Dadhichi Iron And Steel PVT. LTD. vs. Chhattisgarh G S T

Held

The Court held that the petitioner's argument that the investigation was barred by Section 6(2)(1)(b) of the CGST Act, 2017, lacked substance. The Court found a clear distinction between proceedings drawn for the demand of tax evaded by the petitioner and an investigation conducted by the DG, GST Intelligence Wings into an offence committed by an establishment through the use of bogus and fake invoices and illegally availing ITCs. The Court noted that the initial show cause notice and proceedings were in respect of intrastate transactions involving fake invoices for ineligible ITC. However, subsequent investigation, particularly after a raid, revealed a far graver and more serious magnitude of offence, with detected ineligible ITCs of approximately Rs. 60 crores, likely to increase. The Court reasoned that the nature of the offence being investigated by the DGGSTI was distinct from the earlier proceedings, focusing on defrauding government revenue through inter-state fake transactions, which falls under Section 132 of the CGST Act. The Court also distinguished the judgments cited by the petitioner, stating they were rendered in different contextual backgrounds and were not applicable to the present factual matrix. Therefore, the writ petition was dismissed.

Facts

The petitioner, Dadhichi Iron And Steel Pvt. Ltd., challenged an investigation and summons issued by the Directorate General of Goods And Service Tax Intelligence (DGGSTI) under the CGST Act, 2017. The petitioner argued that a prior show cause notice proceeding initiated by CGST authorities regarding fake invoices barred the DGGSTI from initiating a new investigation into the same subject matter, citing Section 6(2)(1)(b) of the CGST Act. The petitioner had previously faced proceedings for alleged use of fake invoices, leading to cancellation of its GST registration, which was pending restoration. The DGGSTI initiated a fresh investigation based on secret information, alleging the petitioner issued fake ITC invoices worth crores of rupees across multiple states, involving actual goods not being supplied. This investigation led to the arrest of one of the petitioner's directors.

Key Issues

1. Whether the investigation initiated by the Directorate General of Goods And Service Tax Intelligence (DGGSTI) and the summons issued are illegal and barred by Section 6(2)(1)(b) of the CGST Act, 2017, given that prior proceedings concerning the use of fake invoices were pending before CGST authorities? Petitioner's Arguments: The petitioner contended that once a matter is seized by the CGST Act authorities, it cannot be subjected to simultaneous investigation by officers appointed under Section 3 of the CGST Act, as per the express bar in Section 6(2)(1)(b). They argued that the subject matter in both proceedings, the alleged use of fake and fictitious invoices, is the same, rendering the subsequent investigation and proceedings liable to be quashed. Respondents' Arguments: The respondents argued that the writ petition was misconceived. They differentiated the initial show cause notice, which pertained to using fake invoices for Input Tax Credit (ITC) within intrastate transactions, from the current investigation by the DGGSTI. The DGGSTI's investigation, initiated based on secret information and involving inter-state transactions, focused on defrauding government revenue through fake transactions and issuing fake invoices without actual supply, falling under Section 132 of the CGST Act. They asserted that the nature of the offence being investigated was entirely different and not hit by Section 6(2)(1)(b).