GST Vidhi | GST Case Law

Case Overview: M/s. Sri Shivasakthi Mercantile Private Ltd Vs. The Assistant Commissioner (State Tax), Tondiarpet Assessment Circle

Court: High Court of Judicature at Madras

Case No: W.P. No. 25972 of 2024

Date of Order: 05.09.2024

Judge: Hon'ble Mr. Justice Krishnan Ramasamy

Case Summary: The petitioner challenged the order passed by the first respondent under Section 73 of the CGST/TNGST Act, 2017 for reversing ineligible Input Tax Credit (ITC) for the assessment year 2019-2020. The petitioner claimed that both Central and State Authorities were proceeding concurrently on the same matter, which is against Section 6(2)(b) of the CGST/TNGST Act and contravenes the principles of natural justice. The petitioner sought to quash the impugned order and to defreeze the bank account attached in relation to the ongoing proceedings.

Facts of the Case:

·        The second respondent, Central Authority, had already initiated proceedings for reversing ineligible ITC for the year 2019-2020 through a Show Cause Notice dated 31.03.2023.

·        The petitioner had responded to the first respondent’s notice on 13.03.2023, stating that the Central Authority was already handling the matter, and requested the withdrawal of the notice.

·        Despite this, the first respondent issued another Show Cause Notice in Form DRC-01 on 16.11.2023 and passed an impugned order on 16.04.2024.

·        The petitioner argued that the impugned proceedings were in violation of Section 6(2) of the CGST/TNGST Act, which prevents concurrent actions by both Central and State Authorities on the same issue.

Petitioner's Submission:

·        The petitioner argued that the State Authority (first respondent) had no jurisdiction to proceed when the Central Authority had already initiated proceedings on the same issue.

·        The petitioner referred to clarifications issued by the Central Board of Excise and Customs (CBEC) on 05.10.2018 and the GST Policy Wing on 22.06.2020, which state that once one authority initiates proceedings, the other must refrain from pursuing the matter independently.

·        The petitioner had already made a significant tax payment (over 10% of the disputed tax) through Form GST DRC-03 before the issuance of notices, but this was not acknowledged in the impugned order.

·        The petitioner requested that the impugned order be set aside, arguing that the order was issued without considering their response and without jurisdiction.

Respondents' Submission:

·        The Additional Government Pleader for the first and second respondents and the Senior Standing Counsel for the third respondent supported the orders passed by the State Authority.

Findings of the Court:

·        The court found merit in the petitioner’s argument, noting that both Central and State Authorities should not initiate parallel proceedings on the same issue, as clarified in the CBEC and GST Policy Wing circulars.

·        The court observed that the petitioner had made a tax payment through Form GST DRC-03 prior to the show cause notices, but this was not properly considered by the first respondent.

·        Additionally, the court highlighted that the petitioner’s reply to the ASMT-10 notice dated 13.02.2023 was ignored by the first respondent.

Judgment:

·        The impugned orders passed by the first respondent are set aside.

·        The case is remanded to the first respondent for fresh consideration, with the following conditions:

·        The petitioner shall submit their reply and any necessary documents within two weeks from receiving a copy of this order.

·        The first respondent must issue a 14-day notice for a personal hearing and pass appropriate orders on the merits of the case without being influenced by this court's observations.

·        The bank attachment relating to the ongoing proceedings is to be lifted, and the petitioner’s bank account must be defreezed upon the production of this order.

·        The writ petition is disposed of with no costs, and the connected miscellaneous petitions are closed.

Conclusion: The court ruled in favor of the petitioner, concluding that the concurrent proceedings initiated by both Central and State Authorities were in violation of established GST regulations. The matter was remanded for fresh consideration, with a directive to lift the bank attachment.

 Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.