Case Title | G.K.Trading Company VS Union Of India |
Court | Allahabad High Court |
Honourable Judges | Justice Surya Prakash Kesarwani Justice Dr. Yogendra Kumar Srivastava |
Citation | 2020 (12) GSTPanacea 166 HC Allahabad WRIT TAX No. – 666 Of 2020 |
Judgement Date | 02-December-2020 |
In this case, a petitioner is facing multiple summons related to an inquiry initiated under the Uttar Pradesh Goods and Services Tax (U.P. GST) Act, 2017. The key points of contention are as follows:
1. The petitioner received several summonses, initially on an unspecified date in 2017, followed by additional summonses on August 26, 2019, and August 26, 2020, requiring them to provide statements for an ongoing inquiry.
2. The petitioner argues that once an inquiry is initiated by respondent no. 5 under the U.P. GST Act, other respondents (nos. 3 and 4) are prohibited from initiating any further proceedings on the same matter, citing Section 6(2)(b) of the U.P. GST Act, 2017. This section essentially bars multiple proceedings on the same set of facts.
3. The petitioner contends that since respondent no. 5 has already initiated an inquiry, respondents nos. 3 and 4 should be prevented from starting their own inquiries based on the same facts.
In response, Sri C.B. Tripathi, the special counsel for the State-respondents, presents the following counterarguments:
1. Section 6(2)(b) of the U.P. GST Act, 2017, prohibits initiating proceedings on the same set of facts, but it does not prohibit separate inquiries by different authorities under the U.P. Act or the Central Act.
2. The term “inquiry” used in Section 70 of the Central GST (CGST) Act is distinct from “proceeding” in Section 6(2)(b) of the U.P. GST Act. Hence, while proceedings on the same facts are prohibited, inquiries are not.
3. The jurisdiction under the U.P. GST Act for respondents nos. 2 and 5 is limited to the State of Uttar Pradesh, whereas the jurisdiction under the Central Act extends across the entire country.
4. The inquiry conducted by respondents nos. 3 and 4 under the CGST Act covers different or broader subjects compared to the inquiry by respondent no. 5 under the U.P. GST Act. Specifically, respondent no. 5’s inquiry focuses on incriminating material found during a survey on May 30, 2018, and evidence of illegal Input Tax Credit claimed by the petitioner. These facts are not mentioned in the summons issued by respondents nos. 3 and 4, indicating that their inquiries are based on different sets of facts.
In summary, the case revolves around the interpretation and application of Section 6(2)(b) of the U.P. GST Act, with the petitioner asserting that multiple proceedings on the same facts are not allowed, while the State-respondents argue that separate inquiries by different authorities are permissible and necessary due to the distinct scope and jurisdiction of the U.P. GST Act and the CGST Act.
The petitioner registered under the U.P. GST Act, 2017, for trading in Iron Bars, Rods, and Non-Alloy Steel, effective from November 1, 2017. On May 30, 2018, a survey conducted by respondent No. 5 at the petitioner’s business premises found no business activity. Consequently, respondent No. 5 (Deputy Commissioner, S.I.B.) issued a summons on June 2, 2018, under Section 70 of the U.P. GST Act, requiring the petitioner to submit details of purchases and sales, along with lists of buyers, sellers, and other documents.
Further action was taken on September 14, 2020, when the Assistant Commissioner (SIB), Commercial Tax, Range-C, Ghaziabad, issued another summons under Section 70 of the Act. This summons required the petitioner to explain certain input tax credits (ITCs) claimed, including those based on invoices from M/s Glider Traders Private Ltd., whose registration had been canceled months before the date of the invoice in question.
Additionally, the Directorate General of Goods and Services Tax Intelligence, Meerut Zonal Unit, Meerut, was conducting an inquiry and issued a summons on July 24, 2019, under Sections 70 and 174 of the CGST Act, 2017. The petitioner was required to appear in person on July 25 or 26, 2019, to provide a statement, but did not respond. Another summons dated August 26, 2019, was issued by respondent No. 4, requiring the petitioner to submit various documents, including copies of invoices, transport documents, purchase ledgers, sales ledgers, liability ledgers of ITC claimed, cash deposits, balance sheets, and profit/loss accounts, covering the period since July 2017.
In this case, the petitioner registered under the U.P. GST Act, 2017, for trading in Iron Bars, Rods, and Non-Alloy Steel. A survey conducted on May 30, 2018, by the Deputy Commissioner (Respondent No.5) found no business activity at the petitioner’s premises. Consequently, a summon was issued on June 2, 2018, under Section 70 of the U.P. GST Act, requesting the petitioner to submit details of purchases, sales, buyers, sellers, and other documents.
Further actions included a summon on September 14, 2020, by the Assistant Commissioner (SIB), Commercial Tax, Ghaziabad, asking for an explanation regarding certain input tax credits claimed, including those based on invoices from M/s Glider Traders Private Ltd., whose registration was canceled months before the invoice date. Additionally, the Directorate General of Goods and Services Tax Intelligence, Meerut, issued summons on July 24, 2019, under Sections 70 and 174 of the CGST Act, 2017, for the petitioner to appear in person to tender a statement.
Despite these summons, the petitioner failed to respond or provide the required information. Further summons on August 26, 2019, and August 26, 2020, by the respondents requested copies of various financial documents and ledgers since July 2017. The petitioner neither appeared before the respondents nor submitted the required details, instead, sending a letter on September 11, 2020, stating that a detailed inquiry was being conducted by Respondent No.5.
Consequently, the petitioner filed the current writ petition seeking relief.
The relevant provisions of the U.P. GST Act and the CGST Act are almost identical, and include Sections 2(91), 4(2), 6(2)(b), and Chapter XIV (Sections 67 to 72) of the Uttar Pradesh Goods and Services Tax Act, 2017. These provisions define the jurisdiction and authority of the officers, procedures for the issuance of orders, and conditions under which proceedings can be initiated. Notably, Section 6(2)(b) specifies that if proceedings have been initiated under the Central GST Act, no proceedings on the same subject matter should be initiated under the U.P. GST Act.
The petitioner, registered under the U.P. GST Act, 2017 for trading in Iron Bars, Rods, and Non-Alloy Steel, was subjected to a survey on 30.05.2018 at their business premises by respondent No.5, the Deputy Commissioner, S.I.B. During this survey, no business activity was found. Consequently, on 02.06.2018, the Deputy Commissioner issued a summon to the petitioner under Section 70 of the U.P. GST Act, requiring details of purchases, sales, buyers, sellers, and other documents.
Subsequently, the Assistant Commissioner (SIB), Commercial Tax, Ghaziabad issued another summon on 14.09.2020, asking for explanations regarding certain input tax credits (ITCs) claimed by the petitioner. These credits included those based on invoices from M/s Glider Traders Private Ltd., whose registration had been canceled months before the invoice date.
An inquiry was being conducted by the Directorate General of Goods and Services Tax Intelligence, Meerut Zonal Unit, which issued summons on 24.07.2019 under Sections 70 and 174 of the CGST Act, 2017. The petitioner was required to appear in person on 25th or 26th July, 2019, but did not respond. Another summon was issued on 26.08.2019 by respondent No.4, requesting various documents and ledgers from July 2017 to date. The petitioner again did not comply. Respondent No.3 issued a further summon on 26.08.2020, but the petitioner failed to appear or provide the requested details, instead writing a letter on 11.09.2020 stating that an inquiry was ongoing by respondent No.5.
The petitioner’s counsel argues that once the Deputy Commissioner (SIB), Ghaziabad (Respondent No.5), conducted a survey of the petitioner’s business premises on May 30, 2018, and is investigating based on that survey, no further inquiry or summons can be issued by the other respondent (Respondent No.4) under Section 70 of the Central Goods and Services Tax (C.G.S.T.) Act. The argument is based on the principle that once a specific investigation has been initiated by one authority, another authority should not be able to initiate a separate inquiry or issue summons, even if their investigative bases or materials differ.
The petitioner’s counsel argues that once a survey and investigation have been initiated by the Deputy Commissioner (SIB), Ghaziabad on May 30, 2018, no additional inquiry or summons should be issued by the respondent No.4 under Section 70 of the C.G.S.T. Act, even if the basis of the inquiry by the two respondents is different. Essentially, the counsel contends that the ongoing investigation by the Deputy Commissioner should preclude further actions by respondent No.4.
The terms “subject-matter,” “proceedings,” and “inquiry” are not explicitly defined in the State G.S.T. Act, Union Territory G.S.T. Act, or C.G.S.T. Act. Therefore, they must be interpreted within the context of these statutes. The word “inquiry” as used in Section 70 has a specific meaning and purpose: it allows the proper officer to summon individuals to provide evidence or produce documents. This definition is distinct from the term “proceedings” used in other sections of the G.S.T. Act.
In the case of Liberty Oil Mills and Others vs. Union of India and Others (1984), the Supreme Court addressed the definition of “investigation” within the Import and Export Control Act and determined that it refers to the process of collecting evidence or gathering material.
Section 70 is designed to facilitate the collection of evidence in cases of tax evasion, which may also result in confiscation. It pertains to instances where tax has not been paid, has been underpaid, erroneously refunded, or where input tax credits have been wrongfully claimed, particularly in cases of fraud or willful misstatement.
In the legal context described, the core argument by the petitioner’s counsel is that once the Deputy Commissioner (SIB), Ghaziabad, conducted a survey on the petitioner’s business premises on May 30, 2018, and started an investigation based on that survey, no further inquiry or summons should be issued by another authority (respondent No. 4) under Section 70 of the Central Goods and Services Tax (C.G.S.T.) Act. This is despite the possibility that the basis for the inquiry or investigation by the two different authorities might be distinct.
The terms “subject-matter,” “proceedings,” and “inquiry” are not explicitly defined in the relevant State G.S.T. Act, Union Territory G.S.T. Act, or C.G.S.T. Act. Thus, their interpretation must align with the context and purpose of these Acts. Specifically, the term “inquiry” as used in Section 70 of the C.G.S.T. Act refers to a process aimed at gathering evidence or requiring the attendance of individuals for evidence or document production. It should not be confused with other statutory processes or steps that may occur before or after the inquiry, nor should it be equated with the broader term “proceedings” mentioned in Section 6(2)(b) of the U.P.G.S.T. Act or C.G.S.T. Act.
In the case of Liberty Oil Mills and others vs. Union of India and others (1984), the Supreme Court interpreted the term “investigation” under the Import and Export Control Act and Imports (Control) Order, 1955, as involving the collection of evidence or gathering of material, given the lack of a specific definition.
Section 70 is designed for gathering evidence related to tax evasion, which could lead to actions like confiscation, demand, or recovery under Sections 73 or 74 of the C.G.S.T. Act. Once an inquiry under Section 70 is concluded and evidence of tax evasion or related issues is found, it may result in formal proceedings under Sections 73 or 74, but the inquiry itself is distinct and not equivalent to the proceedings described in Section 6(2)(b) of the Act.
Download PDF:
For Reference
Visit:
Read Another
Case Law:
GST Case Law: