M/S Ahluwalia Contracts (INDIA) LTD. vs. The Union Of INDIA

Held

The Court held that the contention of the petitioner that the respondent authorities, having already taken action under Section 73, should be restrained from conducting an audit under Section 65 with respect to the same subject matter, is fit to be rejected. The Court reasoned that the ambit and scope of Section 61 (scrutiny) and Section 65 (audit) are different and can be exercised by different officers. While findings from both Section 61 and Section 65 may culminate in proceedings under Section 73/74, an order passed under Section 73 based on findings from Section 61 is not necessarily final and is always subject to audit under Section 65. The Court found the reliance of the Respondent Department on a Punjab and Haryana High Court judgment in M/s MAG Filters and Equipments Private Limited to be well-founded, stating that an audit is a preliminary inquiry and the department ought not to be prevented from conducting it, as no prejudice is caused to the registered person. The Court did not find any reason to interfere with the notice for conducting the audit. The petitioner was directed to make available the records and documents within two weeks, and the audit was to be concluded within three months thereafter.

Facts

The petitioner, M/s Ahluwalia Contracts (India) Ltd., filed a writ petition challenging a notice dated September 19, 2025, issued by Respondent No. 5 (Joint Commissioner, State Tax, Audit) for conducting an audit under Section 65 of the CGST/BGST Act for the financial year 2022-23. The petitioner argued that assessment proceedings under Section 73 of the BGST Act for the same financial year had already been concluded by Respondent No. 6 via an order dated December 30, 2023, following a scrutiny under Section 61. The petitioner contended that initiating a fresh proceeding under Section 65 on the same subject matter was barred by Section 6(2) of the GST Act, citing a Supreme Court judgment. The revenue contended that Section 65 audit is an independent statutory power and is not barred by the conclusion of proceedings under Section 73.

Key Issues

1. Whether the initiation of audit proceedings under Section 65 of the CGST/BGST Act for the financial year 2022-23 is barred by Section 6(2) of the GST Act, given that assessment proceedings under Section 73 for the same period have already been concluded. Petitioner's Argument: The petitioner argued that Section 6(2)(b) of the CGST/BGST Act expressly prohibits a proper officer from initiating proceedings on a subject matter for which proceedings have already been initiated by another proper officer. They relied on the Supreme Court judgment in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate & Ors. to support their contention that taxpayers should be protected from multiple proceedings for the same subject matter. Revenue's Argument: The revenue contended that the audit under Section 65 is an independent statutory power and its initiation is not barred by the completion of proceedings under Section 73. They argued that audit operates in a different jurisdiction and is a preliminary inquiry, not a re-determination of the same issue.