J And K Synthetic PVT LTD Th Rajesh Kumar 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 held that intelligence-based enforcement actions, which do not arise from an audit of accounts or detailed scrutiny of returns, can be initiated by either the Central or State tax administrations, irrespective of the taxpayer's assignment, as per Section 6 of the CGST Act. Such actions are based on information of tax evasion from the value chain, not administrative scrutiny. The Court clarified that actions like issuing summons, conducting searches, or seizures do not constitute 'proceedings' under Section 6(2)(b) of the CGST Act, and 'initiation of proceedings' refers to the formal commencement of adjudicatory proceedings via a show cause notice. The Court found no merit in the petitioners' contention regarding jurisdiction based on assignment, as the actions were intelligence-based. The Court's opinion on the other issues (bunching and Joint Commissioner's jurisdiction for amounts below Rs. 1.00 crore) was stated as prima facie and not prejudicial to the petitioners raising them 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, and their summaries. The notices alleged fraudulent availment and utilization of Input Tax Credit (ITC) based on intelligence inputs and search operations conducted under Section 67(2) of the CGST Act. The searches revealed discrepancies, including paper transactions without actual supply of goods, and that only some units were functional. 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. 1.00 crore, and that bunching of show cause notices for multiple assessment years was impermissible. The petitioners approached the High Court directly under Article 226 of the Constitution.

Key Issues

The Court had to decide three main questions of law: 1. Whether the issuance of a specific notification for cross-empowerment under Section 6 of the CGST Act and SGST Act is mandatory, and if in its absence, a proper officer under the CGST Act can exercise jurisdiction over an assessee assigned to State authorities, and vice versa? 2. Whether the bunching of show cause notices under Section 74 of the CGST Act is legally permissible? 3. Whether the Joint Commissioner is competent to issue a show cause notice to an assessee when the amount involved is less than Rs. 1.00 crore under the CGST Act? The petitioners contended that the impugned notices were without authority due to lack of jurisdiction by the CGST proper officers, citing their assignment to State Tax Authorities. They also argued that the Joint Commissioner lacked jurisdiction based on a circular for amounts below Rs. 1.00 crore and that Section 74 of the CGST Act did not permit the bunching of show cause notices for multiple assessment years. The respondent (Union of India) did not present arguments on these specific points in the provided text.