Central & State GST Proceedings Not On 'Same Subject Matter' Merely Because Both Concern ITC For Same FY: Delhi High Court

The Delhi High Court has recently held that Central and State GST proceedings cannot be treated as being on the 'same subject matter under Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, merely because both proceedings concern Input Tax Credit for the same financial year.

The Division Bench of Justices Anil Kshetarpal and Shail Jain said that determining whether proceedings initiated by Central and State GST authorities concern the same subject matter requires an examination of the nature and scope of the respective proceedings, the period involved, the allegations, transactions or ITC under scrutiny, liability sought to be determined and the material relied upon.

“Whether the portion of the Central proceedings relating to FY 2020-21 was, in substance and in law, concerned with the same subject matter as the proceedings previously initiated by the State GST authorities cannot be determined merely from the fact that both proceedings relate to ITC for the same financial year,” it observed.

The Court was dealing with a writ petition filed by an Insurance company, challenging proceedings initiated by the Central GST authorities as being barred by Section 6(2)(b), in light of State GST proceedings concerning the alleged excess availment of ITC for FY 2020-21.

The State GST authorities had issued a show cause notice to the company in November 2024, alleging excess availment of ITC of about Rs. 2.44 crore for FY 2020-21. The proceedings were subsequently dropped in February 2025.

Meanwhile, proceedings initiated by the Central GST authorities continued. A show cause notice issued in May 2025 under Section 74 of the CGST Act covered the wider period from FY 2018-19 to FY 2023-24 and alleged fraudulent availment of excess ITC. The proceedings culminated in a demand of about Rs. 4.80 crore along with penalty.

The company contended that the Central proceedings relating to FY 2020-21 involved the very same dispute already taken up by the State GST authorities.

The Court however held that mere fact that both proceedings relate to GST, or that both proceedings involve examination of ITC, would not, by itself, conclude the enquiry.

“It would be necessary to examine the nature and scope of the respective proceedings, the period involved, the allegations forming the basis of the proceedings, the transactions or ITC under scrutiny, the liability sought to be determined and the material relied upon by the respective authorities.”

It noted that the State proceedings concerned FY 2020-21 and alleged excess ITC of Rs. 2.44 crore, whereas the Central proceedings covered FY 2018-19 to FY 2023-24 and involved allegations and material forming the basis of a demand of Rs. 4.80 crore.

“Thus, whether the portion of the Central proceedings relating to FY 2020-21 was, in substance and in law, concerned with the same subject matter as the proceedings previously initiated by the State GST authorities cannot be determined merely from the fact that both proceedings relate to ITC for the same financial year. The respective SCNs, the allegations contained therein, the basis of the alleged ITC discrepancy, the computations relied upon, the transactions covered, the material forming the basis of the proceedings and the order passed by the State authorities would all be relevant to such determination,” it held.

Holding that the issue required a comparison of the underlying factual record, the Court declined to undertake the exercise in its writ jurisdiction and permitted the company to avail statutory remedy of appeal.

For Petitioner: Advocate Ashwini Chandrashekaran, Advocate Priyanshi Chakraborty & Advocate Smruti Sagarika Das.

For Respondents: Senior Standing Counsel for CBIC Atul Tripathi with Advocate Shubham Mishra, Advocate Gaurav Mani Tripathi & Advocate Akshay Sagar.