R.K. Ispat Ltd. Vs Union of India and others (Jammu And Kashmir High Court )
Conclusion: Cross-empowerment under Section 6(1) of the CGST Act was automatic and did not require a separate Government notification. Both Central and State GST officers possess concurrent jurisdiction to initiate intelligence-based enforcement actions. The Joint Commissioner, CGST was competent to issue show cause notices regardless of the monetary threshold; limits in CBIC circulars were administrative, not jurisdictional. Composite notices for multiple years not barred by statute.
Held: Assessee-company was engaged in manufacturing and trading under the CGST and SGST Acts. It challenged show cause notices and summary issued by the Joint Commissioner, CGST Commissionerate, Jammu. The notices alleged fraudulent availment and utilization of bogus Input Tax Credit (ITC) through paper transactions without actual supply or receipt of goods among 12 related entities situated at the Jammu & Kashmir Integrated Textile Park, Kathua. Based on intelligence inputs and search operations under Section 67(2) of the CGST Act, it was found that only two units were functional, and the remaining engaged in circular trading to inflate turnover. Instead of responding to show cause notices, assessee approached the High Court under Article 226, primarily challenging the jurisdiction and competence of the issuing officer. Assessee contended that CGST authorities lacked jurisdiction as assessee was assigned to the State Tax Department; Joint Commissioner could not issue the notice as the alleged tax amount was below ₹1 crore, contrary to a 2018 circular and a composite notice covering five assessment years (2017–18 to 2021–22) violated Section 74 of the CGST Act. It was held that regarding Intelligence-Based Enforcement Action, the Supreme Court’s ruling in M/s Armour Security India Pvt. Ltd., which clarified that intelligence-based enforcement actions based on information about tax evasion from the value chain could be initiated by either Central or State authorities. The Bench quoted extensively from paragraphs 47–51 and 96 of the Armour Security judgment, which held that cross-empowerment under Section 6 of the CGST Act allowed either authority to act on intelligence-based tax evasion cases. The Court noted that the present show cause notices were issued following search operations under Section 67(2), which uncovered fraudulent transactions among 12 companies, including assesses. It was found that several entities were engaged in paper transactions without actual supply of goods, with some units non-functional and lacking required permissions. The Bench held that the challenge to jurisdiction was untenable as the power to initiate intelligence-based action was not restricted by taxpayer assignment. It also clarified that the bunching of multiple assessment years in a single notice was not inherently illegal when based on common intelligence inputs. Accordingly, the writ petitions were dismissed, affirming that the impugned notices were validly issued pursuant to intelligence-based enforcement actions.
