2024 (9) TMI 1236 - HC - GST

Supervisory jurisdiction or under the original jurisdiction under the Constitution of India - Concurrent jurisdiction of State and Central GST authorities - violation of Article 14 of the Constitution of India - blocking of Input Tax Credit - HELD THAT - Section 6 (2) (b) of the Act treats the empowered officers under the SGTS/UGST Act at the central level to be at par and does not prescribe for transfer of investigation of the proceedings from State authority to the Central authority or vice-versa - The object of Section 6(2)(b) of the Act is to avoid multiple proceedings by the Sales Tax Officer and Central Tax Officer on the same subject matter and the Rules of purposive interpretation requires Section 6(2)(b) of the Act to be read in light of this object. It would be evident from the Circular issued by the Ministry of Finance/ Department of Revenue, dated 05.10.2018 that central government itself has acknowledged that once the officer of the State authority has initiated action, it would be the proper officer who would then conduct further proceedings under the Act. The import of the aforesaid Circular dated 5.10.2018 is to be understood to mean that when an inquiry is conducted by a proper officer of the State, an investigation is required to be done by the Central Tax Officer, the Central Tax Officer would exercise the said power for the purpose of investigation. However, it would not mean that the proceedings being conducted by the State Tax Officer would also be transferred to the Central Tax Officer and the proceedings as initiated earlier point of time would rather continue with that authority that initially commence the proceedings. Thus, it would be evidently clear from the aforesaid circular(s) that the State and Central Governments have been extended the same powers under the CGST and SGST Act and if one of the officers has already initiated proceedings, the same cannot be transferred to another and he alone is to issue process under the Act and take it to its logical end. The word subject-matter used in Section 6(2)(b) of the Act would mean, the nature of proceedings . In the present case, it would thus mean the proceedings initiated prior at any point of time vide Annexure P-1 by respondent No. 1 and, therefore, for the same subject matter, respondent No. 2 cannot be allowed to initiate proceedings. Such action, if allowed, would be contrary to the provisions contained in Section 6(2)(b) of the Act. There are merit in this petition and the same is accordingly allowed and the Blocked Credit Ledger dated 16.05.2024, popped up on the online web portal on 20.05.2024, passed by respondent No. 2 and the summons dated 16.03.2024 issued by respondent No. 2, are accordingly quashed and set aside - petition allowed.

Summary

Issues Involved:
1. Jurisdiction of Respondent No. 2 under the CGST Act.
2. Validity of the Blocked Credit Ledger dated 16.05.2024.
3. Adherence to principles of natural justice.
4. Interpretation of Section 6 of the CGST Act, 2017.
5. Cross empowerment of State and Central Tax officers.

Issue-wise Detailed Analysis:

1. Jurisdiction of Respondent No. 2 under the CGST Act:
The petitioner contended that Respondent No. 2, Director General of Goods and Service Tax Intelligence, Rohtak, Haryana, acted without jurisdiction in issuing the summons dated 16.03.2024 and blocking the Input Tax Credit (ITC). The court observed that Section 6 of the CGST Act, 2017, and corresponding provisions in the SGST/UGST Acts empower officers of State and Central Tax authorities to act as proper officers for each other, subject to conditions specified by the government. The court emphasized that once a proper officer under the SGST Act has initiated proceedings, no parallel proceedings can be initiated by an officer under the CGST Act on the same subject matter, as per Section 6(2)(b) of the Act.

2. Validity of the Blocked Credit Ledger dated 16.05.2024:
The court found that the Blocked Credit Ledger dated 16.05.2024, which appeared on the petitioner's online portal on 20.05.2024, was issued by Respondent No. 2 without following the mandatory procedure and without affording an opportunity of hearing. The court held that such action was contrary to the principles of natural justice and the provisions of Section 6(2)(b) of the CGST Act, which prevents multiple proceedings on the same subject matter by different authorities.

3. Adherence to principles of natural justice:
The petitioner argued that Respondent No. 2 did not follow the principles of natural justice before blocking the ITC. The court noted that although summons were issued to the petitioner by Respondent No. 2, the petitioner was not given an adequate opportunity to present their case or respond to the allegations. The court reiterated that the principles of natural justice require that a party be given a fair opportunity to be heard before any adverse action is taken.

4. Interpretation of Section 6 of the CGST Act, 2017:
The court provided a detailed interpretation of Section 6 of the CGST Act, emphasizing its purpose to avoid multiple proceedings by different tax authorities on the same subject matter. The court explained that Section 6(2)(b) ensures that once proceedings are initiated by an officer under the SGST/UGST Act, no parallel proceedings can be initiated by an officer under the CGST Act. This interpretation was supported by circulars issued by the Ministry of Finance, which clarified that enforcement actions initiated by one tax authority should be completed by that authority without transferring the case to another.

5. Cross empowerment of State and Central Tax officers:
The court highlighted the cross empowerment of State and Central Tax officers under Section 6 of the CGST Act, which allows officers to act as proper officers for each other. However, this cross empowerment is subject to the condition that no parallel proceedings are initiated on the same subject matter. The court referred to internal communications and circulars to support the view that once an enforcement action is initiated by one authority, it should be taken to its logical conclusion by that authority without interference from the other.

Conclusion:
The petition was allowed, and the Blocked Credit Ledger dated 16.05.2024 and the summons dated 16.03.2024 issued by Respondent No. 2 were quashed and set aside. The court emphasized the importance of adhering to the principles of natural justice and avoiding multiple proceedings on the same subject matter by different tax authorities. Pending applications, if any, were also disposed of.