Jammu and Kashmir High Court Upholds CGST Act's Cross-Empowerment Provision
Court affirms automatic cross-empowerment under Section 6 of CGST Act, dismissing objections on jurisdiction and administrative control.
In a significant judgment, the Jammu and Kashmir High Court has upheld the automatic cross-empowerment of officers under Section 6 of the Central Goods and Services Tax (CGST) Act, 2017, dismissing the petitions filed by R.K. Ispat Ltd. and others. The petitioners had challenged the jurisdiction of the Central tax authorities to issue show cause notices, asserting that they were administratively assigned to the State tax authorities.
The division bench consisting of Justices Sanjeev Kumar and Sanjay Parihar ruled that the cross-empowerment of officers under Section 6(1) of the CGST Act is inherent and automatic, obviating the need for a separate notification unless the government intends to impose specific conditions. The judgment clarified that in the absence of such conditions, officers from both Central and State tax administrations are deemed proper officers for all purposes of the CGST Act.
The petitioners, firms engaged in manufacturing and trading, had received show cause notices based on intelligence inputs indicating fraudulent availing and utilization of bogus Input Tax Credit (ITC) through paper transactions. They contended that the Joint Commissioner, CGST Jammu, lacked jurisdiction, especially as the amount involved was below Rs. 1 crore, and argued against the bunching of notices across multiple financial years.
The High Court addressed these concerns, ruling that the Joint Commissioner is competent to issue notices irrespective of the monetary threshold, as administrative guidelines do not limit the jurisdiction of higher officers. On the issue of bunching show cause notices under Section 74 of the CGST Act, the court noted that there is no express prohibition against it and left the matter open for adjudication in appropriate proceedings.
The judgment further emphasized the concept of intelligence-based enforcement actions, which can be initiated by either Central or State tax administrations, irrespective of the taxpayer's administrative allocation. The court underscored that such actions are based on information of tax evasion from the value chain rather than administrative scrutiny of accounts or returns.
In concluding the case, the court dismissed the petitions, affirming the validity of the show cause notices issued to the petitioners. The judgment serves as a significant precedent in reinforcing the framework of cross-empowerment under GST laws, ensuring robust enforcement mechanisms against tax evasion.
Bottom Line:
The concept of cross-empowerment under Section 6 of the CGST Act, 2017 is automatic and does not require a separate notification unless the Government intends to impose conditions. Additionally, intelligence-based enforcement actions can be initiated by either the Central or State tax administration, irrespective of administrative allocation.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Section 6, Section 74, Section 5(2)
R.K.Ispat Ltd. v. Union of India, (Jammu And Kashmir)(DB) : Law Finder Doc Id # 2786387
