Orbit Spinning PVT LTD Th Sajan Marriya 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, unlike audits or scrutiny of returns, can be initiated by either Central or State tax administrations, irrespective of the taxpayer's assignment, as per Section 6 of the CGST Act. The Court clarified that actions like gathering intelligence, issuing summons, or conducting searches do not constitute 'initiation of proceedings' under Section 6(2)(b), which refers to the formal commencement of adjudicatory proceedings via show cause notices. The Court found no merit in the petitioners' challenge regarding jurisdiction based on assignment, as the actions were intelligence-based. The Court also noted that the issue of the Joint Commissioner's competence for amounts below Rs. 1 crore and the permissibility of bunching notices were not conclusively decided, with the Court stating its views on these were prima facie and did not prejudice the petitioners from 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 paper transactions without actual supply of goods. 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 under Section 74 of the CGST Act. The revenue's action stemmed from intelligence inputs and search operations conducted under Section 67(2) of the CGST Act.

Key Issues

The Court had to decide three 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 bunching of show cause notices under Section 74 of the CGST Act 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? The petitioner argued that the CGST authorities lacked jurisdiction due to assignment to State authorities, that the Joint Commissioner lacked jurisdiction for amounts below Rs. 1 crore citing a circular, and that bunching of notices for multiple assessment years was impermissible under Section 74. The respondent (Union of India) did not record specific arguments in the judgment.