2025 (1) TMI 1511 - HC - GST

Suspension of the petitioner s GST registration - parallel enquiry by the State and Central GST authorities - violation of Rule 21 (c) of the Central Goods and Services Tax Rules 2017 - HELD THAT - The challenge to the SCN proceeds in light of the investigation which has been initiated by the Directorate General of GST Intelligence DGGI in terms of a SCN dated 01 July 2024 and which stands placed on our record as Annexure P-6. Admittedly the said SCN proceedings are yet to be concluded. From the counter affidavit which has been handed over by the State GST authorities in these proceedings it is evident that the pendency of proceedings before the DGGI is conceded. In view of the aforesaid we find ourselves unable to sustain the validity of the impugned SCN dated 25 April 2024. The impugned SCN dated 25 April 2024 is quashed - petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered by the Court was whether the Show Cause Notice (SCN) dated 25 April 2024 issued by the State GST authorities, which led to the suspension of the petitioner's GST registration, was valid given the parallel proceedings initiated by the Directorate General of GST Intelligence (DGGI) under a separate SCN dated 01 July 2024. The Court also examined whether such parallel proceedings violated Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act).

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents: The legal framework centers around Section 6(2)(b) of the CGST Act, which prohibits parallel proceedings by State and Central GST authorities on the same issue. The Court referenced its previous decision in the case of DLF Home Developers Limited, which established that simultaneous proceedings by different GST authorities on the same matter are not permissible.

Court's interpretation and reasoning: The Court reiterated its interpretation from the DLF Home Developers Limited case, emphasizing that parallel inquiries by State and Central authorities are not allowed. The Court noted that the State GST authorities were aware of the ongoing proceedings by the DGGI, as evidenced by their counter affidavit, which acknowledged the pendency of the DGGI's investigation.

Key evidence and findings: The Court considered the SCN dated 01 July 2024 issued by the DGGI and the counter affidavit from the State GST authorities, which confirmed the ongoing DGGI proceedings. The Court found that the issues addressed in the SCN from the State GST authorities overlapped with those being investigated by the DGGI.

Application of law to facts: Applying Section 6(2)(b) of the CGST Act, the Court determined that the State GST authorities could not proceed with their SCN dated 25 April 2024 because the same issues were already under investigation by the DGGI. The Court emphasized the need to avoid duplicative proceedings and upheld the principle established in the DLF Home Developers Limited case.

Treatment of competing arguments: The Court considered the arguments from both parties. The State GST authorities, through their counsel, conceded that the demand related to Input Tax Credit (ITC) reversal on non-business transactions and exempt supplies should be set aside, acknowledging the DGGI's jurisdiction over the matter. The petitioner argued against the validity of the SCN issued by the State GST authorities, citing the ongoing DGGI investigation.

Conclusions: The Court concluded that the SCN dated 25 April 2024 issued by the State GST authorities was invalid due to the ongoing DGGI proceedings on the same issues. The Court quashed the SCN, allowing the DGGI to continue and conclude its investigation.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Court reiterated its stance from the DLF Home Developers Limited case, stating: "We find merit in the contention that respondent no. 1 cannot adjudicate a demand, which is also the subject matter of other proceedings. Since, the period covered under the impugned order is also subsumed in the show cause notice issued by the DGGI, both the proceedings cannot be carried on simultaneously."

Core principles established: The judgment reinforced the principle that parallel proceedings by State and Central GST authorities on the same issue are not permissible under Section 6(2)(b) of the CGST Act. The Court emphasized the need to prevent duplicative investigations and uphold the integrity of the adjudication process.

Final determinations on each issue: The Court quashed the SCN dated 25 April 2024 issued by the State GST authorities, allowing the DGGI to continue its investigation as per the SCN dated 01 July 2024. The Court granted the State GST authorities the liberty to share relevant information with the DGGI and kept all contentions on merits open for future consideration.