Bipin Kumar Agrawal Vs Commissioner CGST and Central Excise (Orissa High Court)
Cuttack: The Orissa High Court has set aside a demand order issued by Central Goods and Services Tax (CGST) authorities, ruling that their initiation of proceedings was barred because State GST authorities had already concluded an audit on the same subject matter and for the same tax periods. The judgment highlights the principle under GST law aimed at preventing overlapping jurisdiction between Central and State tax administrations.
The petitioner, Bipin Kumar Agrawal, challenged an order dated April 26, 2024, issued by the Assistant Commissioner, CGST and Central Excise. This order raised a tax demand under Section 74 of the CGST Act, 2017, stemming from a scrutiny process conducted under Section 61 of the Act. The demand pertained to the assessment years 2017-18 and 2018-19.
The petitioner argued that the Central GST authorities were precluded from initiating these proceedings because the State GST authorities had already conducted an audit covering the identical subject matter and periods under Section 65 of the Odisha Goods and Services Tax Act, 2017 (OGST Act). This State audit had concluded with a final report issued on May 4, 2023. The petitioner stated that they had accepted parts of this State audit report and had made payments for the tax differences pointed out.
The core of the petitioner’s argument rested on Section 6(2)(b) of the CGST Act (mirrored in the OGST Act), which stipulates that “where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.” The petitioner contended that the State audit conducted under Section 65 constituted a “proceeding” as envisaged by this provision, and since it was concluded before the Central GST issued their show cause notice (which preceded the impugned demand order), the Central authorities were barred from initiating their own action.
To support this interpretation, the petitioner relied heavily on a judgment of the Allahabad High Court in G.K. Trading Company v. Union of India and others. The Allahabad High Court in that case had held that the term “proceeding” in Section 6(2)(b) refers to an adjudication process or proceedings related to assessment, audit, demands, recovery, penalties, etc., and is distinct from a mere inquiry under Section 70 (power to summon persons). The G.K. Trading Company judgment had specifically included audit under Section 65 within the scope of “proceedings” for the purpose of Section 6(2)(b).
The Orissa High Court noted that there was no factual dispute regarding the State audit having been conducted and concluded for the relevant periods, and the petitioner having accepted parts of it. While the Central GST had issued a summons under Section 70 prior to the State’s audit notice, the Central show cause notice leading to the demand was issued after the State audit report was filed.
The court expressly agreed with the view taken by the Allahabad High Court in G.K. Trading Company. It concurred that Section 6(2)(b) is intended to prevent overlapping probes by Central and State authorities on the same subject matter. The court reaffirmed that an audit conducted under Section 65 qualifies as a “proceeding” under Section 6(2)(b). Drawing a distinction, the court noted, citing the Supreme Court decision in Liberty Oil Mills v. Union of India, that a summons under Section 70 is merely a process of collecting evidence or gathering material, not a formal “proceeding” that would activate the bar of Section 6(2)(b) at that preliminary stage. In this case, the State initiated the formal ‘proceeding’ (audit) after the Central summons but before the Central show cause notice.
Given that the State Revenue had initiated and concluded the audit (a “proceeding”) for the periods 2017-18 and 2018-19, the High Court concluded that the subsequent initiation of proceedings by the Central Revenue on the same subject matter for the same periods through a show cause notice and resulting demand was prohibited by the mandate of Section 6(2)(b).
Accordingly, the Orissa High Court set aside and quashed the impugned demand order dated April 26, 2024, passed by the Assistant Commissioner, CGST. The court allowed the writ petition.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
