Central tax authority is entitled to proceed with the matter and take it to the logical conclusions and the same principle is applicable vice versa. The scope of Section 6(2)(b) and Section 70 is different and distinct, as the former deals with any proceedings on a subject matter/same subject matter whereas, Section 70 deals with power to summon in an inquiry and therefore, the words proceedings and inquiry cannot be mixed up to read as if there is a bar for the respondent to invoke the power under Section 70 of the CGST Act. There is no ground made out by the appellant for quashing the summons issued by the respondent under Section 70 of the CGST Act - appeal dismissed.

Issues Involved:
1. Jurisdiction of the respondent to issue summons under Section 70 of the CGST Act.
2. Validity of the summons issued by the respondent during the pendency of proceedings initiated by the State tax authorities.
3. Interpretation of Section 6(2)(b) of the CGST Act.
4. Concurrent jurisdiction and cross-empowerment of State and Central tax authorities.
5. Maintainability of a writ petition challenging a summons.

Issue-wise Detailed Analysis:

1. Jurisdiction of the respondent to issue summons under Section 70 of the CGST Act:
The appellant contended that the respondent, being a Central authority, lacked jurisdiction to issue summons under Section 70 of the CGST Act as the appellant's company falls within the State jurisdiction under the SGST Act. The respondent argued that they have sufficient jurisdiction to invoke Section 70 and issue summons. The Court held that the respondent has the power to summon any person whose attendance is necessary to give evidence or produce documents in any inquiry, as provided under Section 70 of the CGST Act.

2. Validity of the summons issued by the respondent during the pendency of proceedings initiated by the State tax authorities:
The appellant argued that since the State tax authorities had already initiated action, the summons issued by the respondent is without jurisdiction and causes undue hardship. The respondent maintained that both State and Central authorities are empowered to initiate intelligence-based enforcement actions independently. The Court referred to the CBEC clarification dated 05.10.2018, which stated that both Central and State tax administrations have the power to take enforcement action irrespective of the administrative assignment of the taxpayer. Thus, the Court concluded that the respondent's summons was valid.

3. Interpretation of Section 6(2)(b) of the CGST Act:
The appellant relied on Section 6(2)(b) to argue that once the State authority has initiated proceedings, the Central authority cannot initiate proceedings on the same subject matter. The Court clarified that Section 6(2)(b) pertains to "proceedings on a subject matter," whereas Section 70 deals with "inquiry." The Court held that the scope of Section 6(2)(b) and Section 70 is different and distinct, and the bar under Section 6(2)(b) does not apply to the issuance of summons under Section 70.

4. Concurrent jurisdiction and cross-empowerment of State and Central tax authorities:
The Court noted the CBEC clarification and the GST Council's decision that both Central and State tax administrations are empowered to take intelligence-based enforcement actions. The Court held that the ambiguity regarding enforcement actions by Central and State authorities was resolved by the CBEC clarification, which allows both authorities to proceed independently and take actions to their logical conclusions.

5. Maintainability of a writ petition challenging a summons:
The respondent argued that a writ petition challenging a summons is not maintainable. The Court referred to various judgments, including the decision in G.K. Trading Company vs. Union of India, which distinguished between "proceedings" and "inquiry." The Court concluded that the issuance of summons for conducting an inquiry does not fall under the bar of Section 6(2)(b) and thus, the writ petition challenging the summons was not maintainable.

Conclusion:
The Court dismissed the writ appeal, holding that the respondent had the jurisdiction to issue summons under Section 70 of the CGST Act and that the summons was valid despite the ongoing proceedings by the State tax authorities. The Court emphasized the distinction between "proceedings" and "inquiry" and upheld the concurrent jurisdiction and cross-empowerment of State and Central tax authorities as clarified by the CBEC.

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