2024 (10) TMI 1240 - HC - GST

Challenge to SCN demanding input tax credit availed by the Petitioner along with interest and penalty - ITC in respect of the IGST paid on manpower supply services received by the Petitioner during the period 2017- 2022 - HELD THAT - A perusal of the material on record and the submissions made by both sides will clearly indicate that prior to the State GST Authorities issuing the impugned Show Cause Notices at Annexures A, Al and A2 is concerned, the Central GST Authorities had already initiated proceedings as against the petitioner and consequently, in the light of Section 6(2)(b) of the KGST Act, 2017 which contemplates a complete bar / embargo on the State GST Authorities to initiate proceedings in a situation where the Central GST Authorities had already initiated proceedings as against the petitioner in respect of the same subject matter. The impugned Show Cause Notices at Annexures A, Al and A2 are clearly illegal, arbitrary and without jurisdiction or authority of law and contrary to the aforesaid statutory provisions and the same deserve to be quashed. The challenge to the impugned Show Cause Notice at Annexure-B can be disposed of by directing the petitioner to submit a suitable reply together with the relevant documents and by directing the concerned respondent Nos.1, 3 and 4, Central GST Authorities to consider the same and proceed further in accordance with law bearing in mind the observations made (Section 13(3)(C) of the CGST Act, 2017, Section 128A of the CGST Act, 2017, Circular No. 211/5/24- GST dated 26.06.2024 etc.). The impugned Show Cause Notices at Annexures A, A1 and A2 dated 05.08.2023, 05.08.2023 and 06.10.2023, respectively, are hereby quashed - The petition is allowed in part.

Summary

Issues:
Challenge to show cause notices demanding input tax credit availed, jurisdiction of State GST Authorities, denial of input tax credit, liability to pay interest on GST, applicability of Circular No. 211/5/24-GST, parallel proceedings by Central and State GST Authorities.

Analysis:
1. The petitioner sought writs to quash show cause notices demanding input tax credit availed along with interest and penalty. The petitioner was engaged in business related to vehicles and registered under CGST Act, with respondents being CGST and State GST Authorities. The petitioner challenged show cause notices issued by both Central and State GST Authorities.

2. The petitioner argued that State GST Authorities initiated proceedings after Central GST Authorities, violating Section 6(2)(b) of KGST Act, which bars State GST Authorities from parallel proceedings. The court found the State GST Authorities' notices illegal, arbitrary, and lacking jurisdiction, ordering their quashing.

3. Regarding the show cause notice by Central GST Authorities denying input tax credit, the petitioner contended that denial under Section 16(4) of CGST Act was against Circular No. 211/5/24-GST and a previous court judgment. The court referenced Circular provisions allowing ITC and rejecting interest liability on belated claims, directing the petitioner to reply to the notice.

4. The court highlighted the Circular's relevance and the court judgment, emphasizing the petitioner's entitlement to ITC and absence of interest liability for delayed claims. It directed Central GST Authorities to consider the petitioner's reply, ensuring compliance with statutory provisions and Circular guidelines.

5. Ultimately, the court partially allowed the petition, quashing the impugned show cause notices by State and Central GST Authorities. It granted the petitioner the opportunity to respond to the Central GST Authorities' notice, directing them to consider the reply and make decisions within four weeks, adhering to legal provisions, Circulars, and court judgments.