While allowing a writ petition filed by Raj Metal Industries & Anr, the Calcutta High Court has quashed the proceedings initiated by the West Bengal GST authorities by considering the fact that the matter is already pending before the CGST authorities.
The Company argued before the Court that in terms of clause (b) of sub-section (2) of section 6 of the WBGST ACT, where a proper officer under Central Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under that Act on the same subject matter. Relying on a notification dated 05.10.2018 issued by the Central Board of Indirect Taxes and Customs (CBIC), they further argued that if an officer of the Central tax authority initiates intelligence based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of the Central tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its logical conclusions.
While staying the summons and further proceedings by the State department, Justice Sekhar B Saraf held that the summons that have been issued on October 19, 2020 by the State GST is, prima facie, in violation of Section 6(2)(b) of the WBGST Act.
“Upon due consideration, I am of the view that the summons that have been issued on October19, 2020 by the State GST is, prima facie, in violation of Section 6(2)(b) of the WBGST Act. Accordingly, I direct stay of the above summons and any proceedings there under,” the Court said.
Advocates Vinay Sharaf, Himangshu Kr Ray, Rowsan Kr Jha appeared for the petitioners.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This is an application under Article 226 of the Constitution of India wherein the writ petitioners have challenged the vires of Rule 86A of the CGST Rules/WBGST Rules and Section 16(2)(c) of the CGST Act/WBGST Act.
The writ petitioners further challenge the actions initiated by the State GST authorities with respect to summons issued on October 19, 2020.
The petitioners also challenge the blocking of the electronic credit ledger that was done on December 8, 2020.
Mr. Vinay Shraff, counsel appearing on behalf of the petitioners submits that the proceedings were pending under the CGST Act and therefore, no proceedings could have been initiated by the State GST. He relies on Sub-Section 2(b) of Section 6 of the West Bengal GST Act to indicate that when a proceeding has been initiated by the Central authorities, the State cannot step into the same. On the same ground, he challenges the blocking of the credit ledger. He has further relied on a Circular issued by the Ministry of Finance, Department of Revenue, dated October 5, 2018 to buttress his argument.
I have heard Mr. Dastoor, learned Additional Solicitor General, appearing on behalf of the Union of India, Mr. Abhratosh Majumdar, learned Additional Advocate General, appearing on behalf of the State CGST and Mr. Somnath Ganguly, learned counsel appearing on behalf of the CGST. Upon due consideration, I am of the view that the summons that have been issued on October 19, 2020 by the State GST is, prima facie, in violation of Section 6(2)(b) of the WBGST Act. Accordingly, I direct stay of the above summons and any proceedings thereunder.
With regard to blocking of the electronic credit ledger, Mr. Majumdar has submitted that this action has been taken by the State authorities acting as an agent of the Central authorities and is not a ‘proceeding’ as indicated in Section 6(2)(b) of the WBGST Act.
As the vires of Rule 86A of the CGST Rules/WBGST Rules and Section 16(2)(c) of the CGST Act/WBGST Act is under challenge, affidavits are required to be exchanged in this matter. Accordingly, affidavits-in-opposition be filed within four weeks; reply thereto, may be filed within two weeks thereafter.
I make it clear that the order, passed above, shall not preclude the Central GST authorities to proceed in accordance with law and to continue with any proceedings that have been initiated by them.
The matter is directed to appear after completion of exchange of affidavits in this matter.
Urgent photostat certified copy of this order, if applied for, be given to the parties upon compliance of all necessary formalities.