Parallel proceedings by Central & State Tax Authorities cannot be initiated at the same time

Petitioner: Raj Metal Industries

Respondents: Union of India & State GST

Authority: Calcutta High Court

Date: 24th March 2021

Case: The petitioner received summons by the State GST Authorities on the same subject matter initiated by the Central GST Authorities. The e-credit ledger of the petitioner was blocked u/s 16(2)(c) read with Rule 86A.

Core Issue: The petitioner challenged:

1. The vires of Rule 86A of the CGST Rules / WBGST Rules and Section 16(2)(c) of the CSGT Act / WBGST Act;

2. The blocking of e-credit ledger; and

3. The actions initiated by State GST authorities with respect to the summons issued.

Court’s Observation:

1. As per Section 6(2)(b) of the WBGST Act, where a proper officer under CGST Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under State GST Act on the same subject matter.

2. Clarification have been issued by CBIC that if an officer of central tax authority initiates intelligence-based enforcement action against a taxpayer who is administratively assigned to the state tax authority; the officers of central tax authority would not transfer the case to the state tax counterpart and would themselves take the case to its logical conclusion.

Judgement:

1. The summons issued by State GST is in violation of Section 6(2)(b) of WBGST Act. It is therefore directed to stay the summons and any proceedings thereunder.

2. Blocking of e-Credit ledger has been done by the state tax authorities as an agent of central tax authorities and it is not a proceeding as per Section 6(2)(b) of the WBGST Act.

3. The order passed above shall not preclude the central tax authorities to proceed in accordance with law and to continue with any proceedings that have been initiated by them.