Abdur Rouf Khan vs. Superintendent Of Central Tax, Kolkata Audit-Ii Commissionerate And Ors.
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The petitioner, Abdur Rouf Khan, challenged audit observations dated January 13, 2025, issued by the Superintendent of Central Tax. The petitioner argued that the issues raised in the audit had already been decided by State authorities for the financial years 2018-2019, 2019-2020, and 2017-2018, under Section 73 of the GST Act. The petitioner contended that the Central authorities were barred from initiating proceedings on the same subject matter due to Section 6(2)(b) of the WBGST/CGST Act, 2017. The CGST authorities argued that audit proceedings under Section 65 were initiated, and no steps had been taken under Section 65(7), making the petitioner's contention premature. The State authorities confirmed their prior proceedings were lawful. The Court noted that a show-cause notice dated December 19, 2023, and an order dated April 25, 2024, were issued by Central authorities for tax periods 2018-2019 to 2021-2022, based on audit observations of suppressed taxable value and unreconciled turnover.
Held
The Court held that the Central authorities had indeed chosen to initiate a fresh audit for financial years 2017-2018 to 2022-2023, despite previous audits and adjudication under Section 73 for tax periods 2018-2019 to 2021-2022. The Court found that there was ordinarily no scope to carry out further audit under Section 65 for periods already covered by a previous audit and adjudication. Therefore, the Court ruled that the fresh audit should be restricted to the periods 2017-2018 and 2022-2023, which were not previously covered by the adjudication. The writ petition was allowed to this extent. The Court also noted that a representation had been made by the petitioner on January 24, 2025, and directed that the respondents consider this representation. The respondents were permitted to proceed with the audit for the restricted periods of 2017-2018 and 2022-2023. The ratio decidendi is that once a subject matter has been adjudicated by one set of authorities (State or Central), the other set of authorities is barred from initiating fresh proceedings on the same subject matter for the same period under Section 6(2)(b) of the CGST/WBGST Act, 2017.
Key Issues
1. Whether the Central authorities, including respondent No. 1, proceeded in violation of Section 6(2)(b) of the CGST/WBGST Act, 2017, by initiating audit observations on a subject matter already decided by State authorities. Petitioner's Contention: The petitioner argued that since State authorities had passed orders under Section 73 of the Act for tax periods 2018-2019, 2019-2020, and 2017-2018, concerning identical issues and covering the petitioner's entire turnover, the Central authorities were barred from initiating fresh audit observations for the financial years 2018-2019 and 2022-2023. Reliance was placed on Section 6(2)(b) of the Act and Article 20 of the Constitution of India. Revenue/State's Contention: The CGST authorities submitted that audit proceedings were initiated under Section 65 of the Act, and no steps had yet been taken under Section 65(7), rendering the petitioner's challenge premature. They asserted that the audit was statutorily sanctioned and without irregularity. The State authorities confirmed their prior proceedings were lawful.
Sections Cited
Section 6(2)(b), Section 65, Section 65(7), Section 73, Section 9, Section 37, Section 38, Section 39, Section 49, Section 59, Rule 61(3)
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2025
Kaushik Sl. No. 02 Ct. No. 05
WPA 3987 of 2025
Abdur Rouf Khan Vs. Superintendent of Central Tax, Kolkata Audit-II Commissionerate, Group 31, Circle-V & ors.
Mr. Prasenjit Das Mr. Bhaskar Sengupta
…. for the petitioner
Ms. Manju Manot Agarwal
Ms. Aishwarya Rajyashree
…..for the UOI
Mr. Anirban Ray, Ld. GP
Mr. T. M. Siddiqui, Ld. AGP
Mr. Tanoy Chakraborty
Mr. Saptak Sanyal
Mr. Debraj Sahu
……for the State
Mr. Shiv Shankar Banerjee
Mr. Abhishek Chakraborty
….for the CGST
Ms. Manasi Mukherjee
Mr. Bijitesh Mukherjee
…..for the respondent no. 1
Affidavit-of-service filed in Court today be taken on record.
The petitioner seeks to challenge the audit observation dated 13th January, 2025 which are annexed and marked annexure P-5 to the instant writ petition on the ground that the said issue has already been decided by the State authorities and having regard to the provisions contained in Section 6(2)(b) of the WBGST/CGST Act, 2017(hereinafter referred to as the said Act), the concerned respondents are restrained from initiating any
2 proceeding against the petitioner on the same subject matter.
Mr. Das learned advocate appearing in support of the aforesaid writ petition has drawn the attention of this Court to the order dated 30th March, 2024 passed under Section 73 of the said Act in respect of the financial year 2018-2019. He has also drawn the attention of this Court the order dated 11th July, 2024 passed under Section 73 of the said Act for tax period of 2019-2020 and also to the order dated 28th November, 2023 for the assessment year 2017-2018. All the above orders have been passed by the State authorities. According to him, all the aforesaid orders pertain to an identical issue and cover the entire turn over of the petitioner. According to him, in the light of the above decisions the Central authorities ought not to have made the audit observations in respect of the financial year 2018-2019 and 2022-2023 since according to him the aforesaid issue has already been finally decided by passing appropriate orders under Section 73 of the said Act. This apart a show- cause dated 19th December, 2023 and the order in original passed by the Central authorities for the tax period of 2018-2019 to 2021-2022 on 25th April, 2024 has been disclosed. In the light of the above, the audit observations as aforesaid are in conflict with the provisions of Section 6(2)(b) of the said Act
3 and also Article 20 of the Constitution of India. Accordingly, the same should be quashed.
Mr. Banerjee, learned advocate appears on behalf of the CGST authorities while Ms. Mukherjee appears on behalf of the respondent No.
Both Mr. Banerjee and Ms. Mukherjee would submit that the audit proceedings have been initiated under Section 65 of the said. According to them, no steps have still been taken by the authorities in terms of the Section 65(7) of the said Act. As such the contention of the petitioner at this stage is entirely premature. In any event, it is submitted that the audit proceedings have been initiated with the sanction of the Statute. There is no irregularity in initiating the same.
Mr. Siddiqui, learned AGP who appears on behalf of the State would submit that the State has already proceeded against the registered tax payer in accordance with law. There is no irregularity in this regard.
Having heard learned advocates appearing for the respective parties, the one of the questions that falls for consideration in the present petition is whether the central authorities including the respondent No. 1 had proceeded in violation of the provisions contained in Section 6 (2)(B) of the said Act, I find that the Section 6(2)(B) of the said Act, inter alia, provides that where the proper officer under the
4 State and the service tax or the Union territory goods and the service tax Act, have initiated any proceedings on the subject matter, no proceedings shall be initiated by the proper officer under the said Act on the same subject matter.
Admittedly, in this case, there appears to be three several proceedings initiated by the State authorities against the petitioner in respect of the tax period of 2018-2019, 2019-2020 and 2020-2021 under Section 73 of the said Act. In all the aforesaid matters the issue that fell for consideration was the claim of exempted supply as sought for by the petitioner. From a perusal of the orders, it would further transpire that an enforcement case was initiated to verify the veracity of the claim made by the petitioner as regards exempted/nil rated supply and it is pursuant thereto that three several orders have been passed. Insofar as the show cause notice issued by the CGST authorities dated 19th December, 2023 is concerned, I find that the same has been initiated for the petitioner having acted in contravention of the provisions Sections 9, 37, 38, 39, 49 and 59 of the said Act and Rule 61 (3) of the CGST Rules, 2017 (hereinafter referred to as the said Rules). The same is based on the audit observations for the year 2018-19 to 2021-22. The matter also pertains to suppression of material facts and evasion
5 of payment of taxes. The other order referred to by the petitioner under Section 73 dated 24th April, 2024, for the tax period of 2018-2019, 2019-2020, 2020-2021, 2021-2022 issued by the Central Authorities is based on an above show-cause dated 19th December, 2023. The petitioner has, however, conspicuously chosen not to annex the audit observation. On perusal of the order impugned it would demonstrate that the order proceeds on basis of audit observations of suppression of taxable value and mismatch unreconciled gross turnover of the petitioner and on the basis thereof, an order was passed.
I, however, find that notwithstanding the aforesaid audit observation and the consequential adjudication under Section 73 by falling back of Section 65(7) of the said Act, the respondents have once again chosen to initiate a fresh audit in respect of the financial year 2017-2018 to 2022-2023. 9. Having regard to the fact that the previous audit has already been conducted in respect of the tax period 2018-2019 to 2021-2022, I am of the view ordinarily there is no scope to carry out any further audit under Section 65 of the said Act. Admittedly, in this case, a notice under Section 73 has been issued under Section 65(7) of the tax period 2018-2019 to 2021- 2022. 6
In view thereof, there being little scope for the respondents to reopen the audit afresh for the periods which have already been covered by the previous audit, the aforesaid audit should be restricted to the periods 2017-2018 and 2022-2023. 11. The writ petition stands allowed to the above extent.
In this context, as already pointed out by Ms. Mukherjee, learned advocate representing the respondent no. 1 that a representation has already been made by the petitioner on 24th January, 2025. 13. The above order shall not stand in the way of the respondents considering the petitioners representation.
The respondents shall, however at free to proceed with the audit in respect of the tax period 2017-2018 and 2022-2023 in accordance with law.
In view thereof, a writ petition stands disposed of without any order as to costs.
(Raja Basu Chowdhury, J.)
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.