Neeraj Jain vs The Union Of India, Ministry Of ...
2023 Latest Caselaw 5212 Patna

          IN THE HIGH COURT OF JUDICATURE AT PATNA
                    Civil Writ Jurisdiction Case No.7599 of 2023
     ======================================================

Neeraj Jain Son of Nirmal Kumar Jain Resident of Flat - 1A, Lotus Apartment, 45 A, Buro Shibtala Main Road, New Alipur Residency, P.S. Sahapur, District - Kolkata, West Bengal.

... ... Petitioner/s Versus

1. The Union of India, Ministry of Finance, Department of Revenue New Delhi.

2. The State of Maharashtra Ministry of Finance, Department of Goods and Service Tax, Maharashtra.

3. The Central Board of Indirect Taxes and Customs, Ministry of Finance, Department of Revenue, North Block, New Delhi.

4. The Directorate General of GST Intelligence, Patna Zone Unit, Cybotech Tower, Near Pani Tanki More, Boring - Patliputra Road, Patliputra, Patna, Bihar.

5. The Assistant Commissioner of State Tax (INV) D- 005, Raigad Division, Room No. 711, 7th Floor, Konkan Bhavan, Belapur, Navi Mumbai, Maharashtra.

6. The Commissioner of State Tax, Konkan Bhavan, Belapur, Navi Mumbai, Maharashtra.

... ... Respondent/s ====================================================== Appearance :

     For the Petitioner/s   :      Mr.Alok Kumar Agrawal, Advocate
     For the UOI            :      Dr. K.N. Singh, ASG
                                   Mr. Anshuman Singh, Sr.SC, CGST & CX
                                   Mr. Ranvir Kumar, Sr. SC
     For the State          :      Mr. Vivek Prasad, GP-7
                                   Ms. Supragya AC to GP-7
                                   Ms. Roona AC to GP-7
                                   Mr. Sanjay Kumar, AC to GP-7
                                   Ms. Manisha Singh, AC to GP-7

====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE RAJIV ROY ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE)

Date : 10-10-2023

The petitioner herein, a resident of West Bengal is

aggrieved with the notices issued by the 4 th respondent, an Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

officer authorized under the Central Goods and Services Tax

Act and the notices issued by the 5 th respondent, an officer

under the State Goods and Services Tax Act produced

respectively as Annexures 6 and 5; both of which are summons

issued under Section 70 of the State and Central Goods and

Services Tax Act, for procuring the presence of the noticee as a

witness in the proceedings initiated.

2. The learned counsel for the petitioner

specifically placed reliance on Section 6 of the Goods and

Services Tax Act before us, to contend that there can be no

proceedings initiated and continued simultaneously by the State

and Central authorities. A Circular of the CBEC dated

05.10.2018, is also relied upon to further contend that, if a

proceeding is initiated by one of the authorities; then the other

authority though competent to proceed on investigation should

stay its hands, till the first authority, who initiated the

proceedings complete that. Reliance is placed on a Division

Bench judgment of the High Court of Gujarat dated

04.03.2020, in Ms. Bhawani Textiles Vs. Additional Director

General in R/Special Civil Application No. 5273 of 2020 and

another Division Bench of the High Court of Delhi in Indo

International Tobacco Ltd. vs. Vivek Prasad, Additional Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

Director General, DGGI; 2022(67) G.S.T.L. 403 (Del.)

3. The learned Additional Solicitor General, Dr.

K.N. Singh appearing for the Central Tax Authority points out

that the proceedings for investigation are with respect to two

different entities, assessees registered respectively in

Maharashtra and Patna and the notice issued under Section 70

cannot be termed stricto sensu a proceeding for investigation. It

is the contention of the learned Additional Solicitor General

that the reference to M/s. Vedam Entrerprise an assessee under

the Maharashtra Goods and Services Tax Act, 2017,

specifically indicates that the proceedings for investigation is

against that assessee and the petitioner has been summoned

only as a witness. One M/s. Arti Plastics, an assessee under the

Bihar State Goods and Services Tax Act is said to have

purchased goods from M/s. Vedam Enterprises. M/s. Vedam

Enterprises was revealed to be a fictitious entity, when the

person whose credentials were produced for registration, had

distanced himself from the said firm, alleging fraudulent

registration in his name. The petitioner herein was found to be

the go between in the transactions between the two entities, one

registered in Maharashtra, M/s. Vedam Enterprises and the

other in Bihar, M/s. Arti Plastics. The investigation proceedings Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

initiated by the State Taxes Authority in Maharashtra is against

M/s. Vedam Enterprises registered in Maharashtra. The

investigation initiated by the Central Tax Authority within

Bihar is against M/s. Arti Plastics, the assessee registered in

Bihar.

4. Shri Vivek Prasad, learned Government

Advocate appearing for the State fully supports the contention

raised by the learned Additional Solicitor General.

5. Bhawani Textiles (supra) was a case in which,

based on search under Section 67 of the Central Goods and

Services Tax Act, the Directorate General of Gujarat Services

Tax Intelligence, Ahemdabad issued a summons under Section

70(1) of the Central Goods and Services Tax Act to the writ

applicant. The search was conducted in the office premises of

the writ applicant itself. The writ applicant replied that the

entire books of accounts were seized by the DGGI, Ahemdabad

Zonal Unit (AZU). The petitioner was aggrieved by the

subsequent summons issued by the Deputy Collector of State

Tax and another by the DGGI, Surat when actually the DGGI,

AZU, had conducted the search operation and issued summons

first. The Division Bench directed the DGGI, AZU, to look into

the matter and ensure that no harassment is caused to the writ Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

applicant. The Division Bench of the High Court of Delhi in

Indo International Tobacco Ltd. (supra) found that the High

Court of Gujarat had not expressed any opinion on the merits

of the case and had not considered the ambit and scope of the

circular dated 05.10.2018. We are in respectful agreement of

the observation made by the Division Bench of the High Court

of Delhi; that there is no dictum coming out of the decision of

the High Court of Gujarat.

6. Indo International Tobacco Ltd. (supra)

though relied on the very same circular issued by the CBEC,

the High Court of Delhi categorically found that it is not

applicable to the facts arising in that case. Especially since,

though parallel investigations were initiated, the one initiated

by the State Tax Authority was transferred to the Central Tax

Authority. Since there was no prohibition for such transfer

under the Central Goods and Services Tax Act, Section 62(2)

(b) and the Circular having limited application was found

irrelevant to the facts of this case, thus the writ petition filed

against the parallel proceedings being rejected. However, we

notice that the provisions of the Goods and Services Tax

enactment's including Section 6 and the Circular of the CBEC

were elaborately dealt with by the High Court of Delhi. Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

7. After referring to the Constitutional provisions

by which the Goods and Services Tax regime was brought into

force, it was found that power was conferred for inspection,

search, seizure (under Section 67) investigation and

determination of non-payment or short-payment of tax and

erroneous claims of input tax credit, by reason of fraud, willful

misstatement or suppression of facts (under Section 74) and

even otherwise under Section 73. The power was conferred on

the 'Proper Officer' by the State and Central Goods and

Services Tax enactments. The Proper Officer is defined under

Section 2(91) of the Central and State Goods and Services Tax

Act as the officer respectively of the Central Tax and the State

Tax. Section 3 and 4 of the CGST Act respectively deal with

the class of officers that may be appointed by the Government

and/or by the Central Board of Indirect Taxes and Customs.

Section 5 of the Central Goods and Services Tax Act empowers

the officers of the Central Tax to exercise the powers and

discharge the duties conferred on them under the Central

Goods and Services Tax Act. In exercise of the power conferred

under Sections 3 and 5 of the Central Goods and Services Tax

Act, notifications have been issued empowering the Central

Tax Authorities with limited territorial jurisdiction over various Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

areas of the country and also the officers of the Directorate

General of Goods and Services Tax, its Intelligence and Audit

Wing, as Central Tax Officers conferring on them powers

extended throughout the territory of India. Hence, there are

Central Tax Officers, who are empowered to exercise all India

jurisdiction and those who enjoy limited territorial jurisdiction.

The State Government also issues notifications under the State

Goods and Services Tax Act, Section 3 and 4 of the SGST Act,

empowering the State Tax Officers to exercise powers over

limited territorial jurisdiction within the State and some who

exercise powers throughout the territory of the State.

8. For administrative purposes a tax payer in a

particular area can be assigned to the Central Tax Officer or

State Tax Officer, which assignment is done randomly. Under

Section 6(1), cross-empowerment of officers appointed under

the State and Central Goods and Services Tax Act is enabled.

Under Section 6(1) & (2)(a) of the CGST Act a 'Proper

Officer' exercising control over the territory under the State or

Union Territory Goods and Services Tax Act (for brevity

'SGST or UGST Act') is also empowered to issue an order

under the Central Goods and Services Tax Act (CGST Act).

Correspondingly Section 6(1) and (2)(a) of SGST Act and Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

UTGST Act empowers a 'Proper Officer' under the CGST Act

to initiate any order under the SGST or UGST Act. Sub-

clause(b) of Section 6(2) of the respective enactments prohibit

the 'Proper Officer' under that Act from initiating a proceeding

on the same subject matter, if the 'Proper Officer' under the

other Act has initiated a proceeding.

9. The Circular dated 05.10.2018 gives effect to

the mandate of Section 6 of the Central, State and UT Goods

and Services Tax enactments. It makes the mandate of Section

6 applicable to intelligence based enforcement action,

clarifying that both the Central, State or Union Territory Tax

Officers are authorized to initiate such proceedings irrespective

of the assignment of the tax payer to a particular authority. The

Circular clarifies that when one of such Officer either under the

Central of State enactment, initiate proceedings, though

administratively the tax payer is assigned to the other, there is

no need to transfer the proceedings to the other authority and it

also clarifies that the 'Proper Officer', who issued the

proceedings first in time, shall continue with it and the second

proceedings initiated by the other officer shall not be continued

until there is logical culmination of the first inquiry initiated.

10. On the working of the Circular, the Division Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

Bench in Indo International Tobacco Ltd. (supra) has so

stated, succinctly, in Paragraphs 66 which is extracted herein:-

66. A bare reading of Section 6 of the CGST and the abovementioned Circular, on first blush, supports the interpretation put forth by the Learned Senior Counsel for the petitioners. However, in our opinion, neither Section 6 of the CGST Act nor the Circular dated 5-10-2018 is intended to nor can be given an overarching effect to cover all the situations that may arise in the implementation of the CGST and the SGST Acts. The Circular cannot be extended to cover all and myriad situations that may arise in the administration and the functioning of the GST structure, now being governed by the CGST Act; the SGST Act; the UTGST Act; and the IGST Act. Section 6 of the CGST Act and the above said Circular clearly has a limited application, which is of ensuring that there is no overlapping exercise of jurisdiction by the Central and the State Tax Officers. It is to bring harmony between the Centre and the State in the implementation of the GST regime, with the two not jostling for jurisdiction over a taxpayer. It is, however, not intended to answer a situation where due to complexity or vastness of the inquiry or proceedings or involvement of number of taxpayers or otherwise, one authority willingly cedes jurisdiction to the other which also has jurisdiction over such inquiry/proceedings/taxpayers.

11. As has been held by the Division Bench of the

High Court of Delhi, Section 6 or the Circular does not reckon

all situations, which would arise in the course of an Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

investigation. As has been rightly pointed out by the learned

ASG and the learned Government Advocate in the present case,

the investigation is not against the petitioner herein. The

investigation by the State Tax Authority in Maharashtra is

against one M/s. Vedam Enterprises, who is an assessee within

the State of Maharashtra, whose registration has been found to

be fictitious. The investigation initiated by the State Tax

Authority within Bihar, at Patna is with respect to an assessee

M/s. Arti Plastics, who is registered within the State of Bihar.

The investigation reveals that both the said assessees, one

registered in Maharashtra and the other in Bihar had dealings

between themselves, based on which input tax credit was

claimed by the assessee in Bihar. M/s. Vedam Enterprises is

said to be the supplier and M/s. Arti Plastics, the purchaser and

the petitioner herein, the go between. The petitioner has been

directed to appear as a witness for which summons had been

issued under Section 70 of the respective enactments, by both

the authorities.

12. As of now, there is no investigation pending

against the petitioner. He is called upon to produce his books of

accounts to ascertain his complicity in the transactions between

M/s. Vedam Enterprises and M/s. Arti Plastics. The notice Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

issued against the petitioner is not a notice under Section 67, 73

or 74.

13. We respectfully quote the finding of a Division

Bench of the Allahabad High Court in M/S G.K. Trading

Company vs. Union of India and Anr. in Writ Tax No. 666

of 2020. Paragraph nos. 16, 17 and 18 of the aforesaid

judgment reads as under:-

16. Section 70 of the U.P.G.S.T. Act or C.G.S.T. Act is part of Chapter XIV which contains provisions for inspection, search, seizure and arrest. Section 70 of both the Acts are pari materia which empowers the proper officer under the 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.

17. Thus, Section 6(2)(b) of the C.G.S.T. Act prohibits separate initiation of proceedings on the same subject-matter by the proper officer under the C.G.S.T. Act when proceeding on the same subject-matter by the proper officer under the State Act has been initiated, whereas Section 70 of the U.P.G.S.T./ C.G.S.T. Act merely empowers the proper officer to summon any person in any inquiry. The word "proceedings" used in Section 6(2)(b) is qualified Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

by the words "subject-matter" which indicates 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. These proceedings are subsequent to inquiry under Section 70 of the Act. The words "in any inquiry" used in Section 70 of the Act is referable to the provisions of Chapter XIV, i.e. Section 67 (power of inspection, search and seizure), Section 68 (inspection of goods in movement), Section 69 (power to arrest), Section 71 (access to business premises) and Section 72 (officers to assist proper officers). Therefore, proper officer under the U.P.G.S.T. Act or the C.G.S.T. Act may invoke power under Section 70 in any inquiry. Prohibition of Section 6(2)(b) of the C.G.S.T. Act shall come into play only when any proceeding on the same subject-matter has already been initiated by a proper officer under the U.P.G.S.T. Act.

18. Thus, the words "any proceeding" on the same "subject-matter" used in Section 6(2)(b) of the Act, which is subject to conditions specified in the notification issued under sub-Section (1); means any proceeding on the same cause of action and for the same dispute involving some adjudication proceedings which may include assessment proceedings, proceedings Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

for penalties etc., proceedings for demands and recovery under Sections 73 and 74 etc.

14. We find absolutely no application of the

Section 6(2)(b) or the Circular and the petitioner should appear

before the respective tax authorities, pursuant to the summons

issued under Section 70 of the respective enactments.

14. The petitioner has expressed inability insofar

as the illness of his wife, which cannot be a reason, not to

appear before the statutory authority, for all times.

15. However, we reckon the apprehension

expressed by the learned counsel for the petitioner that in

producing documents before both the authorities, if

requisitioned, there would be difficulties. Considering the

totality of the circumstances we direct the State Tax authority

within the State of Maharashtra to issue a notice for appearance

some time in the month of December, 2023 and the State Tax

Authority in Patna to issue a notice some time in the month of

November, 2023. If any documents are requisitioned, the

petitioner would be entitled to produce it before the authority,

who first requisitions it and such authority shall enable

authenticated copies to be issued, at the expense of the

petitioner, for production before the other authority, if so Patna High Court CWJC No.7599 of 2023 dt.10-10-2023

required.

16. With the above observations, the writ petition

stands dismissed.

(K. Vinod Chandran, CJ)

( Rajiv Roy, J) aditya/-

AFR/NAFR                AFR
CAV DATE
Uploading Date          17.10.2023.
Transmission Date