Silklon Processors PVT LTD Th Vikrant Sharma 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 three questions of law. Firstly, regarding cross-empowerment under Section 6 of the CGST Act, the Court held that intelligence-based enforcement actions can be initiated by either Central or State tax administrations, even if the taxpayer is assigned to the other. This is because such actions are not based on audit or scrutiny of returns assigned to a specific administration. Secondly, concerning the bunching of show cause notices under Section 74, the Court's detailed conclusions, referencing Supreme Court judgments, indicated that actions taken for probing, gathering evidence, or information do not constitute 'proceedings' for the purpose of Section 6(2)(b), and that the expression 'initiation of any proceedings' refers to the formal commencement of adjudicatory proceedings by way of a show cause notice. The Court found no merit in the petitions based on its interpretation of Section 6 of the CGST Act. The Court clarified that its conclusions on Section 6 were definitive, but other views were prima facie and could be raised before the issuing authority. The petitions were dismissed.

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 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 show cause notices for multiple assessment years was impermissible. The revenue initiated proceedings based on intelligence inputs gathered through search operations, which revealed alleged paper transactions without actual supply of goods.

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 Tax Authorities, and vice versa? 2. Whether the bunching of show cause notices under Section 74 of the CGST Act, 2017 is legally permissible? 3. Whether the Joint Commissioner is a competent authority to issue a show cause notice to an assessee when the amount involved is less than Rs. 1 crore under the CGST Act? Petitioner's Arguments: The petitioners contended that the CGST authorities lacked jurisdiction as they were assigned to State Tax Authorities. They also argued that the Joint Commissioner was incompetent to issue notices for amounts below Rs. 1 crore, citing a Government of India circular. Furthermore, they asserted that bunching show cause notices for five assessment years violated Section 74 of the CGST Act. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue. However, the context implies that the revenue relied on the intelligence gathered and the powers vested under the CGST Act for initiating proceedings.