MARCH 20, 2024

By Vijay Kumar

IN the vast expanse of the Indian taxation landscape, amidst the labyrinth of Acts, rules, notifications and circulars, lies the enigmatic puzzle known as the Goods and Services Tax (GST). Introduced with much fanfare as the one-stop solution to streamline taxation, it has turned out to be a conundrum wrapped in bureaucratic red tape. And like any good mystery, it seems the more sleuths we have, the more convoluted it becomes.

The problem, it seems, lies not in the complexity of the tax itself, but in the multitude of interpreters trying to make sense of it. It's as if each sleuth has his own secret decoder ring, leading to a cacophony of conflicting conclusions. Instead of clarity, chaos ensues. Every sleuth brings his own interpretation, leading to conflicting directions and befuddled businessmen. It's like watching a Bollywood movie where everyone is dancing to a different tune, but nobody knows the steps.

In this comedy of errors, even Sherlock Holmes would throw up his hands in frustration. "Elementary, my dear Watson? More like, 'Incomprehensible, my dear Watson!'" he might exclaim.

Meanwhile, our poor businessmen are caught in the crossfire, desperately trying to navigate the murky waters of GST compliance. They're like sailors lost at sea, surrounded by a flotilla of tax forms and legal documents, with no lighthouse in sight.

And let's not forget the comedic timing of the government, who, like a mischievous jester, keeps changing the rules just when everyone thinks they've finally figured it out.

But amidst the chaos and confusion, a glimmer of humour shone through. The Tax Sleuths, in their zealous pursuit of tax justice, often found themselves embroiled in comical situations that would make even the most stoic tax officer chuckle.

Proliferation of multiple enforcement agencies and their overlapping jurisdictions.: One of the primary issues contributing to the complexity of GST enforcement in India is the existence of multiple agencies tasked with ensuring compliance. Each agency operates with its own set of powers and responsibilities, often leading to duplication of efforts and confusion among taxpayers.

The proliferation of enforcement agencies with overlapping jurisdictions has several detrimental effects on the GST system and its stakeholders.

Now have a look at this real case –reported as 2024-TIOL-440-HC-JHARKHAND-GST

The facts:

The Petitioner is the proprietor of a Trading Company in Ranchi and is in the business since 2017-18.

On 16.03.2023, an inspection was carried out by the Intelligence Bureau of the State Goods and Services Tax, and after the inspection was concluded, the GST Officers fixed the date for furnishing books of accounts. An amount of Rs.34 lakhs from the Cash ledger of the Petitioner and Rs.6 lakhs from the proprietorship firm of his wife were made to be deposited.

While the proceedings had been initiated by the State Goods & Services Tax Department, the Petitioner was served with a notice dated 10.04.2023 by the Preventive Branch of Central Goods and Services Tax, Ranchi with a direction to reverse the Input Tax Credit along with interest and penalty on account of alleged purchases from non-existent entity.

While two departments were in seisin of the proceedings, a search was carried out by the DGGI on 06.06.2023 and various seizures were made. Followed by the earlier notices of the Preventive Branch dated 10.04.2023, various notices were issued from time to time viz., 07.06.2023; 21.06.2023 including Summons by the Preventive Wing dated 26.06.2023. Simultaneously after the search was carried out by the DGGI, simultaneous Summons were issued dated 21.06.2023; 03.07.2023; 07.07.2023; 11.07.2023 and 13.07.2023.

On 24.07.2023, the residential flat of the Petitioner was searched and the statement of Petitioner's wife and mother were recorded. While the summons issued by the State GST and DGGI were to be attended, the petitioner made certain reversals on different dates, totalling to a sum of Rs. 3.42 Crores.

Seven bank accounts of the petitioner were frozen by an order dated 30.04.2023, issued by the Senior Intelligence Officer, DGGI, Jamshedpur.

Under the circumstances, since the petitioner has received summons from three Departments of GST, the petitioner approached the High Court, seeking a declaration that the authority who has initiated the proceedings prior in point of time, shall be the only authority to carry out the proceedings.

The petitioner relied upon Notification No. 39/2017-Central Tax dated 13.10.2017 and the Clarification D.O.F. No. CBEC/20/43/01/2017-GST(Pt.) dated 5.10.2018, which stated:

3. It is accordingly clarified that the officers of both Central tax and State tax are authorized to initiate intelligence-based enforcement action on the entire taxpayer's base irrespective of the administrative assignment of the taxpayer to any authority. The authority which initiates such action is empowered to complete the entire process of investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action.

4. In other words, if an officer of the Central tax authority initiates intelligence-based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of Central tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its logical conclusions.

5. Similar position would remain in case of intelligence-based enforcement action Initiated by officers of State tax authorities against a taxpayer administratively assigned to the Central tax authority.

The petitioner also relied upon F. No. CBEC-20/10/07/2019- GST by the GST Wing dated 22.06.2020, in which the subject was - Reference form DGGI on Cross empowerment under GST. reg . and it was clarified:

2. Issue raised in the reference is whether intelligence based enforcement actions initiated by the Central Tax officers against those taxpayers which are assigned to the State Tax administration gets covered under section 6(1) of the CGST Act and the corresponding provisions of the SGST/UTGST Acts or whether a specific notification is required to be issued for cross empowerment on the same lines as notification No. 39/2017-CT dated 13.10.2017 authorizing the State Officers for the purpose or refunds under section 54 and 55 of the CGST Act.

3.1 The issue has been examined in the light of relevant legal provisions under the CGST Act, 2017.

It is observed that Section 6 of the CGST Act provides for cross empowerment of State Tax officers and Central Tax officers and reads as:

“6. (1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by Notification specify.

3.2. Thus in terms of sub-section (1) of section 6 of the CGST Act and sub-section (1) of section 6 of the respective State GST Acts respective State Tax officers and the Central Tax officers respectively are authorised to be the proper officers for the purposes of respective Acts and no separate notification is required for exercising the said powers in this case by the Central Tax Officers under the provisions of the State GST Act. It is noteworthy in this context that the registered person in GST are registered under both the CGST Act and the respective SGST/UTGST Act.

3.3 The confusion seems to be arising from the fact that, the said sub-section provides for notification by the Government if such cross empowerment is to be subjected to conditions. It means that notification would be required only if any conditions are to be imposed. For example, Notification No. 39/2017-CT dated 13.10.2017 restricts powers of the State Tax officers for the purposes of refund and they have been specified as the proper officers only under section 54 and 55 of the CGST Act and not under rule 96 of the CGST Rules, 2017 (IGST Refund on exports). If no notification is issued to impose any condition, it means that the officers of State and Centre have been appointed as proper officer for all the purpose of the CGST Act and SGST Acts.

4. Further, it may kindly be noted that a notification under section 6(1) of the CGST Act would be part of subordinate legislation which instead of empowering the officer under the Act, can only be used to impose conditions on the powers given to the officers by the section. In the absence or any such conditions, the power of Cross-empowerment under section 6(1) of the CGST Act is absolute and not conditional.

The High Court found that:

•  Bare perusal of section 6 of the Act, especially Section 6(2)(b), when read with the Clarification dated 05.10.2018, further read with Clarification dated 22.06.2020, it clearly denotes and implies that it is a chain of a particular event happening under the Act and every & any enquiry/investigation carried out at the behest of any of the Department are interrelated.

•  The DGGI is raising a question about credibility and competence of the State GST Authorities, in carrying out the investigation concerning wrong/inadmissible availment of Input Tax Credit.

•  The officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities.

•  Undeniably, the proceedings at the instance of State Authorities or the Preventive Wing or the DGGI is at initial stage and the proceedings on the basis of ‘Search & Seizure' by the State Authorities, is prior in point of time.

•  Hence, Section 6(2)(b) read with clarification dated 05.10.2018, adds to the issues raised by the petitioner herein and manifestly crystalizes that since all the proceedings are interrelated, the State Authorities should continue with the proceedings.

As for the attachment of bank account, the Court observed,

We failed to understand as to what had become so emergent that prior to any determination or finding of any irregular/inadmissible/wrong availment of Input Tax Credit, the bank account had to be attached, which appears to be an ‘arm twisting method' to make the petitioner succumb to the particular authority, which cannot be the dictum of the Act and we deprecate the same.

The Court directed that the Preventive Wing of the CGST and DGGI Wing of the CGST, shall forward all their investigation carried out against the petitioner and inter-related transaction to the State Authorities, who shall continue with the proceedings from the same stage.

Many Central GST officers honestly believe that the State GST officers are utterly incompetent. Even if this is true, the fact is that they both are conferred with the same powers under the law – jestly so.

Until next week