Patna HC: State GST Assessment Valid, No Procedural or Jurisdictional Flaw Found

The Patna High Court recently affirmed a GST assessment decision given by the State Tax Authorities. The court determined that there were no procedural or jurisdictional flaws in the case because no procedures were begun by the Central agency at the time the State order was issued.

CTS Industries Limited, based in Begusarai, Bihar, has filed two writ petitions challenging assessment decisions issued on June 28, 2022, by the Assistant Commissioner of State Tax for the Begusarai Circle. These orders established demands under Section 74(9) of the Bihar Goods and Services Tax Act, 2017, based on the alleged unlawful use of Input Tax Credit (ITC) for purchases made by D.S. Bitumix, a company that was later discovered to be non-existent.

The applicant asserted that the Directorate General of GST Intelligence (DGGI), a Central agency, started an investigation into the identical transactions and precluding the State authority from acting independently. The applicant, quoting Section 6(2)(b) of the CGST Act and a CBIC circular dated 05.10.2018, asserted that merely the agency starting an investigation can complete the process of adjudication.

In response, the State’s counsel contended that the State authority issued the assessment decision in June 2022 after evaluating GST filings under Section 61, rather than directly based on the DGGI’s conclusions. He added that the DGGI only sent its demand-cum-show-cause notice in March 2023, nine months after the State’s directive was issued. As a result, the restriction under Section 6(2)(b) did not apply.

No breach of jurisdictional provisions was there as the State’s action preceded the Central agency’s proceedings, a division bench comprising Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey ruled. No violation was discovered by the court, and the applicant was provided with the SCN u/s 74 reporting the hearing date and unable to appear or answer.

The state authority that passed the assessment order was valid, the Patna High Court ruled, and the writ petition was dismissed. The applicant was allowed to submit a legal appeal and asked that any delay in performing the same shall be regarded leniently by the appellate authority, considering the applicant’s bona fide belief in pursuing a writ petition.