Parallel proceedings by Central & State Tax Authorities cannot be initiated at the same time
The Orissa High Court hold that if Central Tax authority initiates actions against a taxpayer, then they cannot transfer the case to its state counterpart and no parallel action can be taken by the State tax Authorities during the pendency of such proceeding.
Facts of the case:-
The present petition was filed by the petitioner which is engaged in trading of iron and scraps. It was argued by the Petitioner that their business premises was impounded by the Director General of Goods and Services Tax Intelligence (DGGSTI), Bhubaneswar Zonal Unit and a search was undertaken thereof under Section 67 of the Central Goods and Services Tax Act, 2017 (CGST Act).
Section 67of CGST Act deals with the power of the officer to conduct inspection, search and seizure in the premises of the taxable person.
During the course of search records, documents were seized and summons were issued to the petitioner under Section 70 of the CGST Act on 31st October, 2018.The Petitioner participated in the proceeding which is still pending.
Section 70 of CGST Act deals with the power to summon persons to give evidence and produce documents.
The petitioner further received a show cause notice by the State Authority, wherein the allegation was that tax dues has not been paid or short paid or refund has been released erroneously or input tax credit has been wrongly availed or utilized as provided under Section 74 of the Odisha Goods and Services Tax Act (OGST Act).
Section 74 of OGST Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful misstatement or suppression of facts.
Submission on behalf of the Petitioner
It was contended by the petitioner that they appeared before the State GST authority and informed them that the Senior Intelligence Officer of the DGGSTI, Bhubaneswar has seized all the documents and issued summons to them. They are informed that the summons was duly attended by them from time to time. Hence the proceedings initiated by the State GST authority should be kept in abeyance till such time of proceedings before the DGGSTI concluded.
However despite the above request, State GST authority proceeded to pass an order under Section 74 of the OGST Act requiring the petitioner to pay a sum towards OGST, CGST, interest and penalty.
Therefore petitioner has questioned the show cause notice and the order issued by State GST authority under Section 74 of the OGST Act raising a demand for the month of March, 2018 under both the OGST and CGST Act.
The petitioner clearly quoted the letter issued Central Board of Excise and Customs (CGST) to all the GST authorities in which it was inter alia stated in paragraphs 3, 4 and 5 that:
3. Both Central and State tax officers are authorized to initiate intelligence based enforcement action on the entire taxpayer’s base irrespective of the administrative assignment of the taxpayer to any authority and the authority which initiates such action is empowered to complete the entire process of investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action
4. In other words, if an officer of the Central tax authority initiates intelligence based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of Central tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its logical conclusions.
5. Similar position would remain in case of intelligence based enforcement action initiated by officers of State tax authorities against a taxpayer administratively assigned to the Central tax authority.”
Submission on behalf of the Respondent
The State Tax Authority agreed to the above circular which categorically states that if the officer of the Central tax authority initiates intelligence/enforcement action against a taxpayer, administratively assigned to a State tax authority, then the Central tax authority officers themselves have to further undertake the investigation and take the case to its logical conclusion and ‘would not transfer the said case to its state tax counterpart’.
However it was contended by them that they were unaware about the fact that the Central tax authority has initiated investigation in the above matter.
It was held by the Orissa High Court that the contention of the respondent that they had no knowledge of the proceedings initiated by the Central Tax Authorities is not true since a letter in this regard was submitted by respondent to State tax Authority pointing out that the parallel investigation were carried out by DGGSTI (Central Authority) in respect to the concerned matter.
It was mentioned that the period of enquiry as far as Central tax authority is concerned is from July, 2017 to June, 2018 whereas State Tax Authority has issued a show cause notice specific for March, 2018 and, therefore, there was an overlapping of the periods.
For the reasons noted above, the Court quashes the show cause notice, the impugned order passed by State Tax Authority and directs that till the conclusion of the proceeding initiated against the Petitioner by the DGGSTI, no coercive action be taken against the Petitioner by the State Tax Authorities.
In the present scenario, wherein various investigation and/or enforcement agencies are overlapping just for the sake of revenue drive, this judgment of Odisha High Court, may bring lot of relief from unnecessary harassment which client is facing in day to day operations.
Anurag Suri vs. DGGST Intelligence and others (2021-TIOL-802-HC-ORISSA-GST)