Aastha Apparels Pvt. Ltd. Vs Director General of GST Intelligence & Ors. (Delhi High Court)
Summary: The Delhi High Court, in Aastha Apparels Pvt. Ltd. v. Director General of GST Intelligence & Ors., W.P.(C) 16293/2024, passed an interim order on 10 December 2024 restraining the respondents from taking further steps pursuant to the show cause notice dated 3 August 2024 issued by the Directorate General of GST Intelligence (DGGI). The dispute concerned the initiation of proceedings by Central GST authorities when the State GST authorities had already issued notices relating, according to the petitioner, to substantially the same parties and transactions. The petitioner invoked Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, which addresses initiation of proceedings by different GST authorities on the same subject matter.
The petitioner submitted that the State GST authorities had previously issued show cause notices dated 23 January 2021, 2 February 2021 and 29 September 2023, following a search conducted jointly by the DGGI and the Directorate of Revenue Intelligence (DRI) on 11 September 2019. Senior counsel for the petitioner contended that the earlier notices and the subsequent DGGI notice concerned common parties and transactions. It was further argued that the majority of allegations arose from the retrospective cancellation of GST registrations of certain suppliers. On this basis, the petitioner maintained that the DGGI proceedings were barred by Section 6(2)(b) of the CGST Act.
The petitioner additionally contended that, once the State GST authorities had invoked Section 73 of the CGST Act, it would be impermissible for the DGGI to proceed under Section 74 on allegations involving fraud, wilful misstatement or suppression of facts in relation to the same transactions. Another submission related to self-assessed shipping bills and the absence of any steps to reopen concluded assessments. The petitioner was granted liberty to amend its writ petition suitably to incorporate this contention, if advised.
After considering the submissions, the High Court held that the matter required further consideration. It directed the respondents to file counter affidavits within three weeks and allowed the petitioner two weeks thereafter to file a rejoinder. Pending the next listing, the Court restrained further action pursuant to the impugned DGGI show cause notice dated 3 August 2024. However, the order expressly preserved the DGGI’s right to transmit information and material to the State GST authorities, who could take such action as was permissible in law. The matter was directed to be listed again on 20 January 2025.
Importantly, the order was interim in nature. The High Court did not finally quash the DGGI notice or conclusively determine the applicability of Section 6(2)(b), the validity of proceedings under Section 74, or the merits of the allegations concerning suppliers and shipping bills.
FULL TEXT OF THE ORDER OF DELHI HIGH COURT
1. Notice. Since the respondents are duly represented, no further steps need be taken.
2. We accord all the noticed respondents three weeks’ time to file a counter affidavit. The petitioner shall have two weeks therefrom to file a rejoinder affidavit.
3. We have taken note of the submissions which were advanced by Mr. Gulati, learned senior counsel appearing on behalf of the writ petitioner, Mr. Satish Aggarwala, learned counsel representing the Director General of GST Intelligence [‘DGGI’] and Mr. Rajeev Aggarwal, learned counsel representing the State Goods and Services Tax [‘GST’] authorities.
4. Undisputedly, for the period in question, the State GST authorities had come to issue Show Cause Notices [‘SCNs’] on 23 January 2021, 02 February 2021 and 29 September 2023. These notices had come to be issued post the search which was undertaken by the DGGI along with the officials of the Directorate of Revenue Intelligence [‘DRI’] on 11 September 2019.
5. Mr. Gulati, had also taken us through the allegations levelled in the notices issued by the State GST authorities in order to establish the commonality of parties and transactions which also form subject matter of the impugned SCN dated 03 August 2024 issued by the DGGI. It was his contention that the majority of the allegations stem from a retrospective cancellation of the registration of some of the suppliers. It was in the aforesaid backdrop that Mr. Gulati submitted that the proceedings initiated by the DGGI would not sustain in light of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 [‘CGST Act’].
6. It was also his submission that once the provisions of Section 73 of the CGST Act had been invoked by the State GST authorities, it would be impermissible for the DGGI to allege or construct a case against the writ petitioner referable to Section 74 and which is concerned with cases of fraud, wilful misstatement and suppression of facts.
7. We also bear in consideration the submission of Mr. Gulati which is based on the self-assessment of shipping bills and no steps for reopening of those, including concluded assessments, having ever been initiated. In light of the aforenoted contention, we also accord liberty to the writ petitioner to suitably amend the writ petition, if so chosen and advised. Matter requires consideration.
8. Accordingly, and till the next date of listing, we restrain the respondents from taking further steps pursuant to the impugned SCN dated 03 August 2024.
9. This, however, shall be without prejudice to the right of the DGGI to transmit all information and material for the consideration of the State GST authorities and who may take and initiate such action as may be permissible in law.
10. Let the writ petition be called again on 20.01.2025.
