M/S Friends Alloys vs. UOI 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 on the merits was required, other than issuing directions consistent with the Apex Court's ruling. The Court noted that while Section 6(2)(b) bars parallel adjudicatory proceedings on the same subject matter once proceedings are initiated by one authority, legitimate investigative steps like summons under Section 70 are permissible as long as they do not amount to parallel adjudication. The Court directed the petitioner to appear before the Central Authority and file a response to the Show Cause Notice by December 15, 2025, raising all contentions, including those based on the Armour Security judgment. The petitioner was also directed to comply with summons and intimations from the State Authorities and inform them about the Central Authority's Show Cause Notice. The State and Central Authorities were directed to communicate to verify the petitioner's claim and coordinate to avoid multiple adjudicatory processes on the same subject matter, in line with the Armour Security judgment. The adjudicatory authority would then proceed further after providing the petitioner an opportunity to be heard. The Court explicitly stated it had not expressed any opinion on the merits of the allegations or the validity of the notices.

Facts

The petitioner, M/s Friends Alloys, filed a writ petition challenging notices and summons issued by Central GST authorities, specifically a Show Cause Notice dated July 11, 2024, under Section 74 of the CGST Act. The petitioner contended that these proceedings were initiated despite earlier proceedings on the same subject matter by the State GST Authority, citing Section 6(2)(b) of the CGST Act which prohibits parallel proceedings. The State GST Authority had issued summons and notices, including an intimation under Rule 142(1A) (DRC-01A) dated April 1, 2024. The petitioner sought quashing of the Central GST notices or, alternatively, a direction to keep them in abeyance until the State GST proceedings were completed.

Key Issues

1. Whether the issuance of a Show Cause Notice by the Central GST Authority under Section 74 of the CGST Act, subsequent to the initiation of proceedings by the State GST Authority, constitutes parallel proceedings barred by Section 6(2)(b) of the CGST Act, given that the subject matter is alleged to be the same? Petitioner's arguments: The petitioner argued that the Central GST Authority is barred from initiating further proceedings due to the prohibition in Section 6(2)(b) of the CGST Act, as the State GST Authority had already initiated proceedings concerning the same subject matter. They relied on the principle that parallel adjudicatory proceedings on the same cause of action by different authorities are impermissible. Respondents' arguments: The State and Central GST authorities stated they would abide by Section 6(2)(b) of the CGST Act and the principles laid down by the Supreme Court 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. The respondent State also referred to various High Court judgments directing petitioners to present their case before competent authorities for decision in terms of the Armour Security judgment.