Facts of the Case

The petitioner, M/s Hanuman Enterprises (OPC) Pvt. Ltd., filed a writ petition before the Delhi High Court challenging multiple actions taken by GST authorities, including blocking of Input Tax Credit (ITC), provisional attachment of bank accounts, and initiation of investigation proceedings.

Initially, the petitioner alleged that it had already been investigated by the Delhi State GST authorities and therefore, a fresh investigation initiated by the Directorate General of GST Intelligence (DGGI), Jaipur was impermissible under Section 6(2)(b) of the CGST Act.

It was also contended that earlier actions such as ITC blocking and bank account attachment had already been undertaken and resolved.

Issues Involved

  1. Whether multiple GST authorities can initiate investigation against the same taxpayer for the same period under Section 6(2)(b) of the CGST Act.
  2. Whether prior actions such as ITC blocking and provisional attachment amount to “investigation” barring further proceedings.
  3. Whether DGGI, Jaipur was barred from conducting investigation due to earlier actions by other authorities.

Petitioner’s Arguments

  • The petitioner argued that:
    • Investigation had already been conducted by the Delhi State Authority for the same period.
    • Under Section 6(2)(b) CGST Act, a second investigation by another authority is not permissible.
    • Reliance was placed on CBEC Circular dated 05.10.2018, stating that once an authority initiates proceedings, it must carry them to conclusion.
    • Blocking of ITC and attachment of bank accounts indicated that investigation had already been undertaken.

Respondent’s Arguments

  • The respondents clarified that:
    • No investigation was conducted by the Delhi State Authority; actions like ITC blocking were based on communications from DGGI.
    • DGGI, Chennai’s actions were limited to another entity (M/s Balaji Enterprises) and not the petitioner.
    • The petitioner’s accounts were attached only due to its association with the said entity.
    • No authority had conducted any investigation specifically into the affairs of the petitioner.

Court’s Findings / Order

The Delhi High Court held that:

  • Mere blocking of ITC or provisional attachment of bank accounts does not amount to “investigation”.
  • No prior investigation had been conducted against the petitioner by any authority.
  • Therefore, Section 6(2)(b) of the CGST Act was not applicable.
  • The CBEC Circular dated 05.10.2018 was misinterpreted by the petitioner and did not restrict fresh investigation.
  • Authorities are empowered to initiate investigation based on independent information.
  • Investigation against connected entities does not bar investigation against a separate registered taxpayer.

Final Order:
The Court refused to interfere with the investigation by DGGI, Jaipur and disposed of the petition.

Important Clarifications by the Court

  • Blocking of ITC and bank account attachment ≠ Investigation
  • Separate GST registration = Independent legal entity for investigation purposes
  • Section 6(2)(b) applies only when an actual investigation has already been conducted
  • Intelligence-based investigation can be initiated independently by competent authorities

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/59514082023CW29002023_173748.pdf

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