Unity Traders vs. Govt Of Nct Of Delhi
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The petitioner, Unity Traders, approached the Delhi High Court challenging a Show Cause Notice (SCN) dated 25 April 2024 issued by the Government of NCT of Delhi, alleging violation of Rule 21(c) of the Central Goods and Services Tax Rules, 2017. Consequently, the petitioner's GST registration was suspended from 25 April 2024. The challenge was based on a previous High Court decision in DLF Home Developers Limited, which held that parallel inquiries by State and Central GST authorities are impermissible under Section 6(2)(b) of the CGST Act, 2017. The petitioner contended that the Directorate General of GST Intelligence (DGGI) had already initiated an investigation concerning the same issues, as evidenced by an SCN dated 01 July 2024. The State GST authorities conceded the pendency of proceedings before the DGGI.
Held
The Court allowed the writ petition and quashed the impugned Show Cause Notice dated 25 April 2024 issued by the State GST authorities. The Court reasoned that the principle laid down in the DLF Home Developers Limited case, which prohibits parallel inquiries by State and Central GST authorities under Section 6(2)(b) of the CGST Act, 2017, was applicable. Since the DGGI had already initiated an investigation concerning the same issues, as evidenced by its SCN dated 01 July 2024, the State GST authorities could not simultaneously proceed with their own inquiry. The Court found that the pendency of the DGGI's investigation was conceded by the State GST authorities. The order was made without prejudice to the right of the DGGI to continue and conclude its investigation. Liberty was granted to the State GST authorities to transmit any relevant material information to the DGGI. All contentions on merits were kept open.
Key Issues
1. Whether the State GST authorities could issue a Show Cause Notice and initiate proceedings when a parallel investigation into the same issues was already being conducted by the Directorate General of GST Intelligence (DGGI)? This issue turns on the interpretation and application of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017. Petitioner's arguments: The petitioner argued that issuing a parallel SCN by the State GST authorities, while the DGGI was already investigating the same matters, was impermissible. They relied on the High Court's previous decisions in DLF Home Developers Limited vs. Sales Tax Officer Class II, which established that simultaneous proceedings by different authorities for the same issue are not allowed under Section 6(2)(b) of the CGST Act. Revenue's arguments: The respondent (Government of NCT of Delhi) did not explicitly record any arguments against the petitioner's contention. However, their counter-affidavit conceded the pendency of proceedings before the DGGI.
Sections Cited
Section 6(2)(b), Rule 21(c)
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Cause title — parties, addresses and appearances
O R D E R %
2025
Tax Officer Class II Avato Ward 107 Special Zone 12 Delhi & Anr.4 on 04 September 2024 and which came to be reiterated in DLF
1 SCN 2 Rules 3 GST 4 W.P.(C) 11052/2024 This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 19:50:05 Home Developers Limited v. Sales Tax Officer Class II5. In that decision, we had held that a parallel enquiry cannot be conducted by the State and Central GST authorities. This in light of the mandatory prescriptions which stand enshrined in Section 6(2)(b) of the Central Goods and Services Tax Act, 20176. 3. While dealing with the ambit of that provision, we had in DLF Homes held as follows: - “2. The present petition is confined only to the demand in respect of ITC to be reversed on non-business transactions and exempt supplies. The petitioner’s challenge to the said demand is premised on the basis that the Directorate General of GST Intelligence (hereafter the DGGI) has also issued a show cause notice dated 02.02.2024 for the tax period 01.07.2017 to 31.03.2021, which also includes the demand proposed on the aforesaid issue. It is the petitioner’s case that two authorities cannot proceed simultaneously in respect of the same issue.
The impugned order indicates that respondent no.1 is also fully conscious of the same and therefore, it has proceeded to confirm the demand without adjudicating the same. The relevant extract of the impugned order is set out below :- “........... On ITC to be reversed on non-business transactions & exempt supplies: The taxpayer has informed that the proceeding under the subject has already been taken up by DGGI (HQ), New Delhi had referred section 6(2)(b) of CGST Act 2017 and stated that parallel proceeding cannot be started. Deputy Director Investigation (INV- DGGI (HQ) New Delhi vide letter no DGGI/INV/GST/2722- 2023/INV/o/o/Pr.OGG(HQ)/2028 dated 20.12.2023DGGI (HQ) has acknowledge the fact. Since the proceeding on the issue at being executed by DGGI (HQ), New Delhi, the demand raised through DRC01 sands as it is.”
We find merit in the contention that respondent no.1 cannot adjudicate a demand, which is also the subject matter of other proceedings. Since, the period covered under the impugned order is also subsumed in the show cause notice issued by the DGGI, both the proceedings cannot be carried on simultaneously.
5 W.P.(C) 11037/2024 6 Act This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 19:50:05 5. Mr. Rajeev Aggarwal, the learned counsel appearing for respondent no.1 states, on instructions, that the demand, in respect of ITC to be reversed on non-business transactions and exempt supplies, be set aside as the same would be adjudicated by the DGGI.
In view of the above, the impugned demand is required to be set aside to the extent as noted above. It is so directed.
It is clarified that the concerned Authority shall adjudicate the said issue pursuant to a show cause notice dated 02.02.2024 issued by the DGGI.
The present petition is allowed in the aforesaid terms. The pending application is also disposed of.”
The challenge to the SCN before us proceeds in light of the investigation which has been initiated by the Directorate General of GST Intelligence7 in terms of a SCN dated 01 July 2024 and which stands placed on our record as Annexure P-6. Admittedly, the said SCN proceedings are yet to be concluded.
From the counter affidavit which has been handed over by the State GST authorities in these proceedings, it is evident that the pendency of proceedings before the DGGI is conceded. In view of the aforesaid, we find ourselves unable to sustain the validity of the impugned SCN dated 25 April 2024. 6. We, accordingly, allow the instant writ petition and quash the impugned SCN dated 25 April 2024. This order, however, shall be without prejudice to the right of the DGGI to continue and conclude the investigation flowing from the SCN of 01 July 2024. 7. We also accord liberty to the State GST authorities to transmit all material information that may be in their possession and which may be considered as relevant to the inquiry presently being
7 DGGI This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 19:50:05 undertaken by the DGGI. All contentions of respective parties on merits are kept open.
YASHWANT VARMA, J.
HARISH VAIDYANATHAN SHANKAR, J. JANUARY 14, 2025/DR
This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/07/2025 at 19:50:05
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.