Case Law Details
Metalax Industries Vs GST Officer Ward 66 & Ors. (Delhi High Court)
The Delhi High Court, in the case of Metalax Industries vs. GST Officer Ward 66 & Ors., examined the validity of tax proceedings initiated by State GST authorities for Financial Years 2017-18 and 2018-19. The petitioners challenged the proceedings based on Section 6(2)(b) of the Central Goods and Services Tax (CGST) Act, 2017, arguing that once an investigation had commenced by the Directorate General of GST Intelligence (DGGI), the State GST authorities could not conduct parallel proceedings. The court referred to its earlier rulings in DLF Home Developers Limited vs. Sales Tax Officer, where it had clarified that simultaneous investigations by different tax authorities on the same issue were not permissible. Given that the DGGI had already issued a show cause notice (SCN) covering the relevant period and tax demands, the court found merit in the petitioners’ claim that State GST authorities could not issue separate orders for the same matter.
The High Court subsequently quashed the SCNs issued by the State GST department and the corresponding tax demands. However, it clarified that the final adjudication on the matter would be determined by the ongoing DGGI investigation. The ruling reaffirmed that State GST authorities could review and take necessary actions based on the outcome of the DGGI proceedings but could not independently pursue parallel assessments for the same issue and time period. The court’s decision highlights the need for clear jurisdictional demarcations between tax authorities to avoid duplication of proceedings and potential taxpayer hardship.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. These two writ petitions which pertain to Financial Years1 2017-18 and 2018-19 impugn the proceedings initiated by the State Goods and Service Tax2 authorities by issuance of the Show Cause Notices3 which are impugned before us as also the final orders passed upon the culmination of those SCN proceedings.
2. The challenge essentially proceeds on the basis of Section 6(2)(b) of the Central Goods and Services Tax Act, 20174 in light of the SCN dated 31 August 2022 pertaining to the subject period and thus it being contended that once the said authority had commenced an investigation, it would be impermissible for the State GST authorities to examine the said period or to pass any order of assessment pursuant
3. Our attention was also drawn to the view that we had expressed in DLF Home Developers Limited vs. Sales Tax Officer Class II Avato Ward 107 Special Zone 12 Delhi & Anr.5 on 04 September 2024 and which came to be reiterated in DLF Home Developers Limited v. Sales Tax Officer Class II6.
4. We had while construing the provisions of Section 6(2)(b), in DLF Home Developers held as follows:-
“2. The present petition is confined only to the demand in respect of ITC to be reversed on non-business transactions and exempt supplies. The petitioner’s challenge to the said demand is premised on the basis that the Directorate General of GST Intelligence (hereafter the DGGI) has also issued a show cause notice dated 02.02.2024 for the tax period 01.07.2017 to 31.03.2021, which also includes the demand proposed on the aforesaid issue. It is the petitioner’s case that two authorities cannot proceed simultaneously in respect of the same issue.
3. The impugned order indicates that respondent no.1 is also fully conscious of the same and therefore, it has proceeded to confirm the demand without adjudicating the same. The relevant extract of the impugned order is set out below :-
“………..
On ITC to be reversed on non-business transactions & exempt supplies: The taxpayer has informed that the proceeding under the subject has already been taken up by DGGI (HQ), New Delhi had referred section 6(2)(b) of CGST Act 2017 and stated that parallel proceeding cannot be started. Deputy Director Investigation (INV-DGGI (HQ) New Delhi vide letter no DGGI/INV/GST/2722- 2023/INV/o/o/Pr.OGG(HQ)/2028 dated 20.12.2023DGGI (HQ) has acknowledge the fact. Since the proceeding on the issue at being executed by DGGI (HQ), New Delhi, the demand raised through DRC01 sands as it is.”
4. We find merit in the contention that respondent no.1 cannot adjudicate a demand, which is also the subject matter of other Since, the period covered under the impugned order is also subsumed in the show cause notice issued by the DGGI, both the proceedings cannot be carried on simultaneously.
5. Mr. Rajeev Aggarwal, the learned counsel appearing for respondent no.1 states, on instructions, that the demand, in respect of ITC to be reversed on non-business transactions and exempt supplies, be set aside as the same would be adjudicated by the DGGI.
6. In view of the above, the impugned demand is required to be set aside to the extent as noted above. It is so directed.
7. It is clarified that the concerned Authority shall adjudicate the said issue pursuant to a show cause notice dated 02.02.2024 issued by the DGGI.
8. The present petition is allowed in the aforesaid terms. The pending application is also disposed of.”
5. Consequently, and in view of the above, we allow the present writ petitions and quash the impugned orders dated 29 December 2023 [W.P.(C) 4710/2024] and 30 April 2024 [W.P.(C) 6915/2024] as well as the impugned SCN dated 31 August 2022 issued for F.Y. 2017-18 [W.P.(C) 4710/2024] and F.Y. 2018-19 [W.P.(C) 6915/2024].
6. The aforesaid direction shall be subject to the final outcome of the investigation that is being undertaken by the Directorate General of Goods and Services Tax Intelligence. It shall thus be open for the State GST authorities to review the steps liable to be taken upon culmination of those proceedings.
7. All rights and contentions of respective parties on merits are kept open.
Notes:
1 F.Y.
2 GST
3 SCNs
4 CGST Act
5 W.P.(C) 11052/2024
6 W.P.(C) 11037/2024
Author Bio
