Distinct Infractions Save GST Proceedings From Section 6(2)(b) Bar: Delhi HC

The Delhi High Court has fortified the investigative powers of tax authorities, ruling that parallel proceedings by Central and State GST wings are permissible if they target distinct legal infractions rather than identical liabilities. This clarification prevents taxpayers from using the statutory bar against double jeopardy as a shield when investigations reveal fraudulent activities not previously adjudicated.

A bench comprising Hon'ble Mr. Justice Anil Kshetarpal and Hon'ble Ms. Justice Shail Jain heard the writ petition challenging Show Cause Notices and recovery orders issued by the Central GST authorities. The petitioner contended that these proceedings were hit by the statutory prohibition against multiple authorities initiating action on the same subject matter, given that State GST authorities had already concluded a prior assessment for the same period.

Key Takeaways

Defining 'Same Subject Matter'

Identity of the assessee and the financial year is insufficient to trigger the bar under Section 6(2)(b) of the Central Goods and Services Tax Act, 2017; there must be an identity of the specific liability or contravention.

Intelligence-Led Investigations

Proceedings founded on specific intelligence regarding fraudulent availment of Input Tax Credit (ITC) without actual supply of goods constitute a distinct infraction from general ITC demand assessments.

Hierarchy of Remedies

Disputed questions of fact regarding the genuineness of transactions and the adequacy of hearing must be addressed through the statutory appellate mechanism rather than writ jurisdiction under Article 226.

Interpretation of Section 6(2)(b) and Distinct Infractions

The Court examined whether the proceedings initiated under Section 74 of the Central Goods and Services Tax Act, 2017 by the Central authorities were barred by the prior Section 73 proceedings initiated by the State authorities. The Bench observed that while both proceedings involved Input Tax Credit claimed from an entity named M.R. Enterprises, the Central proceedings were specifically founded upon intelligence gathered by the Directorate General of GST Intelligence (DGGI) regarding bogus transactions. The Court, in its reasoning, observed: "The expression 'same subject matter' has to be understood with reference to the particular liability, deficiency or contravention which is sought to be adjudicated. Where the proceedings concern the same liability or the same contravention, the statutory bar would operate. Conversely, distinct infractions would not become the same subject matter merely because they relate to the same assessee, the same period or involve a similar tax liability."

The Court's Rationale on Multiple GSTINs

The Court noted that the two Central proceedings referred to the supplier, M.R. Enterprises, bearing different GSTINs. It held that the difference in GSTINs is a relevant circumstance in determining whether the subject matter is identical, though not conclusive. The Court emphasized that for the statutory bar to operate, the petitioner must establish that the very contravention currently alleged had already been adjudicated upon.

The Court has the following directions:

"In view of the aforesaid discussion, the present Writ Petition is devoid of merit and is, accordingly, dismissed. The Petitioner shall, however, be at liberty to avail the statutory remedy of appeal under Section 107 of the CGST Act against the Orders dated 10.01.2025 and 31.01.2025, in accordance with law. The appellate authority shall consider the aforesaid contentions independently and in accordance with law, without being influenced by any observation contained in the present judgment except to the extent expressly decided herein."

Ratio

For the statutory bar under Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 to operate, it is necessary to establish identity of the liability or contravention forming the subject matter of the two proceedings. Distinct infractions do not constitute the 'same subject matter' merely because they relate to the same assessee, the same period, or a similar tax liability. Proceedings founded on specific intelligence regarding fraudulent availment of ITC without actual supply of goods are materially different from general assessments of ITC demand.

Background

The Petitioner, Shri Krishna Industries, a proprietorship involved in manufacturing plastic products, was registered under both the Central Goods and Services Tax Act, 2017 and the Delhi Goods and Services Tax Act, 2017. The State GST authorities had earlier issued a Show Cause Notice under Section 73 concerning ITC claimed from M.R. Enterprises for FY 2017-18, which resulted in a fresh order dated 29.07.2024 following a remand by the High Court. Subsequently, the Central GST authorities (DGGI and Delhi North) issued Show Cause Notices under Section 74, alleging fraudulent ITC availment without actual supply of goods, leading to demand orders in January 2025. The Petitioner moved the High Court, relying on Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate & Anr. and Metalax Industries v. GST Officer, Ward 66 & Ors., arguing that the subsequent Central proceedings were barred as they concerned the same subject matter already dealt with by the State. The Court ultimately dismissed the petition, finding that the subsequent investigations into 'bogus transactions' constituted a distinct infraction, and directed the petitioner to approach the appellate authority for factual disputes.

Case Details:
Case No.: W.P.(C) 4897/2025 and CM APPL. 22525/2025
Case Title: Shri Krishna Industries Through It Proprietor Prop Mohan Lal V. Commissioner Of Central Goods And Services Tax And Ors.
Appearances:
For the Petitioner(s): Mr. Rakesh Kumar, Adv.
For the Respondent(s): Ms. Monica Benjamin, SSC with Ms. Laiba Arif, Ms. Prerika Narang, Advs.

Source: 2026 CaseBase(DEL) 5710