CGST Act Bars Parallel Proceedings By State, Central GST Authorities Only For Same Subject Matter: Delhi HC

The Delhi High Court has recently held that the bar on parallel proceedings under Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 applies only where proceedings by State and Central GST authorities relate to the same subject matter and not where they pertain to different financial years or distinct infractions.

A Division Bench of Justices Nitin Wasudeo Sambre and Ajay Digpaul made the observation while dismissing a writ petition challenging an order confirming tax demand under Section 74 of the CGST Act for the financial year 2018–2019.

The petitioner, a GST-registered partnership firm dealing in scientific products, was earlier issued a show cause notice under Section 73 of the State GST Act for the financial year 2019–2020, alleging incorrect declaration of tax liability and excess availment of input tax credit (ITC). The demand was confirmed by the authorities.

Subsequently, a separate show cause notice was issued under Section 74 of the CGST Act for the financial year 2018–2019, alleging wrongful availment of ITC based on invoices issued by a non-existent firm. This demand too was confirmed by the adjudicating authority.

Challenging the latter proceedings, the petitioner argued that they were barred under Section 6(2)(b) of the CGST Act, which prohibits parallel proceedings on the same subject matter.

The Court rejected the contention, clarifying that Section 6(2)(b) of the CGST Act is intended to prohibit parallel or duplicative proceedings in respect of the same subject matter.

“The bar, however, is not absolute. It is attracted only where the proceedings sought to be initiated are regarding the same subject matter i.e.; they pertain to the same specific tax liability, arise from the same set of facts, and relate to the same contravention or infraction for the same time period.,” it said.

On facts, the Bench noted that the earlier proceedings under Section 73 pertained to FY 2019–2020, whereas the impugned proceedings under Section 74 related to FY 2018–2019. There was thus no overlap in the assessment period.

The court further highlighted that the nature of allegations in both proceedings was materially different. While proceedings under Section 73 concern cases without fraud or suppression, Section 74 is attracted where there are allegations of fraud, wilful misstatement or suppression of facts.

Stating that there was “no overlap” in this case, the Court held that the statutory bar under Section 6(2)(b) was not attracted.

As such, the petition was dismissed.

For Petitioner: Advocate Akhil Krishan Maggu; Advocate Vikas Sareen; Advocate Oshin Maggu; Advocate Aryan Nagpal; and Advocate Mehak Sharma.

For Respondents: Senior Standing Counsel Atul Tripathi, along with Advocate Shubham Mishra; Advocate Gaurav Mani Tripathi; Advocate Akshay Sagar; and Advocate Madhav Anand. Advocate Sumit K. Batra and Advocate Priyanka Jindal appeared for Respondent No. 2.