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Facts of the Case

K and R Rail Engineering Ltd approached the Telangana High Court seeking a declaration that a parallel investigation initiated against it on 04.08.2023 by the Directorate General of GST Intelligence (DGGI), Hyderabad Zonal Unit, was without jurisdiction and violative of Articles 19(1)(g), 20 and 21 of the Constitution, given that a separate enquiry into the same alleged fake Input Tax Credit availment (from M/s LDJ Engineering and Infrastructure Limited) was already being conducted by the Deputy Commissioner (State Tax), STU-1, Secunderabad Division. On an earlier hearing, the Court had directed the Department's counsel to obtain instructions on the alleged parallel enquiry.

Issues Involved

  1. Whether simultaneous investigation by both Central (DGGI) and State GST authorities into the same subject matter of alleged fake ITC availment amounts to a legally impermissible parallel proceeding.
  2. Whether the appropriate remedy, once a parallel proceeding is identified, is transfer of the matter to a single authority under Section 6(2)(b) of the CGST Act rather than a declaration of illegality.

Petitioner's Arguments

  • The petitioner contended that respondents 3 to 6 (DGGI officers) were conducting a parallel investigation on the same subject matter already under enquiry by the State GST authority, in violation of Section 6(2)(b) of the CGST Act.
  • It was submitted that such duplicated proceedings were arbitrary, without jurisdiction, and violative of Articles 19(1)(g), 20 and 21 of the Constitution.
  • Interim protection was also sought restraining coercive action pending resolution of the jurisdictional conflict.

Respondent's Arguments

  • The Senior Standing Counsel for the CBIC Department produced a communication dated 23.08.2023 from the Senior Intelligence Officer, DGGI, Hyderabad, acknowledging that the Department was earlier unaware of the enquiry already initiated by the Deputy Commissioner (State Tax), STU-1, Secunderabad Division.
  • It was submitted that, having identified the overlap, the Department itself proposed to transfer the case concerning fake ITC availment from M/s LDJ Engineering and Infrastructure Limited to the State Authorities under Section 6(2)(b) of the CGST Act.

Court Order / Findings

  • Noting the respondents' own stand transferring the entire file to the State Deputy Commissioner (State Tax), the Court held that, insofar as the fake ITC availment issue was concerned, the grievance of parallel investigation stood redressed.
  • The writ petition was disposed of without costs, and the pending miscellaneous petitions, if any, were directed to stand closed, without the Court needing to record any further declaration on the parallel-proceedings challenge.

Important Clarification

  • Where Central and State GST authorities are found to be conducting parallel enquiries on the same subject matter, Section 6(2)(b) of the CGST Act requires that the matter be handled by a single authority, and once one wing acknowledges the overlap and transfers the file, the parallel-proceedings grievance is effectively redressed without needing an adjudicated declaration of illegality.
  • A taxpayer facing simultaneous notices from Central and State GST wings on the same allegation should promptly bring the earlier enquiry to the later authority's notice, as this can itself trigger an administrative transfer under Section 6(2)(b).

Sections Involved

  • Section 6(2)(b), CGST Act, 2017 – bars initiation of proceedings by one tax authority (Central or State) on a subject matter already under proceedings before the other.
  • Articles 19(1)(g), 20 and 21, Constitution of India – fundamental rights invoked to challenge the parallel investigation.

Decision – In Favour of

The decision is in favour of the assessee. The parallel-investigation grievance stood redressed once the Department itself transferred the enquiry to the State authority, and the writ petition was disposed of without costs.

Case Details

Court: High Court for the State of Telangana
Case No.: Writ Petition No. 21279/2023
CNR / Citation: Not available in judgment text
Coram: Hon'ble Sri Justice P. Sam Koshy and Hon'ble Sri Justice Laxmi Narayana Alishetty
Date of Order: 24 August 2023

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