M/S Natural Industries Th Ram Avtar 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 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. This is because such actions are based on information from the value chain or transactions, not administrative scrutiny like audits or return reviews. The Court clarified that actions like summons, searches, or seizures do not constitute the 'initiation of proceedings' under Section 6(2)(b), which refers to the formal commencement of adjudicatory proceedings via a show cause notice. The 'subject matter' refers to the tax liability or contravention sought to be assessed or recovered. The Court found no merit in the petitions, dismissing them. However, it clarified that its conclusions on Section 6 were interpretive and would not prejudice the petitioners from raising other issues before the issuing authority. The Court did not explicitly address the permissibility of bunching notices or the Joint Commissioner's jurisdiction for amounts below Rs. 1 crore in its final reasoning, focusing primarily on the jurisdictional aspect under Section 6.

Facts

The petitioners, companies and firms engaged in manufacturing and trading, challenged show cause notices issued by the Joint Commissioner, CGST Jammu. The notices, dated 17.04.2024 and summarized on 31.03.2024, alleged fraudulent availment and utilization of Input Tax Credit (ITC) on bogus transactions without actual supply or receipt 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 five assessment years (2017-18 to 2021-22) was impermissible under Section 74 of the CGST Act. The revenue initiated proceedings based on intelligence inputs and search operations under Section 67(2) of the CGST Act.

Key Issues

1. Whether the issuance of a specific notification for cross-empowerment under Section 6 of the CGST Act and SGST Act 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? (Question of law). The petitioner argued that without specific cross-empowerment notifications, jurisdiction cannot be exercised by the other authority. The revenue contended that intelligence-based enforcement actions allow for cross-jurisdictional initiation. 2. Whether bunching of show cause notices under Section 74 of the CGST Act is permissible under law? (Question of law). The petitioner argued against the permissibility of bunching notices for multiple assessment years. The revenue did not record specific arguments on this point in the judgment. 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? (Question of law). The petitioner argued that a circular restricted the Joint Commissioner's jurisdiction for amounts below Rs. 1 crore. The revenue did not record specific arguments on this point in the judgment.