Madras High Court
Kuppan Gounder P.G.Natarajan vs Directorate General Of Gst ... on 1 September, 2021
W.A.No.2003 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 01.09.2021
CORAM
The Honourable Mr.Justice T.S.SIVAGNANAM
and
The Honourable Mr.Justice SATHI KUMAR SUKUMARA KURUP
Judgment Reserved On Judgment Pronounced On
16.08.2021 01.09.2021
W.A.No.2003 of 2021
and
C.M.P.No.12863 of 2021
Kuppan Gounder P.G.Natarajan,
Managing Director,
M/s.KPN Travels India Ltd.,
No.238, Rajaji Street,
Swarnapuri Salem-636 004. .. Appellant
-vs-
Directorate General of GST Intelligence,
West Block-8, Wing No.6,
2nd Floor, R.K.Puram,
New Delhi-110 066. .. Respondent
Prayer :- Appeal under Clause 15 of Letters Patent against the order
dated 29.07.2021 passed in W.P.No.15708 of 2021 and set aside the same.
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For Appellant : Mr.E.Om Prakash, Senior Counsel
for M/s.A and N Care Solicitors
For Respondent : Mr.V.Sundareswaran,
Senior Standing Counsel
******
JUDGMENT
T.S.Sivagnanam, J.
This appeal has been filed by the appellant/writ petitioner,
challenging the order passed in W.P.No.15708 of 2021, dated 29.07.2021.
2.The appellant is the Managing Director of a Company registered
under the Indian Companies Act, 1956, which is engaged in the business of
transportation. The appellant sought for issuance of Writ of Certiorari to
quash the summons issued by the respondent dated 08.07.2021, under
Section 70 of the Central Goods and Services Tax Act, 2017 (hereinafter
referred to as “the CGST Act”).
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3.The case of the appellant is that the company, in which the
appellant is the Managing Director, was promoted by him, because a
pioneer in the transport business and has achieved the present status out of
dedication and hard work. The company held by the family members of the
appellant as the shareholders and continued to offer bus services to its
customers. The appellant received a notice dated 17.12.2020 from the
Assistant Commissioner (SC), Salem stating that there are certain
discrepancies in the GST returns in GSTR-3B filed by the appellant for the
financial years 2018-19 and 2019-20, while compared with the online
service providers returns of the appellant viz., GSTR-8. The appellant
submitted explanation with appropriate details, vide letter dated 29.12.2020.
While so on 19.01.2021, the respondent conducted a search in the premiss
of the appellant and the appellant would state that they were harassed and
their employees were attacked, which necessitated lodging of a complaint
with the police concerned and a case had been registered.
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4.It is the further case of the appellant that the respondent on
20.01.2021, issued summons to the Managing Director and the Directors of
the Company under Section 70 of the CGST Act. This summons, according
to the appellant, is devoid of reasons, issued in a mechanical manner. The
appellant filed W.P.No.2723 of 2021 challenging the said summons and by
order dated 08.02.2021, the Court directed the summons to be kept in
abeyance.
5.It is further submitted that the respondent passed an order of
provisional attachment under Section 83 of the CGST Act attaching 14 bank
accounts, which include that of the Company and the individual bank
accounts of the Directors, vide order dated 20.01.2020. This having been
brought to the notice of the learned Writ Court, by order orders dated
08.02.2021 and 10.03.2021, the orders of provisional attachment were
directed to be lifted. Aggrieved by such order, the respondent preferred
W.A.No.984 of 2021 in which, certain interim directions were given on
25.03.2021 directing the order passed lifting the attachment to remain
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W.A.No.2003 of 2021
stayed; directing the Authorized Representative of the appellant to appear
before the respondent on 29.03.2021 at 11.00 am; an opportunity of
personal hearing was granted; and the respondent was directed to pass a
speaking order within a time frame. Till final orders were passed, taking
note of the submission that the appellant's business activity had been
crippled, the representation dated 27.01.2021, was directed to be considered
and appropriate interim orders shall be passed, if found tenable, considering
the lifting of the provisional attachment in respect of a few Bank accounts to
enable the appellant to carry on its business activities. Pursuant to such
direction, the respondent had lifted the order of provisional attachment in
respect of three Bank accounts, though the appellant sought for lifting the
attachment in respect of seven Bank accounts. Aggrieved by the same, the
appellant had filed W.P.No.11367 of 2021.
6.The petitioner filed W.P.No.12402 of 2021 challenging the order
passed by the respondent dated 01.04.2021, to quash the said order and to
release all the Bank accounts, which had been attached.
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7.The present appeal, which arises out of the order passed in
W.P.No.15628 of 2021 as stated above, challenges the summons issued by
the respondent dated 08.07.2021. The learned Writ Court by order dated
29.07.2021, dismissed the writ petition. Aggrieved by the same, the
appellant is before us by way of this appeal.
8.Mr.E.Om Prakash, learned Senior Counsel appearing for M/s.A and
N Care Solicitors submitted that the appellant's company falls within the
State jurisdiction under the State Goods and Service Tax Act, 2017
(hereinafter referred to as “the SGST Act”) and the respondent is an
authority with the central jurisdiction and therefore, he has no jurisdiction to
initiate any proceedings under the CGST/SGST Act more so when, the State
authority had already initiated action and the matter is pending at different
stages.
9.Further, it is submitted that the summons had been issued without
any authority of law and by overlapping assessment jurisdiction causing
untold hardship and harassment to the appellant. Further, it is submitted
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that the respondent had issued the impugned summons without considering
that the officials at Chennai had conducted a search in the premises of the
appellant and summons was issued to the appellant, which is subject matter
of challenge in W.P.No.2723 of 2021 and therefore, the summons, which
was impugned in the writ petition, had to be quashed on account of lack of
jurisdiction.
10.Further, it is submitted that under Section 62 of the SGST Act, an
assessment can be made, however, the said provision would not apply to the
appellant's case and even going by the said provisions, which refer to the
'proper office', it would mean in the appellant's case, the State authority and
not the respondent. Further, it is submitted that there is no notification or
order empowering the respondent to initiate assessment proceedings or raise
a demand against the appellant, as they fall within the jurisdiction of the
State authority under the SGST Act. Further, it is submitted that the State
authority had already issued two notices in respect of the alleged
discrepancy in the returns and the matter is pending within their jurisdiction
and at that juncture, the respondent has no jurisdiction to issue the
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summons. Further, it is submitted that when the summons issued by the
State authority has been directed to be kept in abeyance, pursuant to the
order in W.P.No.2723 of 2021, the summons issued by the respondent is
only with a view to get over the interim order passed by the learned Writ
Court. Further, it is submitted that the appellant, who is summoned to
appears, is aged about 74 years and during the period of pandemic, it would
be putting the appellant to great risk by travelling to Delhi.
11.The learned Senior Counsel submitted that the learned Writ Court
erred in rejecting the contention advanced by the appellant by referring to
Section 6(2)(b) of the CGST Act by observing that the said provision would
have no application to the case of the appellant.
12.The learned Senior Counsel referred to the interim orders granted
by the High Court of Delhi in W.P.(C) No.3968 of 2021 dated 25.03.2021
and 12.04.2021 (Ankit Bindal & Ors. vs. Principal Commissioner of
Central Goods and Services Tax) and the interim order granted by the High
Court of Gujarat at Ahmedabad in Special Civil Application No.16271 of
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2021 dated 22.12.2020. These orders have been referred to, to support the
contention that repeatedly issuing the summons to the assessee by different
authorities, amounts to harassment. Apart from that, the authority, who had
issued the impugned summons, has no jurisdiction to issue the same.
13.It is further submitted that parallel investigation cannot be done by
the State authorities as well as the Central authority and the learned Writ
Court can exercise its jurisdiction, if the exercise of power by the authority
is bad in law and no reasonable person can come to the belief as to the
action is required to be taken in the manner done so. Therefore, the learned
Writ Court had enough jurisdiction to examine whether the formation of
belief to satisfy if the conditions specified in the statutory provision invoked
or met. In support of such contention, reliance was placed in RCT
Industries and Technologies Ltd. vs. Commissioner DGST Delhi and
Others reported in 2021 (46) G.S.T.L. 123 (Delhi). On the above grounds,
the learned Senior Counsel submitted that the summons issued by the
respondent is liable to be quashed on the ground of lack of jurisdiction.
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14.Mr.V.Sundareswaran, learned Senior Standing Counsel appearing
for the Revenue submitted that an investigation was launched against the
Company among several other such transport Companies for non-payment
of GST, which was collected by them from the customers during the period
July, 2017 to December, 2020. Search operations were conducted in the
business premises of the appellant on 19.01.2021 and 20.01.2021 and
documents and records were seized. It is submitted that from the
documents, which were seized and the voluntary statements given by the
employees of the Company, the Department is of the prima facie view that a
GST amount in excess of Rs.8 Crores, which was collected from the
customers through third party undertakings, operations such as e-commerce
operators, has not been remitted to the Department.
15.It is submitted that a writ petition, challenging a summons is not
maintainable and the learned Writ Court rightly dismissed the writ petition
directing the appellant to submit to its jurisdiction. Further, it is submitted
that the respondent has sufficient jurisdiction to invoke Section 70 of the
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CGST Act and issue summons and on the grounds raised, the summons
cannot be quashed and rightly, the writ petition was dismissed.
16.The learned Senior Standing Counsel referred to a clarification
issued by the Central Board of Excise & Customs (CBEC) dated
05.10.2018. It was stated by the Board that it has come to its notice that
there is ambiguity regarding enforcement of action by the Central Tax
Officers in case of taxpayer assigned to the State tax authority and vice
versa. It was stated that the GST Council, in its 9th Meeting held on
16.01.2017, discussed and made recommendations regarding administrative
division of taxpayers and concomitant issues. The recommendation in
relation to cross-empowerment of both tax authorities for enforcement of
intelligence-based action was recorded at para 28 of the Agenda Note No.3
in the minutes of the meeting, which stated that both the Central and the
State tax administrations shall have the power to take intelligence-based
enforcement action in respect of the entire value chain. In terms of the said
decision, the Central Board clarified that the officers of both Central tax and
the State tax are authorized to initiate intelligence-based enforcement action
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on entire taxpayer's base irrespective of the administrative assignment of the
taxpayer to any authority. It was further clarified that the authority, which
initiates such action, is empowered to complete the entire process of
investigation, issuance of show cause notice, adjudication, recovery, filing
of appeal, etc. arising out of such action. In other words, it was clarified
that if an officer of Central tax authority initiates intelligence-based
enforcement action against the 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. Similar the 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.
17.Based on such clarification, it is submitted that State tax authority
as well as the Central tax authority are entitled to initiate intelligence-based
enforcement action separately and cross-empowerment of both authorities is
permitted under the scheme of the CGST Act.
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18.Reliance was placed on the decision in the case of Sanganeriya
Spinning Mills Ltd. vs. Union of India reported in 2019 (28) G.S.T.L. 442
(Raj.) wherein, the Court rejected the challenge to the vires of Section 6(1)
of the Goods and Services Tax Act, 2017 and the notification issued by the
Government dated 20.09.2017 delineating the jurisdiction of the State and
Central authorities.
19.Reliance was placed on the decision in the case of Dadhichi Iron
and Steel Pvt. Ltd. vs. Chhattisgarh GST reported in 2020 (35) G.S.T.L. 4
(Chhattisgarh) with regard to the issue relating to the bar under Section
6(2)(b) of the CGST Act.
20.With regard to the challenge to the summons and as to how the
Court has to consider the challenge to the summons and with regard to the
effect of Section 6(2)(b) and Section 70 of the CGST Act, reliance was
placed on the decision in the case of P.V.Rao vs. Senior Intelligence
Officer, Directorate General of GST Intelligence reported in 2021 (45)
G.S.T.L. 97 (Delhi) = Manu/DE/2078/2020.
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21.Reliance was also placed on the decision in the case of RCI
Industries and Technologies Ltd. (supra) with regard to the jurisdiction of
this Court, when a summons is challenged.
22.To test the effect of Section 6(2)(b) of the CGST Act qua the facts
of the appellant's case, reliance was made to the decision in the case of
Kaushal Kumar Mishra vs. Additional Director General, Ludhiana Zonal
Unit and Another reported in 2021-TIOL-387-HC-P&H-GST.
23.Reliance was placed on the decision in the case of Siddhi Vinayak
Trading Company vs. UoI [Writ Tax No.822 of 2020 dated 23.02.2021
(HC-Allahabad)] wherein, the clarification issued by the CBEC dated
05.10.2018, was referred to and the writ petition was filed challenging the
summons issued by the Central Tax Authorities, where adjudication under
Section 74 of the CGST Act was made by the State authority and the
challenge of such summon was rejected. On the above grounds, the learned
Senior Standing Counsel appearing for the Revenue prayed for sustaining
the order passed in the writ petition.
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24.We have elaborately heard the learned counsel appearing for the
parties, considered the submissions made and the materials placed before us.
25.The challenge to the summons issued by the respondent being on
the question of the jurisdiction of the respondent to issue summons, we may
not be required to examine the facts regarding the search and seizure
operations conducted against the appellant, the Company, the Directors,
business premises etc., and it would suffice to note that the State tax
authorities had initiated action against the appellant, the Company and its
Directors and others and those summons are not subject matter of these
proceedings and it appears that there was an interim order granted and
certain directions issued in an appeal filed by the Department against the
said order. There are separate set of cases filed against the orders of
attachment, which were initially directed to be lifted by the Single Bench of
this Court and writ appeals have been preferred and orders and directions
have been issued and the matter is at that stage qua the action initiated by
the State tax authorities.
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26.The argument of the learned Senior Counsel for the appellant is
that since the State tax authorities had already initiated action, the impugned
summons issued by the respondent, under Section 70 of the CGST Act, is
without jurisdiction. Further, it is submitted that the summons calls upon
the appellant to tender statement by directing his physical appearance at
New Delhi and during the time of pandemic, it will be a great risk for the
appellant, who is aged more than 70 years, who has to travel over to Delhi
by responding to the summons more particularly, when action had already
been initiated by the State tax authorities and the jurisdiction of the
authority to initiate action is subject matter of challenge before this Court in
separate proceedings.
27.Firstly, we need to take note of whether the State tax authorities
and the Central tax authorities enjoy concurrent jurisdiction, the issue of
cross-empowerment of the State tax authorities and the Central tax
authorities. We have pointed out about the clarification relied on by the
Revenue dated 05.10.2018. Thus, the ambiguity with regard to the initiation
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of enforcement action by the State and the Central authorities has been
lingering for quite some time and the matter having been brought to the
notice of the GST Council, in its meeting held during January 2017, it was
decided that both the Central and State tax administrations have the power
to take intelligence-based enforcement action in respect of the entire value
chain. Based on such decision of the GST Council, the CBEC issued
clarification dated 05.10.2018. Thus, this puts an end to the ambiguity and
it is clear from the said clarification that if an intelligence-based
enforcement action is taken against a taxpayer, which is assigned to State
tax authority, the Central tax authority is entitled to proceed with the matter
and take it to the logical conclusions and the same principle is applicable
vice versa. This circular was referred to in Siddhi Vinayak Trading
Company (supra) and the challenge was rejected by referring to the above
clarification issued by the CBEC.
28.Section 6(2)(b) of the CGST Act states that 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
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proceedings shall be initiated by the proper officer under the CGST Act on
the same subject matter. The appellant's case rests upon the interpretation
of the said provision. The key words occurring in Section 6(2)(b), viz.,
“subject-matter” are required to be interpreted to consider as to whether the
challenge to the summons impugned in the writ petition was maintainable.
29.Section 70 of the CGST Act, which has been invoked by the
respondent while issuing summons, empowers the proper officer under the
said Act to summon any person, whose attendance he considers necessary
either to give evidence or to produce a document or any other thing in any
inquiry in the same manner, as provided in the case of a Civil Court under
the provisions of the Code of Civil Procedure, 1908.
29.1.In terms of sub-section (2) of Section 70, every such inquiry
referred to in sub-section (1) of Section 70 shall be deemed to be a “judicial
proceedings” within the meaning of Section 193 and Section 228 of the
Indian Penal Code.
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30.The submission of the learned Senior Counsel for the appellant is
that the State authority has conducted the search and seizure operations and
summons had been issued, order of provisional attachment had been passed
and in such situation, the respondent cannot initiate any action and issue
summons under Section 70 of the CGST Act and the summons is barred as
per the provisions of Section 6(2)(b) of the CGST Act.
31.We need to take note of the word “inquiry” occurring in Section
70 of the CGST Act and the proper officer has power to summon any person
whose attendance he considers necessary to give evidence or to produce a
document or any other thing in any inquiry, in the same manner, as provided
in the case of a Civil Court. The bar contained under Section 6(2)(b) of the
CGST Act is with regard to any proceedings initiated by a proper officer on
a subject matter, on the same subject-matter, the proper officer under the
Central Act cannot initiate any action referred.
32.In our considered view, the scope of Section 6(2)(b) and Section
70 is different and distinct, as the former deals with any “proceedings on a
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subject matter/same subject matter” whereas, Section 70 deals with power to
summon in an inquiry and therefore, the words “proceedings” and “inquiry”
cannot be mixed up to read as if there is a bar for the respondent to invoke
the power under Section 70 of the CGST Act.
33.In G.K.Trading Company vs. Union of India reported in 2021-
TIOL-31-HC-ALL-GST, upon considering the scope of Section 6(2)(b) and
Section 70, it was pointed out that the word “proceedings” used in Section
6(2)(b) is qualified by the words “subject-matter” which indicate an
adjudication process/proceedings on the same cause of action and for the
same dispute, which may be proceedings relating to assessment, audit,
demands and recovery and offences and penalties etc. It was further pointed
out that these proceedings are subsequent to inquiry under Section 70 of the
CGST Act and the words “in any inquiry” are referable to the provisions
under Chapter XIV viz., Sections 67, 68, 69, 71 and 72. Thus, it was held
that the proper officer may invoke power under Section 70 in any inquiry
and the prohibition under Section 6(2)(b) shall come into play when any
proceeding on the same subject-matter had already been initiated by a
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proper officer under the State Act. Therefore, the contention raised by the
appellant stating that in issuance of summons for conducting an inquiry and
to obtain a statement from the appellant cannot be construed to be bar under
Section 6(2)(b) of the CGST Act. Thus, the key words occurring in both the
provisions viz., “in any inquiry” and “proceedings on the same-subject
matter” indicate the crucial difference between these two provisions.
34.It was argued that the summons impugned in the writ petition
issued under Section 70 of the CGST Act merely states that the appellant is
required to attend to tender statement and the summons is absolutely vague.
35.Reliance was placed by the appellant on the decision in RCT
Industries and Technologies Ltd. (supra) for sustaining the writ petition
and that it is maintainable as against the summons issued by the respondent.
The challenge in the said case was a search action carried in the said
assessee's business premises under Section 67 of the Delhi Goods and
Services Tax Act, 2017. The challenge to the action of search was on the
ground that the assessee was put to harassment. The Central tax authorities
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had also conducted search and the search action was challenged in a writ
petition, which was quashed and thereafter, the State GST authority has
subjected the assessee to another search action in relation to the same
period, despite the assessee being subjected to search action at the hands of
the Central authorities and therefore, it was argued that the search by the
State authority is illegal and unlawful and contrary to the provisions of the
Act. One of the issues, which was considered in the said case, was with
regard to the cross-empowerment and taking note of the clarification issued
by the CBEC dated 05.10.2018 and also the letter dated 22.06.2020, the
Hon'ble Division Bench held that the Department shall be bound by the
circulars and that the assessee therein would be at liberty to take action in
case the action of the State and Central authority is overlapping. The
Hon'ble Division Bench had no occasion to examine the effect of Section
6(2)(b) qua Section 70 of the CGST Act. Furthermore, in the said decision,
the distinction with regard to the words “proceedings” under the CGST Act
and an “inquiry” was not the subject matter. Therefore, the said decision
can render no support to the case of the assessee. In the said decision, it
was held that while exercising writ jurisdiction, the Court cannot adjudge or
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test the adequacy or sufficiency of the grounds and can only go into the
question and examine the formation of the belief to satisfy if the conditions
specified under the statutory provision invoked or met. The factual matrix
being entirely different in the said decision, it can render no assistance to
the case of the assessee.
36.For all the above reasons, we find that there is no ground made out
by the appellant for quashing the summons issued by the respondent under
Section 70 of the CGST Act.
37.In the result, the writ appeal fails and the same is dismissed. No
costs. Consequently, connected miscellaneous petition is closed.
(T.S.S., J.) (S.S.K., J.)
01.09.2021
Index: Yes
Speaking Order : Yes
abr
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T.S.Sivagnanam, J.
and
Sathi Kumar Sukumara Kurup, J.
(abr)
To
The Directorate General of GST Intelligence,
West Block-8, Wing No.6,
2nd Floor, R.K.Puram,
New Delhi-110 066.
Pre-delivery Judgment made in
W.A.No.2003 of 2021
01.09.2021
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