Chenab Industries PVT LTD Th Kush Aggarwal J And K Textile Park Industrial Area Kathua vs. Union Of INDIA Ministry Of Finance Deptt Of Revenue New Delhi And Others

Held

The Court addressed the issues by referring to the Supreme Court's interpretation of Section 6 of the CGST Act. It held that intelligence-based enforcement actions, which do not arise from an audit or detailed scrutiny of returns, can be initiated by either the Central or State tax administration, irrespective of the taxpayer's assignment. Such actions are based on information of tax evasion from the value chain or transactions, not administrative scrutiny. The Court clarified that gathering intelligence is a non-intrusive exercise. While proceedings from audits or scrutiny must be initiated by the assigned administration, intelligence-based actions allow for cross-empowerment. The Court found no merit in the petitions, dismissing them. However, it clarified that its conclusions on Section 6 were its interpretation and should not prejudice the petitioners from raising other issues before the issuing authority.

Facts

The petitioners, companies and firms engaged in manufacturing and trading, challenged show cause notices issued by the Joint Commissioner, CGST Jammu. The notices alleged fraudulent availment and utilization of Input Tax Credit (ITC) based on intelligence inputs and search operations. The petitioners argued that the CGST authorities lacked jurisdiction as they were assigned to State Tax Authorities, that the Joint Commissioner lacked jurisdiction for amounts below Rs. 1 crore as per a circular, and that bunching of show cause notices for multiple assessment years was impermissible. The search operations revealed various discrepancies, including paper transactions, lack of actual supply, and some units being non-functional or primarily involved in trading.

Key Issues

1. Whether the issuance of a specific notification for cross-empowerment under Section 6 of the CGST Act, 2017 and SGST Act, 2017 is mandatory, and in its absence, can a proper officer under the CGST Act exercise jurisdiction over an assessee assigned to State authorities, and vice versa? The petitioner contended that without such a notification, jurisdiction cannot be exercised across administrations. The revenue did not record specific arguments on this point. 2. Whether bunching of show cause notices under Section 74 of the CGST Act, 2017 is permissible in law? The petitioner argued against bunching for multiple assessment years. The revenue did not record specific arguments on this point. 3. Whether the Joint Commissioner is competent to issue a show cause notice to an assessee where the amount involved is less than Rs. 1 crore under the CGST Act? The petitioner relied on a circular to argue against the Joint Commissioner's jurisdiction in such cases. The revenue did not record specific arguments on this point.