Sun Automation Limited Vs Sales Tax Officer (Delhi High Court)
Delhi High Court, in the case of M/s Sun Automation Limited vs. Sales Tax Officer, has set aside a demand of over Rs. 157 crores raised by the Delhi Goods and Services Tax (DGST) Department. The court ruled that the DGST Department lacked the authority to initiate proceedings on a subject matter already adjudicated by the Central Goods and Services Tax (CGST) Department. This decision hinges on the interpretation and application of Section 6(2)(b) of the Central Goods and Service Tax Act, 2017.
Background of the Case: M/s Sun Automation Limited, the petitioner, challenged a show cause notice dated November 27, 2024, and a subsequent demand order dated February 27, 2025, issued by the DGST Department. The demand, totaling Rs. 157,66,85,186/-, comprised both tax and penalty related to transactions between the petitioner and two other companies: M/s Microlyte Energy Pvt. Ltd. and M/s. Jetibai Grandsons Services India (P.) Ltd. The petitioner argued that this demand was unsustainable because the CGST Department had already adjudicated the same issue.
Petitioner’s Argument: The core of the petitioner’s argument rested on Section 6(2)(b) of the CGST Act, 2017. This section states: “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 CGST Department had already addressed the transactions in question, and an appeal against their demand was also decided by the Commissioner (Appeals-I), CGST, on April 3, 2025, resulting in a penalty on the petitioner. Therefore, according to the petitioner, the DGST Department’s parallel proceedings on the same subject matter were barred by law.
The petitioner presented a table outlining the overlapping issues, clearly demonstrating that the same subject matter was being pursued by both the central and state authorities.
Judicial Precedent and Court’s Analysis: The Delhi High Court referred to its own prior judgment in Amit Gupta v. Union of India & Ors., W.P. (C) 8625/2022. In this case, the court had extensively discussed Section 6(2)(b) of the CGST Act, holding that its object is to prevent multiple proceedings by central and state officers on the same subject matter. The court in Amit Gupta emphasized that the provision ensures taxpayers are not subjected to parallel proceedings due to the cross-empowerment of officers.
The court in Sun Automation Limited reaffirmed this interpretation, stating that “It is clear that the object of Section 6(2)(b) of the Act is to ensure that cross empowerment of officers of central tax and state tax do not result in the taxpayers being subjected to parallel proceedings.” The court underscored that the rule of purposive interpretation requires Section 6(2)(b) to be read in light of this objective.
Court’s Decision: In light of the clear mandate of Section 6(2)(b) of the CGST Act and the precedent set in Amit Gupta, the Delhi High Court found merit in the petitioner’s arguments. The court ruled that the DGST Department was required to consider the order passed by the appellate authority of the CGST Department on April 3, 2025.
Consequently, the Delhi High Court set aside the impugned demand order dated February 27, 2025, issued by the DGST Department. The court directed that the order of the Commissioner (Appeals-I), CGST, be placed before the DGST Department for fresh consideration. The DGST Department was instructed to reconsider whether the show cause notice dated November 27, 2024, and the subsequent impugned order would sustain in view of Section 6(2)(b) of the CGST Act. The court also mandated a personal hearing for the petitioner before any new decision is taken.
Implications of the Judgment: This judgment reinforces the principle of avoiding parallel proceedings under the Goods and Services Tax regime. It provides clarity on the jurisdictional limits of state and central tax authorities when the same subject matter has been initiated or adjudicated by one of them. The ruling serves as a significant reminder that Section 6(2)(b) of the CGST Act is designed to protect taxpayers from being subjected to multiple investigations and demands for the same issue, thereby streamlining the tax administration process and reducing litigation. The decision emphasizes the importance of inter-departmental coordination and adherence to the provisions designed to prevent overlapping jurisdiction in GST matters.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
