Almost 4 years have elapsed since the introduction of GST Law in India in mid-2017. As the GST Law is in its nascent stages, interpretation of the law and its implementation has become a challenging task for the taxpayers. Not only taxpayers, but GST departments of several states are also facing such challenges. Nowadays, as GST department has started issuing notices to taxpayers based on discrepancies noticed by the GST officers as per their interpretation of Law. It has become a major hindrance in conducting day-to-day business activities for the taxpayers as a considerable amount of time & effort gets exhausted in responding to such notices.
However, there are various provisions under GST Law in which the scope of alternate interpretation and litigation is less and are complete in itself. But if we analyse the current situation in the market, various taxpayers are receiving notices from the GST officers for initiating proceeding against the taxpayers, even when such officers are not authorized by the law to issue notices as clearly stipulated under the law.
If we look at the Law provision as stated in section 6(2)(b) of CGST Act 2017, it is provided that where a proper officer under State Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the Central Goods & Services Tax Act on the same subject matter. Relevant Extract of Section 6(2)(b) of the CGST Act is reproduced here for reference: –
“Section 6(2)(b): where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”
However, several instances have been identified where notices were issued for initiating proceedings against the taxpayer both by the Central and State GST Department based on the same facts wherein first, the State GST department issued the notice and initiated the proceedings, and thereafter the Central GST department did the same against the Petitioner on the same facts.
Various Taxpayers have approached high courts for seeking relaxation in such cases where notices were issued to the taxpayers for initiating the proceedings on the same subject matter by State & Central GST Officers. For instance, the case of Ramesh Mundra v/s State of Gujarat was a unique case in which two criminal proceedings were initiated by the State GST Department and Central GST Department simultaneously based on the same facts wherein firstly State GST department initiated the criminal proceedings against the taxpayer under Section 132 of Gujarat GST Act, 2017 and subsequently the taxpayer was arrested and released on bail. Thereafter the Central GST department initiated the criminal proceedings against the taxpayer under Section 132(1) (b) and 132 (1) (c) of the CGST ACT, 2017 for claiming bogus input tax credit on the same facts, and again the taxpayer was arrested and released on bail. In this case, the Gujarat High Court stayed the proceedings against separate criminal proceedings initiated by the State and Central GST Department against the taxpayer on the same facts.
Similarly, in the case of Sureshbhai Gadhecha Vs State of Gujarat, the Gujarat High Court held that there cannot be two parallel investigations under the State Act as well as the Central Act. Also, Delhi High Court in the case of RCI Industries And Technologies Ltd Vs Commissioner DGST Delhi & Ors. ruled that in case the action of the State and Central Authorities is overlapping, the taxpayer would be at liberty to take action to impugn the same under the law.
Based on the actions taken by the department against the Taxpayers it is quite evident that the department is exercising its power far beyond the powers as entrusted under the law. However, the courts have come to the rescue of the Taxpayers which provides a sigh of relief for the taxpayers. To ensure that a person is not punished twice for the same offense, GST officers should always check the completed and ongoing notices & proceedings initiated against the taxpayer before initiating a proceeding and ensure that no new proceedings are initiated on the same subject matter by Centre & State departments.
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CA Tarun Kapoor
AKGVG & Associates