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

Petitioner: Smt Sonam Berlia (Prop: M/s Arshee Venture)

Respondents: State of Odisha and others

Authority: Orissa High Court

Date: 23rd March, 2021

Case: A search operation was undertaken u/s 67 of the CGST Act by DGGSTI seizing documents and issuing summons. Parallely, a SCN was issued by Odisha GST Authorities u/s 74 for payment of GST, interest and penalty. The Petitioner appeared before Odisha GST authority and submitted that since DGGSTI has seized all the documents and records and hence the proceedings initiated by the Odisha GST Authority should be kept in abeyance till the conclusion of the proceedings by DGGSTI. Despite the facts, the Odisha GST Authority passed order u/s 74 for payment of tax, interest and penalty and also u/s 74(9) for alleged wrong availment of ITC for the same amount.

Core Issue: Whether parallel proceedings can be initiated by the Odisha GST Authority at the same time on the same subject? Whether SCN and subsequent Orders issued by Odisha GST Authority valid in law?

Court’s Observation:

1. Circular dated 5th October, 2018 issued by the CBEC categorically states that if an officer of the Central Tax authority initiates intelligence based enforcement action against a taxpayer who is administratively assigned to a State Tax authority, then the officers of Central Tax authority shall themselves undertake the investigation and take the case to its logical conclusion and ‘would not transfer the said case to its state tax counterpart’.

2. The State Tax Authority claim that they did not had knowledge that the Central tax Authority has seized of the matter despite the Petitioner’s submissions before them.

3. There is also an overlapping of the periods as the period of enquiry of Central Tax authorities are from July 2017 to Sept 2018 and State Tax authorities have issued SCN for April’ 2018.

Judgement: The Court had quashed the SCN and the impugned Orders and directs that till the conclusion of the proceedings initiated by the DGGSTI, no coercive action can be taken against the Petitioner by the State GST Authorities.