Jyotsana Industries 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 can be initiated by either Central or State tax administrations, irrespective of the taxpayer's assignment, as per Section 6 of the CGST Act. Such actions are distinct from audits or scrutiny of returns, which must be initiated by the assigned administration. The Court clarified that 'initiation of proceedings' under Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings via a show cause notice, not preliminary steps like summons or searches. The 'subject matter' refers to the tax liability or contravention sought to be assessed or recovered. The Court found no merit in the petitioners' arguments regarding jurisdiction and the permissibility of bunching notices. The Court's interpretation of Section 6 of the CGST Act was its primary conclusion, with other views being prima facie opinions. The petitions were dismissed, but petitioners were allowed to raise 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, and their summaries. 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, and that bunching of show cause notices for multiple assessment years was impermissible. The search operations revealed various irregularities, including paper transactions without actual supply of goods, and that only some units were functional.

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, whether a proper officer under the CGST Act can exercise jurisdiction over an assessee assigned to State Tax Authorities, and vice versa? 2. Whether 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 not competent to issue notices for amounts below Rs. 1 crore, citing a circular. Furthermore, they argued that bunching show cause notices for five assessment years (2017-18 to 2021-22) was impermissible under Section 74 of the CGST Act. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue or State. However, the court's reasoning addresses the petitioner's contentions.