Case Law Details
Divyashakti Chemicals Vs Additional Commissioner of Central Tax (Telangana High Court)
Telangana High Court on Parallel GST Proceedings and Section 161 Rectification M/s. Divyashakti Chemicals v. Additional Commissioner of Central Tax & Others
The Telangana High Court has once again dealt with an increasingly important GST issue — overlapping or parallel proceedings for the same tax period and same allegations.
In M/s. Divyashakti Chemicals v. Additional Commissioner of Central Tax, the Court examined whether a second adjudication proceeding alleging wrongful Input Tax Credit (ITC) for the same period could continue when an earlier adjudication order on similar allegations had already been passed and appealed.
The judgment is significant for its discussion on:
- Section 6(2)(b) of the CGST Act
- Parallel proceedings under GST
- The Supreme Court ruling in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East
- Scope of rectification under Section 161
- Duty of taxpayers to disclose overlapping investigations
Background of the Case
The petitioner, Divyashakti Chemicals, had its GST registration cancelled on 28.12.2019.
Subsequently:
First Proceedings
- Show cause notice issued on 23.09.2024
- Allegation: wrongful availment of ITC without actual supply
- Penalty proposed under Sections 122(1)(ii) and 122(1)(vii) of the CGST Act
- Order-in-original passed on 18.03.2025
- DRC-07 issued on 20.03.2025
- Statutory appeal already filed on 28.06.2025
Second Proceedings
- Another show cause notice issued on 19.06.2025
- Same tax period: January 2019 to November 2019
- Similar allegations under the same penal provisions
- Order-in-original passed on 10.12.2025
The petitioner challenged the second order before the High Court.
Core Grounds Raised by the Petitioner
The petitioner argued that the second proceeding was:
- A duplicate proceeding
- Hit by Section 6(2)(b) of the CGST Act
- An abuse of process
- Violative of natural justice
- Invalid for non-issuance of mandatory pre-show cause consultation under Rule 142(1A)
The petitioner heavily relied upon the Supreme Court judgment in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East.
What is Section 6(2)(b)?
Section 6(2)(b) generally prevents multiple authorities from simultaneously adjudicating the same subject matter under the CGST and SGST framework.
The idea is simple:
Once proceedings on a subject matter are initiated by one authority, another authority should not initiate parallel proceedings on the same issue.
This protection is intended to prevent:
- duplication,
- conflicting findings,
- double jeopardy in tax administration, and
- harassment of taxpayers.
Supreme Court’s Armour Security Decision
The Telangana High Court referred extensively to the Supreme Court ruling in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East.
The Supreme Court had laid down:
Twofold Test for “Same Subject Matter”
The Court noted that overlap exists when:
i. The proceedings concern the same alleged contravention or liability, and
ii. The demand or relief sought is identical
Only then would the bar under Section 6(2)(b) be clearly attracted.
The Supreme Court also clarified that:
If an assessee becomes aware of parallel proceedings, the assessee must immediately inform the second authority in writing.
This aspect became important in the present case.
Why the High Court Did Not Interfere Directly
A major factor against the petitioner was that:
- the petitioner did not participate in the second proceedings, and
- failed to bring the earlier adjudication to the notice of the adjudicating authority.
The Court observed that although:
- the allegations appeared similar,
- the second requirement of “identical demand” may not be fully satisfied.
Therefore, the Court was not inclined to conclusively hold that Section 6(2)(b) was violated.
Court’s Practical Approach: Section 161 Rectification
Instead of deciding the overlap issue on merits, the High Court directed the petitioner to invoke:
Section 161 of the CGST Act
This provision allows rectification of errors apparent on the face of the record.
The Court observed that:
- the limitation period of six months had not expired,
- therefore rectification remained available.
Accordingly, the Court directed:
- the petitioner to file a rectification application within two weeks,
- the proper officer to decide it within three weeks,
- after granting an opportunity of hearing.
The Court also clarified that:
- the petitioner may still pursue appellate remedies,
- and the Court had expressed no opinion on merits.
Important Takeaways from the Judgment
1. Parallel Proceedings Require Immediate Objection
Taxpayers cannot remain silent during adjudication and later exclusively rely on Section 6(2)(b).
If overlap exists:
- it should be immediately disclosed to the authority in writing.
2. “Same Allegation” Alone May Not Be Enough
The Court emphasized that:
- identical allegations alone may not trigger the Section 6(2)(b) bar,
- the actual tax demand and relief sought must also substantially overlap.
3. Section 161 Can Be a Strategic Remedy
The judgment highlights the growing importance of:
- rectification applications,
- especially where duplication or apparent procedural errors exist.
4. Courts Prefer Statutory Remedies First
Even in complex GST disputes, High Courts continue to:
- encourage rectification,
- appellate remedies,
- and departmental adjudication,
before exercising writ jurisdiction extensively.
Conclusion
The Telangana High Court’s ruling in M/s. Divyashakti Chemicals reinforces an important GST litigation principle:
Taxpayers must actively raise overlap objections during proceedings themselves, rather than waiting to invoke writ jurisdiction later.
The decision also demonstrates how Section 161 rectification is increasingly being treated as a practical mechanism to address procedural duplication and adjudication irregularities.
For GST practitioners, this judgment serves as an important reminder that:
- participation in proceedings matters,
- timely objections are crucial,
- and the Supreme Court’s Armour Security principles are now shaping how courts examine overlapping GST investigations and adjudications.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Learned counsel Sri Md. Shabaz appears for the petitioner through video conferencing.
Sri Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs, appears for respondents No.1 to 4 and 6.
2. The petitioner’s GST registration was cancelled on 28.12.2019. The show cause notice bearing No.138/2024-25 was issued by respondent No.1 on 23.09.2024 alleging wrongful availment of Input Tax Credit without actual supply. The proposed demand and penalties were issued under Section 122(1)(ii) and 122(1)(vii) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as, “the Act”). The order-in-original confirming the demand was passed on 18.03.2025 and DRC-07 is dated 20.03.2025. In the present proceeding, the petitioner has assailed the order-in-original dated 10.12.2025 arising out of the show cause notice dated 19.06.2025 for the same period of January 2019 to November 2019 alleging that on identical allegations, penalty was proposed and confirmed under Section 122(1)(ii) and 122(1)(vii) of the Act. Against the order-in-original dated 18.03.2025, the petitioner has already filed a statutory appeal on 28.06.2025, which is pending. Against the order-in-original dated 10.12.2025, the present writ petition has been filed, inter alia, on the ground that it is in teeth of Section 6(2)(b) of the Act. The petitioner has also taken the ground of non-issuance of mandatory show cause notice under Rule 142(1A) of the Central Goods and Services Tax Rules, 2017. The petitioner has further assailed the impugned order-in-original on the ground that it would be a clear case of duplication and abuse of process of law and also in violation of the principles of natural justice.
3. In the second proceedings, it is not in dispute that the petitioner has not participated. In the decision relied upon by the petitioner in the case of Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East1, the Apex Court has, under the guidelines laid down at paragraph 97 at sub-paragraph (b), observed that when an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation. Paragraph 96 summarises the conclusion on the issue of parallel or overlap proceedings. Sub-paragraph (viii) thereof prescribes that where any two proceedings initiated by the Department seek to assess or recover an identical or a partial overlap in the tax liability, deficiency or obligation arising from any particular contravention, the bar of Section 6(2)(b) would be immediately attracted. Sub-paragraph (x) prescribes the twofold test for determining whether a subject matter is “same” it entails, first, determining if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts and secondly, if the demand or relief sought is identical.
4. Section 161 of the Act, on the other hand, prescribes the rectification of errors apparent on the face of record by the authority who has passed or issued any decision or order or notice or certificate or any other document, which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer. The time limit for seeking rectification is six months from the date of issue of such decision, order or notice.
5. In the instant case, rival submissions have been made on the question of overlap and the duty of the assessee to bring it to the notice of the proper officer the overlap in the tax liability, deficiency or obligation arising from any particular contravention. In the present case, the petitioner has not participated in the proceedings. Therefore, it has failed to bring it to the notice of the assessing authority about the proceedings dated 19.06.2025.
6. On the part of the respondents, it is contended that in determining whether the subject matter is same, though the authority may have proceeded on allegations of contravention of Section 122(1)(ii) and 122(1)(vii) of the Act which were alleged in the previous proceedings, but the second test that the demand or relief sought is identical, is not existing in the present case. Therefore, strictly speaking, the plea of overlap should not arise in the present case. Moreover, since the petitioner has already approached the appellate authority against the order-in-original dated 18.03.2025, the petitioner may not have any difficulty in approaching the appellate authority, as the appeal period is not yet exhausted. Furthermore, the appellate authority would have the benefit of comparing both the orders-in-original imposing demand upon the petitioner for the alleged contraventions.
7. Learned counsel for the petitioner submits that since the GST registration of the petitioner has been cancelled with effect from 28.12.2019, the petitioner may not be able to make the pre-deposit against the impugned order-in-original before the appellate authority and a direction may be issued to waive the same.
8. We have considered the submissions of the learned counsel for the parties.
9. The rival points of law are asserted by either of the parties. On the one hand, the petitioner has failed to participate in the second proceedings to bring out the alleged overlap in the proceedings with the earlier proceedings vide the order-in-original dated 18.03.2025. While applying the twofold test, the first part may be satisfied, but the second may not be attracted, as the demand does not appear to be identical to the first imposition of liability. The petitioner has contended, relying upon the observations made by the Apex Court at paragraph 97(b) of the decision in Armour Security (India) Ltd. (supra), that if the aforesaid authorities are not complying with the said guidelines, it would be open for the taxable person to file a writ petition under Article 226 of the Constitution of India.
10. In the facts and circumstances noted above, we are of the considered opinion that the petitioner may seek rectification of the second proceeding under Section 161 of the Act, since the period of six months has not expired from the date of issuance of the order-in-original dated 10.12.2025. If the petitioner is aggrieved by the order-in-original so passed, it may avail the remedy as is permissible in law also before the appellate authority against the order-in-original and the rectification order. If the rectification application is filed by the petitioner within a period of two weeks, the proper officer would entertain and endeavor to decide it in accordance with law within a period of three weeks thereafter after giving an opportunity of hearing to the petitioner as well. Let it be made clear that we have not made any comments on the merits of the case of the parties.
11. The writ petition is accordingly disposed of. There shall be no order as to costs.
Miscellaneous applications pending, if any, shall stand closed.
Note:
1 (2025) 33 Centax 222 (SC)
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