M/S Saraswati Spinning And Weaving Mills vs. The State Of Hp And Others

Held

The High Court, applying the conclusions and guidelines from the Supreme Court's judgment in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr., held that no further adjudication was required beyond issuing directions consistent with that law. The Court directed the petitioner to appear before the Central Authority and file a response to the Show Cause Notice by 31.01.2026, raising contentions and submitting relevant documents. With respect to summons and intimations like DRC-01(A), the petitioner was directed to comply and inform the State Authorities about the Show Cause Notice, in line with paragraphs 97(a) & (b) of the Armour judgment. The State Authority was then to communicate with the Central Authority to verify the petitioner's claim as per paragraph 97(c). Both authorities were instructed to coordinate to prevent multiple adjudicatory processes on the same subject matter, following the Armour Security case verdict. The adjudicatory authority would then proceed in accordance with law, providing the petitioner an opportunity to be heard. The Court explicitly stated it had not opined on the merits of the allegations or the validity of the notices, keeping all rights and contentions open. The validity of the order dated 03.02.2025 was also not adjudicated, with the petitioner granted liberty to assail it if advised.

Facts

The Petitioner, M/s. Saraswati Spinning and Weaving Mills, filed a writ petition before the Himachal Pradesh High Court challenging the issuance of DRC-01 notices for the periods 2019-20 and 2020-21 by respondents No. 2 & 3 (presumably GST authorities). The petitioner also sought to quash an order dated 05.02.2025 issued by respondent No. 4, which consolidated proceedings for the period 2017-18 to 2022-23, arguing that input tax credit was availed in compliance with the law. The core of the dispute revolves around the prohibition of parallel proceedings on the same subject-matter under Section 6(2)(b) of the CGST Act, especially when proceedings have already been initiated by another jurisdictional authority.

Key Issues

1. Whether the issuance of DRC-01 notices by respondents No. 2 & 3 for the periods 2019-20 and 2020-21, and the order dated 05.02.2025 by respondent No. 4, constitute illegal and parallel proceedings contrary to Section 6(2)(b) of the CGST Act, 2017, given that the petitioner claims to have availed input tax credit in compliance with provisions? Petitioner's contention: The petitioner argued that the proceedings initiated by the CGST and State GST authorities were overlapping and initiated on the same subject matter, violating Section 6(2)(b) of the CGST Act. They contended that the order dated 05.02.2025 was passed in consolidation for multiple periods despite compliance with provisions regarding input tax credit. Respondents' contention: The State and Central GST authorities submitted that they would abide by the statutory mandate under Section 6(2)(b) of the CGST Act and the principles laid down in the Apex Court's judgment in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. They assured that appropriate coordination would be maintained to prevent parallel adjudicatory proceedings. Respondent No. 4's counsel referred to various High Court judgments directing petitioners to present their cases before competent authorities in terms of the Armour case.