Facts of the Case

The petitioners, M/s Keshan Industries LLP and its designated partner Vikash Kumar Keshan, challenged the initiation of an investigation by the 2nd respondent (Commissioner, Central Tax, Central Excise and Service Tax, Medchal) vide File No.GEXCOM/AE/INV/GST/1533/2023-AE-MDCL dated 10.08.2023, contending that another investigation on the same subject matter was already pending before the 3rd respondent (Additional Commissioner, State Tax, Enforcement), in violation of Section 6(2)(b) of the CGST Act, 2017. During a search and seizure operation conducted by the 2nd respondent on 09.08.2023, cash of Rs. 41 lakh and 6,311.453 grams of silver were seized, following which the petitioner is said to have paid Rs. 2 crore, and the second petitioner was arrested. The petitioners sought quashing of the 2nd respondent's investigation as illegal, return of the seized cash and silver, and refund of the Rs. 2 crore paid with interest.

Issues Involved

  1. Whether the 2nd respondent's investigation was barred under Section 6(2)(b) of the CGST Act on the ground that the 3rd respondent (State authority) had already initiated proceedings on the same subject matter.

Petitioner's Arguments

  • The respondents had been conducting an enquiry on the same subject matter, and the 2nd respondent's subsequent investigation was therefore barred by Section 6(2)(b) of the Act, which prohibits initiation of proceedings by a proper officer on a subject matter already the subject of proceedings by another proper officer under the Act.

Respondent's Arguments

  • Learned Standing Counsel for the 2nd respondent (CGST) submitted, on instructions, that its investigation covered the period from April 2020 onwards and was specific to violations under the Act; the 3rd respondent's (State) proceedings, as reflected in the record, were confined to the period April 2020 to March 2023, so the 2nd respondent's investigation for the subsequent period (April 2023 onwards) was not barred under Section 6(2)(b).
  • The State respondent also submitted that recovery of the cash had already been referred to the Income Tax Department, and that if the petitioners' grievance was of overlapping proceedings, they had adequate remedy to raise such objections before the concerned authority itself rather than the writ court, relying on the Madras High Court's decision in VGN Projects Estates Pvt. Ltd. v. Assistant Commissioner (State Taxes), Chennai.

Court Order / Findings

  • The Court held that a plain reading of Section 6(2)(b) of the CGST Act shows the bar on parallel proceedings applies only where two proceedings are initiated on the very same subject matter, and since the 3rd respondent's proceedings were confined to the period April 2020 to March 2023 while the 2nd respondent's investigation concerned the subsequent period from April 2023 onwards, the proceedings initiated by the 2nd respondent were not in contravention of Section 6(2)(b).
  • Following the Madras High Court's approach in VGN Projects Estates, the Court found that the recovery of Rs. 41 lakh in cash and 28 silver bars was made pursuant to a raid conducted on 09.08.2023, much subsequent to the assessment period covered by the 3rd respondent's notice (April 2020 to March 2023), reinforcing that there was no genuine overlap.
  • The writ petition was dismissed without costs, though the petitioners were given liberty to raise all objections before the 2nd and 3rd respondents to verify whether there was, in fact, a parallel proceeding, and to have that objection decided strictly in accordance with law.

Important Clarification

The bar on parallel proceedings under Section 6(2)(b) of the CGST Act operates only where two proper officers initiate action on the identical subject matter for the same period; where a Central and a State authority's investigations relate to distinct, non-overlapping tax periods, the bar does not apply, and any genuine overlap must in the first instance be raised before the concerned authorities themselves rather than resolved by the writ court.

Sections Involved

  • Section 6(2)(b) of the CGST Act, 2017 – bars a proper officer from initiating proceedings on a subject matter already the subject of proceedings by another proper officer under the Act.

Decision – In Favour of

The decision was in favour of the Department, with the writ petition dismissed, though the petitioners retained liberty to raise the overlap objection before the concerned authorities.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case Number: Writ Petition No.22459 of 2023
  • 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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