GST | Same Assessee, Overlapping Periods Not Enough To Bar DGGI Proceedings: Delhi High Court

The Delhi High Court has held that proceedings initiated by State GST authorities and the Directorate General of GST Intelligence (DGGI) are not barred under Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, merely because they relate to the same assessee, overlapping financial periods, or involve Input Tax Credit (ITC).

The Division Bench of Justices Anil Kshetarpal and Shail Jain observed that the statutory bar under Section 6(2)(b) is attracted only when the subsequent proceedings concern the “same subject matter," which has to be determined with reference to the particular tax liability, alleged contravention, and demand involved.

The Court was dealing with a petition challenging proceedings initiated by the DGGI raising a demand of around Rs. 7.81 crore.

Petitioner had contended that the DGGI proceedings were without jurisdiction since State GST authorities had already initiated proceedings concerning alleged wrongful availment of ITC for overlapping periods.

The State GST authorities had earlier issued notices concerning alleged availment of ineligible ITC from cancelled/non-existent suppliers for FY 2017-18 and FY 2018-19. Those proceedings had culminated in orders confirming demands along with interest and penalty.

DGGI subsequently issued a notice under Section 74 of the CGST Act covering FY 2017-18 to FY 2019-20. The notice alleged fraudulent availment of ITC on invoices issued by non-existent and fictitious entities and utilisation of such ITC towards payment of IGST on exports, followed by consequential availment of IGST refunds.

The High Court noted that the State GST proceedings and the DGGI proceedings arose from materially different allegations.

“Although the proceedings may concern ITC and may have some factual or transactional overlap,” the Court said, the material on record indicated a distinction in the nature of the allegations forming the basis of the two proceedings.

The State proceedings were under Section 73 of the DGST Act concerning alleged availment of ineligible ITC, whereas the DGGI proceedings under Section 74 concerned allegations of fraudulent availment and utilisation of ITC based on invoices issued by fictitious/non-existent entities, including its consequential utilisation towards exports and IGST refunds.

The Court also noted that in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate, the Supreme Court had laid down a two-fold test to determine whether the subject matter is the same: first, whether an authority has already proceeded on an identical tax liability or alleged offence on the same facts; and second, whether the demand or relief sought is identical.

Applying these principles, the High Court held that the mere fact that certain ITC claims or transactions may feature in both proceedings would not establish that both proceedings necessarily concerned the identical liability or the same alleged contravention.

“The statutory prohibition is against initiation of proceedings on the same subject matter and not against every subsequent proceeding concerning the same assessee or a related transaction,” it said.

The Court further clarified that the “chronological sequence” of proceedings is not by itself determinative. The fact that DGGI proceedings were initiated after the State GST proceedings had commenced would not automatically attract the statutory bar.

As such, the Court dismissed the writ petition.

For Petitioner: Advocates Chinmaya Seth, A.K. Seth, Palak Mathur, Karanveer Singh

For Respondents: Shubham Tyagi, SSC for CBIC with Navruti Ojha