Suspicious Suppliers Being From Different States Is No Ground To Transfer Proceedings from State to Centre: Punjab & Haryana High Court

The Bench consists of Justices Sanjeev Prakash Sharma and Sanjay Vashisth stated that “merely because the DGGI has information relating to similar fraudulent availment of ITC by other firms who may be related to the firm against which the proceedings have been initiated under Section 74 of the HGST Act by the State authority itself would not be a sufficient ground to presume that the State GST authority would not be able to conduct the proceedings or examine the culpability of the firm against whom proceedings under Section 74 of the HGST Act have been initiated. Merely because there may be other firm also against whom proceedings are initiated, there is no concept of joint proceedings.”

Section 74(1) of the Haryana Goods and Services Tax Act, 2017 provides that if a proper officer suspects that tax has not been paid, is short paid, erroneously refunded, or that input tax credit has been wrongly claimed due to fraud or suppression, he must issue a notice to the person involved, demanding an explanation and requiring payment of the specified amount along with interest and a penalty.

Section 6(2)(b) of Haryana Goods and Services Tax Act, 2017 provides that if a proper officer under the Central Goods and Services Tax Act, 2017 has initiated proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the same act on that matter.

Facts of the case:

In this case, the Haryana State Tax Department and multiple DGGI Zonal Units initiated proceedings against the assessee for wrongful ITC. The State Government GST Department decided to take up the enquiry proceedings for the period from July 2017 to December 2018. However, DGGI conducted a search on February 19, 2021, revealing that many suppliers of the assessee were non-existent. It was noted that the State Government authorities and visitor officers of the DGGI, Meerut Zonal Unit have already seized the documents. DGGI officers verified with the State Taxation Officer, who confirmed about having taken all the documents from July 2019 to January 2021. A notice under Section 74(1) of the Haryana Goods and Services Tax Act, 2017 was issued for the tax period from 01.07.2017 to 21.07.2019 to the assessee.

On March 15, 2022, the Principal Director (Intelligence), DGGI, Headquarters accorded permission to the office of the DGGI, Meerut Zonal Unit to conduct the centralized investigation against the assessee for the period after 2019. The State Tax Officer transferred all proceedings to DGGI, Meerut Zonal Unit. The assessee has filed a writ petition before the Punjab and Haryana High Court challenging the transfer of proceedings to DGGI, Meerut Zonal Unit.

The assessee submitted that the action was in violation of provisions of Section 6(2)(b) of the HGST Act and the proper officer in terms of Section 6(2)(b) of the HGST Act was the officer who had initiated the proceedings under Section 74(2) of the Act. The multiple proceedings cannot be allowed to continue and the proper officer would be the State Tax Officer alone who has the jurisdiction to examine the subject matter.

The department contended that so far as the period after 2019 is concerned, the State Government has not taken any steps for conducting investigation. It is only for overlapping periods that the Court had passed an order and thereafter the said proceedings are now being conducted by the proper officer under the Haryana GST Act. Since the suspicious suppliers are not falling in the State of Haryana, it would be in the interest of justice that the enquiry is conducted by the DGGI, Meerut Zonal Unit.

Observations of the High Court:

The bench opined that entire proceedings under the GST Act for investigation relating to fraudulent availment of ITC are related to a particular firm which is registered in State of Haryana. If there is another firm which has also been found to be availing fraudulent ITC, the Central Government authorities are not precluded from taking action against that firm. Thus, independent action against some other firm would not impede the proceedings already initiated by the State Tax Authorities against the present firm. Neither it can be said to be creating any complication or multiplicity of proceedings.

“The word 'subject matter' used in Section 6(2)(b) of the Act would mean 'the nature of proceedings'. Thus, it would mean the proceedings initiated for wrongful availment of input tax credit by fraudulent means. Thus, if the State has already initiated proceedings by issuing notice under Section 74 of the Act for the period upto 22.07.2019, for the same subject matter, the DGGI cannot be allowed to initiate proceedings for the availment of input tax credit by fraudulent means for the period from 28.07.2019 to 20.01.2022. Such action, if allowed, would be contrary to the provisions contained in Section 6(2)(b) of the Act,” added the bench.

The bench concluded that the proceedings have already been initiated by the State authorities i.e. the Excise and Taxation Officer at Shahbad. The summons and warrants have already been issued and the entire record is available with them. As has come on record, there is no occasion to uphold the action of the DGGI or the action of the State Tax Officer in transferring the proceedings pertaining to the assessee which were pending before it.

The bench while allowing the writ petition opined that the proper officer, namely, Excise & Taxation Officer, Shahbad had no jurisdiction to transfer the proceedings to the Central Government.

Counsel for Petitioner/ Assessee: Sandeep Goyal

Counsel for Respondent/ Department: Mr. R. Venkataraman, Assistant Solicitor General of India assisted by Mr. Sourabh Goel, Senior Standing Counsel, Ms. Shivani Sahni, Advocate, Ms. Geetika Sharma, Advocate,

Ms. Anju Bansal, Advocate, for respondent nos. 1, 4, 5, 7 and 14 in CWP No. 1661/2022 and for respondent nos. 3 and 5 in CWP No. 7411/2023.

Ms. Tanisha Peshawaria, Deputy Advocate General, Haryana.

Case Title: M/s Stalwart Alloys India Private Limited v. Union of India and Others

Case Number: CWP No. 1661 of 2022 (O&M)s