Delhi High Court Upholds ₹10.57 Crore GST Demand, Says Parallel Proceedings Barred Only For Same Subject Matter

The Delhi High Court has dismissed a plea challenging the ₹10.57 crore GST demand, holding that the subsequent proceedings initiated by the Delhi GST authorities were not barred merely because the Directorate General of GST Intelligence (DGGI) had earlier initiated proceedings against the Petitioner concerning overlapping transactions.

The Division Bench of Justices Anil Kshetarpal and Rajneesh Kumar Gupta held that Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, which seeks to prevent parallel proceedings by Central and State tax authorities, applies only where the proceedings concern the same subject matter.

The Court observed that the mere fact that two proceedings arise from the affairs of the same assessee, relate to overlapping periods or involve transactions having some common factual background does not, by itself, establish that they concern the same subject matter.

The case arose from a challenge to a show cause notice issued by the Delhi GST authorities on May 29, 2024, under Section 73 of the CGST Act, followed by an order dated August 29, 2024, creating a demand of ₹10,57,75,250 against Petitioner.

Petitioner, which is engaged in providing script services to Zee Entertainment Enterprises Ltd., argued that the proceedings were without jurisdiction as the DGGI had already initiated proceedings against it and several other noticees.

DGGI had issued a common show-cause notice on March 31, 2023, to 45 noticees, including Petitioner and its former Director. Those proceedings under Section 74 of the CGST Act concerned allegations of fraudulent availment of Input Tax Credit without actual supply of goods or services.

The Delhi GST proceedings, on the other hand, concerned Petitioner's alleged failure to declare its correct tax liability for the period April 2019 to March 2020. The adjudicating authority had also held that Petitioner had availed ITC from taxpayers who had not discharged the corresponding tax liability on their outward supplies, and denied the ITC under Section 16(2)(c) of the CGST Act.

The High Court noted the distinction between the two proceedings, observing that while they may have some factual or transactional overlap, the statutory provisions invoked, nature of allegations and liability sought to be determined were materially different.

"Same subject-matter" is therefore of central significance under Section 6(2)(b), the Court observed.

It held that the provision does not impose a blanket prohibition against every proceeding initiated by a Central or State tax authority concerning an assessee who has previously faced proceedings before another GST authority.

"The prohibition is confined to proceedings on the same subject matter," the Court said.

The Court also rejected Petitioner's argument that the subsequent conclusion of the DGGI proceedings extinguished the separate liability determined by the Delhi GST authorities.

The DGGI proceedings had ultimately been concluded after Zee Entertainment Enterprises Ltd., the principal noticee, paid the tax liability along with applicable interest and penalty. Consequently, proceedings against the remaining co-noticees, including Petitioner, were treated as concluded under Explanation 1 to Section 74 of the CGST Act.

However, the High Court observed that no tax, interest, or penalty had been directed to be recovered from the Petitioner in those proceedings.

It therefore held that the conclusion of the DGGI proceedings could not retrospectively invalidate the separate proceedings initiated by the Delhi GST authority, particularly when those proceedings were founded on a different statutory basis and concerned a different subject matter.

For Petitioner: Advocate Alok Kumar Pandey

For Respondents: Advocates Akash Panwar, Sumit K. Batra and Priyanka Jindal, Anurag Ojha, SSC along with Dipak Raj, Aryaman Singh Chouhan and Aditya Chaudhary, Advs.