2024 (3) TMI 1216 - HC - GST

Proper officer - Jurisdiction of Initiate investigation proceedings by the Central GST and State GST authorities simultaneously - Absence of a proper Notification u/s 6 of the respective GST Enactments for cross-empowerment - Challenged the Jurisdiction of Central Authorities - Whether the petitioners who are assigned to either the Central Tax Authorities or the State Tax Authorities under respective Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and/or Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act, 2017) can be subjected to investigation and further proceeding by the counterparts under the respective GST Enactments - Validity of notices issued under Sections 62 67 of the TNGST Act, 2017 and orders passed u/s 73 and 74 of the TNGST Act, 2017 - HELD THAT - The returns to be filed by the Assessee's under the respective GST Enactments are same. They capture all the details under the respective GST Enactments applicable to an assessee. The returns are to be filed in the common portal as defined in Section 2(26) of the respective GST Enactments. As per Section 2(26) of the respective GST Enactments Common portal means the common goods and services tax electronic portal referred to in Section 146. That apart, the payment of tax whether under the CGST Act, 2017 or under TNGST Act, 2017 are at the same rate. The only difference that may arise at the time of payment of tax due to utilization of the Input Tax Credit (ITC) availed on the inward supplies and their cross utilization for discharging the tax liability in terms of Chapter-X of the respective GST Enactments r/w Chapter-IX of the respective GST Rules, 2017. As per Section 49A of the CGST Act, 2017, Input Tax Credit availed on account of Central Tax, State Tax or Union Territory Tax can be utilized towards payment of Integrated Tax, Central Tax, State Tax or the Union Territory Tax as the case may be, only after the Input Tax Credit available on account of Integrated Tax Credit has been first available on such cases. Section 49A of the CGST Act, which was inserted with effect from 01.02.2019 and notified vide Notification No.2/2019-CT 29/1-2019 as amended by GST (Amendment) Act 2018 (31 of 2018) has to be read in conjunction with Rules 88 A of the CGST Rules, 2017 as inserted by Notification No.16/2019-CT. A similar provision is absent under the TNGST Act, 2017 and TNGST Rules 2017. As per Section 88A of the TNGST Rules, 2017, Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order. Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully. Under Section 3 of the respective Central and State GST Enactments of 2017, both the Central Government and the State Government have appointed a class of officers for the purpose of enforcement of the respective GST Enactments of 2017. Apart from the officers mentioned u/s 4(1) of the respective Central GST Act, 2017 and TNGST Act, 2017, the Board (the Central Board of Indirect Taxes and Customs CBIC ) as defined in Section 2(16) of the CGST Act, 2017 and the Government as defined in Section 2(53) of TNGST Act, 2017, can appoint such officers as they may deem fit to be the officers under these GST Enactments. Thus, the Board can authorize any officer referred to in clauses (a) to (h) of Section 3 of CGST Act, 2017 to appoint any officers of the Central Tax below the rank of Assistant Commissioner of Central Tax to be the Central Tax Officer for the administration of the CGST Act, 2017 alone. Thus, u/s 4(2) of the CGST Act, 2017, these can be only a linear delegation. Under Section 4(2) of the TNGST Act, 2017, all other officers shall have jurisdiction over the whole of the State or over such local areas as the Commissioner may, by an order, specify, in respect of all or any of the functions assigned to them, subject to such conditions as may be specified. Thus, the Commissioner has power to delegate powers under the Act to other Officer specified in Sub-clause (c) to (f) to Section 3 of the TNGST Act, 2017. There is no cross-empowerment u/s 4(2) of the TNGST Act, 2017. Thus, neither the Board u/s 4(1) and (2) of CGST Act, 2017 nor the Government and/or the Commissioner u/s 4(1) and (2) of SGST Act, 2017 can appoint such officers in addition to the officer notified under Section 3 of the respective Act. Thus, the Board can appoint and delegate only to Central Tax Officers appointed under the CGST Act, 2017 for CGST Act, 2017 and the Government and/or the Commissioner can appoint and delegate only to State Tax Officers appointed under the TNGST Act, 2017 for TNGST Act, 2017. These provisions are pari materia with Section 4 of the Customs Act, 1962 and Section 12(E) of the Central Excise Act, 1944. Section 6(1) of the respective GST Enactments empowers Government to issue notification on the recommendation of GST Council for cross-empowerment. However, no notification has been issued except u/s 6(1) of the respective GST Enactments for the purpose of refund although officers from the Central GST and State GST are proper officers under the respective GST Enactments. Since, no notifications have been issued for cross-empowerment with advise of GST Council, except for the purpose of refund of tax under Chapter-XI of the respective GST Enactments r/w Chapter X of the respective GST Rules, impugned proceedings are to be held without jurisdiction. Consequently, the impugned proceedings are liable to be interfered in these writ petitions. Thus, if an assessee has been assigned administratively with the Central Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017, the State Authorities have no jurisdiction to interfere with the assessment proceedings in absence of a corresponding Notification u/s 6 of the respective GST Enactments. Similarly, if an assessee has been assigned to the State Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017, the officers of the Central GST cannot interfere although they may have such intelligence regarding the alleged violation of the Acts and Rules by an assessee. The manner in which the provisions have been designed are to ensure that there is no cross interference by the counterparts. Only exception provided is u/s 6 of the respective GST enactement. Therefore, in absence of a notification for cross-empowerment, the action taken by the respondents are without jurisdiction. Officers under the State or Central Tax Administration as the case may be cannot usurp the power of investigation or adjudication of an assesse who is not assigned to them. Therefore, the proceedings initiated by the respondents so far against the respective petitioners by the Authorities other than the Authority to whom they have been assigned to are to be held as without jurisdiction. Therefore, the impugned proceedings warrants interference. At the same time, it is noticed that there is possibly case made out against each of the petitioners and since same power ought to have been exercised by the respective counterparts of the respondents, namely the Central Authority/State Authority as the case may be, to whom the respective petitioners have been assigned, proceedings should be initiated against each of the petitioners by the Authority to whom they have been assigned for the purported loss of Revenue under the respective GST Enactments. Therefore, while quashing the impugned proceedings, there shall be a direction to the Central Authority/State Authority as the case may be to whom the respective petitioners have been assigned for administrative purpose to initiate appropriate proceedings afresh against them strictly in accordance with the provisions of the respective GST Enactments and GST Enactments Rules and Circular issued thereunder. The time between the initiation of the proceedings impugned in these writ petitions and time during the pendency of the present writ petitions till the date of receipt of this order shall stand excluded for the purpose of computation of limitation. These writ petitions are disposed with the above observations.

Summary

Issues Involved:
1. Jurisdiction of Central and State Tax Authorities under respective GST Acts.
2. Validity of cross-empowerment without proper notification under Section 6 of respective GST Acts.
3. Legality of proceedings initiated by Central Authorities against assessees assigned to State Authorities and vice versa.

Detailed Analysis:

1. Jurisdiction of Central and State Tax Authorities under respective GST Acts:

The primary issue in these writ petitions is whether the petitioners, assigned to either the Central Tax Authorities or the State Tax Authorities under the CGST Act, 2017 and/or the TNGST Act, 2017, can be subjected to investigation and further proceedings by the counterparts under the respective GST Enactments. The petitioners challenged the proceedings initiated by the Central Authorities on the grounds of lack of jurisdiction, asserting that they were assigned to the State Authorities for administrative purposes.

2. Validity of Cross-Empowerment Without Proper Notification Under Section 6 of Respective GST Acts:

The petitioners argued that in the absence of a proper notification under Section 6 of the respective GST Enactments for cross-empowerment, the impugned proceedings by the respective counterparts were without jurisdiction. Section 6 of the CGST Act, 2017, and the TNGST Act, 2017, allow for cross-empowerment of officers from Central and State Tax Authorities, subject to conditions specified by the government on the recommendations of the GST Council. However, no notifications have been issued for cross-empowerment except for the purpose of refunds.

3. Legality of Proceedings Initiated by Central Authorities Against Assessees Assigned to State Authorities and Vice Versa:

The judgment highlighted that the GST Council had decided on a division of taxpayers between Central and State Tax Authorities to ensure a single interface, as reflected in Circular No.01/2017-GST (Council) dated 20.09.2017. The circular allocated 90% of taxpayers with turnover below Rs. 1.5 crores to State Authorities and the remaining 10% to Central Authorities, while taxpayers with turnover above Rs. 1.5 crores were divided equally.

The court noted that the returns filed by assessees under the respective GST Enactments are the same and are to be filed on a common portal. The returns capture all details under the respective GST Enactments applicable to an assessee, and the payment of tax under the CGST Act, 2017, and TNGST Act, 2017, is at the same rate.

The court emphasized that the powers of assessment are vested with the proper officers to whom the assessees have been assigned. Therefore, in the absence of a notification for cross-empowerment under Section 6 of the respective GST Enactments, the actions taken by the respondents (Central or State Authorities) against the petitioners assigned to the other authority are without jurisdiction.

Conclusion:

The court concluded that the proceedings initiated by the respondents against the petitioners by authorities other than those to whom they have been assigned are without jurisdiction and warrant interference. The court quashed the impugned proceedings and directed the respective authorities (Central or State) to whom the petitioners have been assigned to initiate appropriate proceedings afresh against them in accordance with the provisions of the respective GST Enactments and Rules. The time between the initiation of the impugned proceedings and the pendency of the writ petitions is to be excluded for the purpose of computation of limitation.

The writ petitions were disposed of with the above observations, and no costs were awarded. Consequently, connected miscellaneous petitions were closed.