Introduction
In the recent case of Satyam Castings (P.) Ltd. v. Deputy Director, Directorate General of GST Intelligence (‘DGGI’)[i], the Hon’ble Orissa High Court (‘OHC’) addressed the complexities arising from parallel proceedings under the Central Goods and Services Tax Act, 2017 (‘CGST’) and State Goods and Services Tax (‘SGST’) Act. Satyam Castings (P.) Ltd (‘Petitioner’) challenged the validity of the summons and subsequent show cause-cum-demand notice issued by the DGGI, arguing that the SGST authorities already initiated similar proceedings.
Brief Facts
The Petitioner, a registered dealer under the CGST Act engaged in manufacturing cast iron products, was subject to an inspection by the CGST authorities on 31.03.2021. This inspection followed an earlier inspection conducted by the SGST authorities on 24.07.2019.
The Petitioner argued that the CGST authorities could not initiate a separate proceeding as the SGST authorities had already begun their investigation into related matters.
The Petitioner claimed that the ongoing investigation by the SGST authorities covered the tax periods from July 2017 to April 2022, overlapping with the period being investigated by the CGST authorities.
Despite this, the DGGI issued a summons and a show cause-cum demand notice on 29.12.2023, prompting the Petitioner to challenge it on the grounds of s. 6(2)(b) of the CGST/OGST Act prohibits multiple proceedings by different tax authorities on the same subject matter.
Contrarily, the DGGI contended that the investigations targeted different aspects of the Petitioner’s transactions, justifying separate actions by both authorities.
Held
The OHC declined to interfere with the summons and show cause-cum demand notice issued by the DGGI. The OHC held that the two investigations by the CGST and SGST authorities were not on the same subject matter. The SGST authorities were investigating transactions with M/s. Anamika Enterprises, a supplier to the Petitioner, while the DGGI’s investigation focused on the Petitioner’s clandestine clearance of taxable goods without the issuance of any tax invoices in March 2022.
The OHC emphasized that s. 6(2)(b) of the CGST/OGST Act bars proceedings on the same subject matter, but different transactions or entities involved can constitute distinct subject matters even within overlapping time periods.
The OHC relied on several precedents to support its decision:
Anurag Suri vs. Union of India[ii]: In this case, the OHC noted the lack of awareness by the State authorities about the Central authorities’ ongoing proceedings, distinguishing it from the present case, where the subject matters were different.
Vallabh Das vs. Madan Lal and Ors.[iii]: The OHC referenced this case to define ‘subject matter’ as including the cause of action and the relief claimed, emphasizing that different causes of action constitute different subject matters.
Our Analysis
The OHC’s decision to refrain from recording any definite opinion on whether the DGGI’s action is barred by virtue of s. 6(2)(b) of the CGST/OGST Act is very concerning. The Petitioner faces significant challenges in submitting relevant documents and books of accounts seized by the SGST authorities. This situation complicates the Petitioner’s ability to respond effectively to the DGGI’s summons and show cause-cum demand notice. Furthermore, both authorities are essentially investigating based on the same set of records, raising questions about the efficiency and fairness of dual investigations. This ruling underscores the critical need for more apparent coordination and communication between CGST and SGST authorities to avoid placing undue burdens on businesses and ensure a more streamlined and just investigatory process.
End Notes
[i] [2024] 162 taxmann.com 400 (Orissa) Satyam Castings (P.) Ltd. v. Deputy Director, DGGI, High Court of Orissa.
[ii] Anurag Suri v. DG GSTI & Ors., [W.P.(C) No.158 of 2020, dated 23-3-2021].
[iii] Vallabh Das v. Madan Lal (Dr), (1970) 1 SCC 761.
Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.