DGGI Can’t Be Stopped From Taking Intelligence-Based Enforcement Action When Investigation By Other Authority Is Going On: Delhi High Court

The Delhi High Court has held that the Directorate General of Goods and Service Tax Intelligence (DGGI) cannot be stopped from taking intelligence-based enforcement action when investigations by other authorities are going on.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has observed that if any of the authorities have found it necessary to investigate the petitioner based on certain information, the investigation cannot be stopped or interdicted on account of an investigation conducted with respect to any other entity.

The petitioner has challenged the investigations being conducted by the investigation agencies. The Directorate General of Goods and Service Tax Intelligence was conducting an investigation with respect to the petitioner.

The petitioner contended that in terms of Section 6(2)(b) of the CGST Act, DGGI, Jaipur, cannot conduct any investigation as the petitioner has already been investigated for the same period by another agency, the Delhi Commissionerate.

The petitioner relied on the CBEC circular dated October 5, 2018. The circular clarified that both the Central Tax and State Tax are authorised to initiate intelligence-based enforcement action on the entire taxpayer’s base, irrespective of the taxpayer's administrative assignment to any authority. Once the state authorities had initiated an investigation, they were required to complete the same, and it is not open for the DGGI, Jaipur, to commence an investigation in respect of the petitioner.

The department submitted that the petitioner’s ITC was blocked on account of a communication received from DGGI, Jaipur, and the petitioner’s bank account was blocked at the instance of DGGI, Chennai. The petitioner’s registration was proposed to be cancelled on account of a mismatch in returns; however, the proceedings were withdrawn on the petitioner furnishing invoices relating to M/s Girdhari Exports.

The DGGI submitted that the DGGI, Chennai, had not investigated the petitioner but was concerned with an entity named M/s Balaji Enterprises. The petitioner’s bank account was provisionally attached as it was found to be associated with Mr. Sandeep Singhal, who is also the director of the petitioner's company and appears to be in control of its affairs. The DGGI, Chennai, had issued the order for provisional attachment of the accounts of M/s Balaji Enterprises as well as other entities that were associated with Mr. Sandeep Singhal to protect the interests of Revenue. However, no investigation was conducted into the transactions of the petitioner company.

The court noted that on behalf of the Delhi State Authority and DGGI, Chennai, it is apparent that although certain measures were taken that affected the petitioner, inasmuch as its ITC was blocked and the bank accounts were provisionally attached, no investigation was conducted by any authority regarding the affairs of the petitioner company.

The court did not find any reason to interdict DGGI, Jaipur, from conducting the investigation in respect of the petitioner company.

Case Title: M/S. Hanuman Enterprises Pvt. Ltd. Versus The Additional Director General Directorate General Of GST

Citation: 2023 LiveLaw (Del) 756

Date: 14/08/2023

Counsel For Petitioner: Anjali Jha Manish

Counsel For Respondent: Harpreet Singh

Click Here To Read The Order