Summons U/S 70 CGST Act Not 'Initiation of Proceedings' Barred by S. 6(2)(b) Even if State Action Ongoing: High Court - 2024-03-14

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High Court Clarifies: DGGI Summons Under Section 70 CGST Act Not Barred by Parallel State Probe

New Delhi – In a significant ruling on the interplay between Central and State GST authorities, a High Court has dismissed a Civil Writ Petition, holding that the issuance of summons under Section 70 of the Central Goods & Services Tax Act, 2017 (CGST Act) by the Directorate General of GST Intelligence (DGGI) does not amount to "initiation of proceedings" that would be barred by Section 6(2)(b) of the CGST Act, even if State GST authorities have already initiated action on the same subject matter.

The Court, whose specific bench details were not provided in the order, delivered the judgment after considering arguments from the petitioner and the respondents, including the Union of India and State authorities.

Background of the Dispute

The petitioner challenged summons dated September 27, 2023, and February 14, 2024, issued by the Superintendent/Appraiser/Senior Intelligence Officer of the DGGI. The core contention was that State GST authorities had already commenced proceedings concerning the same subject matter. Therefore, invoking Section 6(2)(b) of the CGST Act, the petitioner argued that the DGGI, a Central authority, was precluded from initiating parallel proceedings.

Section 6(2)(b) of the CGST Act stipulates that if a proper officer under the State Goods and Services Tax Act (SGST Act) or Union Territory Goods and Services Tax Act (UTGST Act) has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the CGST Act on the same subject matter.

Petitioner's Arguments

Counsel for the petitioner argued:

* State authorities had already initiated action, triggering the bar under Section 6(2)(b) of the CGST Act.

* Consequently, the summons issued by the DGGI under Section 70 of the CGST Act were invalid and should be quashed.

* Reliance was placed on guidelines issued by the GST-Investigation Wing regarding the issuance of summons and on precedents such as M/s R.P. Buildcon Private Limited & Anr. v. The Superintendent, CGST & CX (Calcutta High Court) and Vivek Narsaria v. The State of Jharkhand & Ors. (Jharkhand High Court), which supported the principle of avoiding parallel proceedings.

Respondents' Counter-Arguments

The Additional Advocate General, Mr. Bharat Vyas, assisted by Ms. Pratyushi Mehta, and counsel for the Union of India, Mr. Ajay Shukla, along with Mr. Raghav Sharma, vehemently opposed the petition. Their key arguments were:

* The writ petition was not maintainable.

* Summons issued under Section 70 of the CGST Act do not constitute "initiation of proceedings" for the purposes of Section 6(2)(b). * The petitioner was allegedly involved in creating bogus crime and claiming input tax credit (ITC) based on fake and forged documents, necessitating the DGGI's inquiry.

* The bar under Section 6(2)(b) would not apply in such circumstances.

* The State also contended that the Union of India is authorized to initiate proceedings in cases of inter-state evasion of tax or claims of tax benefits.

* The respondents cited several judgments, including Amit Gupta v. Union of India (Delhi High Court), G.K. Trading Company v. Union of India (Allahabad High Court), and Kuppan Gounder P.G. Natarajan v. Directorate General of GST Intelligence (Madras High Court), to support their stance that summons under Section 70 are distinct from "proceedings."

Court's Analysis and Reasoning

The High Court meticulously perused the provisions of the CGST Act and the cited judgments. It noted the petitioner's cited cases: * In Vivek Narsaria , the Jharkhand High Court had observed that since State authorities initiated proceedings, they should continue. * In M/s R.P. Buildcon , the Calcutta High Court held that once audit proceedings under Section 65 commenced, other proceedings by Anti Evasion should not proceed.

However, the Court distinguished these by focusing on the nature of "summons" versus "proceedings." It highlighted the key distinction as articulated in judgments cited by the respondents:

"In the judgments referred to by counsel for the respondents, it is held that scope of Section 6(2)(b) and Section 70 of the CGST Act is different and distinct, as the former deals with any proceedings on subject matter, whereas the latter deals with power to issue summon in an inquiry and therefore, the words “proceedings” and “inquiry” cannot be mixed up to read as if there is a bar for the respondents to invoke the power under Section 70 of the CGST Act."

The Court specifically referred to: * G.K. Trading Company v. Union of India (Allahabad High Court), which held that "issuance of summons is not initiation of proceedings referable to under Section 6(2)(b) of the CGST Act." * Kuppan Gounder P.G. Natarajan v. Directorate General of GST Intelligence, New Delhi (Madras High Court), which similarly held that "issuance of summons for conducting an inquiry and to obtain a statement from the appellant cannot be construed to be bar under Section 6(2)(b) of the CGST Act."

The Court also observed that the petitioner, despite the State authorities issuing notices, had not appeared before them and had instead approached the High Court.

The Verdict

Concluding its analysis, the High Court stated:

"In view of the above, we are of the considered view that issuance of summons under Section 70 of the CGST Act is not hit by Section 6(2)(b) of the CGST Act and the present Civil Writ petition being devoid of merits is accordingly dismissed. Stay application stands disposed."

This ruling underscores that an "inquiry," for which summons under Section 70 are issued, is distinct from "proceedings" as contemplated under Section 6(2)(b). Consequently, central GST authorities like the DGGI can issue summons for investigative purposes even if state authorities have taken some action on the same matter, especially in cases involving alleged tax evasion through fraudulent means.