2025(02)LCX0398

Armour Security India Limited

Versus

Commissioner CGST

W.P.(C) 1082/2025 decided on 07-02-2025

IN THE HIGH COURT OF DELHI AT NEW DELHI

W.P.(C) 1082/2025 & CM APPL. 5339/2025 (Stay)

ARMOUR SECURITY INDIA LIMITED         .....Petitioner
                        Through:     Mr. Abhijat Bal, Sr.Adv. with
                                          Mr. Srinivas Kotni, Mr.
                                          Gurdeep, Mr. Roit, Mr.
                                          Rishabh, Advs.

                versus

COMMISSIONER CGST DELHI EAST
COMMISIONERATE                             .....Respondent
                    Through:     Mr. Rajeev Aggarwal, ASC
                                    with Mr. Mayank Kamra, Adv.

CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR

ORDER
07.02.2025

1. This writ petition has been preferred seeking the following reliefs:-

“(a) issue an appropriate writ, order, or direction in the nature of Certiorari to quash, and set aside the summons dated 16.01.2025 & 23.01.2025, issued by the Proper officer attached to the office of Respondent, directing the petitioner to appear and submit documents that have already been submitted to both the DGGI and the State Authority; as violative of Section 6 of the CGST Act;

(b) issue an appropriate writ, order, or direction in the nature or Mandamus, directing the officer of Respondent lo transfer the case to the State Department, where proceedings are already being carried out;

(c) issue an appropriate writ, order, or direction in the nature of Mandamus; directing the officer of Respondent to release the seized documents & electronics devices in view of facts and circumstances of the case;

(d) pass such other and further orders as this Hon'ble Court may deem fit and proper in the circumstances of the present case and in the interests of justice.”

2. As is manifest from the above, the challenge principally is to summons which have been issued by the Central Goods and Services Tax [“GST”] authorities.

3. Mr. Abhijat learned senior counsel appearing for the writ petitioners, draws our attention to the orders dated 16 January 2024 and 11 July 2024 which had come to be framed by the State GST authorities as well as the pendency of proceedings emanating from a Show Cause Notice [“SCN”] dated 18 November 2024 which has been issued. It is in the aforesaid backdrop that Mr. Abhijat would contend that since the State GST authorities are in seisin of the proceedings and have also framed final orders referable to Section 73 of the Central Goods and Services Act, 2017 [“Act”], it would be wholly impermissible for the Central GST authorities to commence any proceedings.

4. The aforesaid submission principally flows on the basis of Section 6(2)(b) of the Act and which reads as follows:-

“6. Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances.—

(2) Subject to the conditions specified in the notification issued under sub-section (1),—

(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.”

5. Undisputedly, the summons that are impugned before us emanate from a search which is stated to have been conducted by the Central GST authorities on 16 January 2025. It is in the aforesaid backdrop that we would have to examine the correctness of the submission that Section 6(2)(b) would bar the Central GST authorities from drawing any proceedings or issuing the summons impugned.

6. We find ourselves unable to sustain that submission bearing in mind the indubitable fact that Section 6(2)(b) seeks to injunct the initiation of proceedings by a Proper Officer where another officer acting under the State GST or the Union GST would have initiated proceedings. While it is true that the proceedings pertaining to the SCN dated 18 November 2024 are still pending and which is one issued at the behest of the State GST authorities, we find ourselves unable to countenance the expression “any proceeding” appearing in Section 6(2)(b) as being liable to be extended to a search or investigation that may have been undertaken.

7. We bear in mind the fact that an investigation or any summons issued pursuant to a search would only be a precursor to proceedings that the Central GST authorities may initiate. We also cannot possibly lose sight of the fact that a search case would stand clearly distinct and separate from proceedings which authorities, be it Central or State, may propose to undertake by virtue of powers conferred by Sections 73 or 74 of the Act.

8. In our considered opinion and as we read Section 6(2)(b), it becomes apparent that what the statute seeks to ensure and prohibit are parallel proceedings pertaining to assessment which may be drawn in exercise of powers conferred by Sections 73 and 74 or for that matter any other proceedings akin thereto by two separate sets of authorities.

9. However and notwithstanding the above, a summons issued pursuant to a search would have to be distinguished from an actual assessment that an authority may choose to undertake. This since such a summons is principally intended to elicit information in respect of material that may have been gathered or comes to light in the course thereof. A search may lead to the discovery of material and information which may not have been even available at the stage of the original assessment proceedings. However, if the contention of the petitioner were to be accepted, authorities would stand injuncted and barred from either examining the implication of the evidence so collated or consider justifiable inferences that could be drawn. A search could, hypothetically speaking, also lead to the recovery of material that never formed part of the original assessment and was unknown to the assessing authority. It could, theoretically speaking, also have a bearing on the truthfulness of the disclosures made in the course of the original proceedings. The submissions addressed by learned senior counsel, in our considered opinion, clearly fails to factor these aspects into consideration.

10. We are thus unconvinced that Section 6(2)(b) seeks to interdict a summon that may be issued pursuant to a search. As noticed hereinabove, at that stage the authority is merely seeking to gather information and a response from the assessee in respect of material unearthed and information gathered. We would at that stage also be unaware of what action the authority proposes to take. We would thus be left to hypothesize whether the authority seeks to invoke Section 73 or Section 74 of the Act. If the authority were to invoke Section 74 in case of an assessment already made, it would still have to establish that the thresholds created by that section are satisfied.

11. The reliance which was placed by Mr. Abhijat on the judgment of the Jharkhand High Court in Vivek Narsaria v State of Jharkhand is equally misconceived. We find from the recordal of facts that proceedings in that matter had been initiated by the State GST authorities in terms of a notice dated 10 April 2023. Both the State as well as the Central GST authorities in Vivek Narsaria were examining whether the assessee was liable to reverse the Input Tax Credit which had been availed on account of purchases having allegedly been made from a non-existent entity. It was in the aforesaid backdrop that the said High Court observed:-

“14. Having heard the arguments advanced by respective parties and having perused the documents brought on record and the statements and averments made in the respective counter-affidavits and materials available on record, we find that bare perusal of section 6 of the Act, especially section 6(2)(b), when read with the Clarification dated October 5, 2018, further read with Clarification dated June 22, 2020, when read together, it clearly denotes and implies that it is a chain of a particular event happening under the Act and every and any enquiry/investigation carried out at the behest of any of the Department are interrelated. Even if, we accept the submission of respondent No. 5 that the proceedings initiated by respondent No. 5 is on the basis of an information received from Noida; in that event also, we are at loss to say that the DGGI is raising a question about credibility and competence of the State GST Authorities, in carrying out the investigation concerning wrong/inadmissible availment of Input-tax Credit, inasmuch as, the officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities.

15. We are little hesitant to accept such argument, inasmuch as, the State Authorities has also initiated the same very proceeding for wrong/illegal availment of input-tax credit. Undeniably, the proceedings at the instance of State Authorities or the Preventive Wing or the DGGI is at initial stage and the proceedings on the basis of “Search and Seizure” by the State Authorities, is prior in point of time. Hence, section 6(2)(b) read with clarification dated October 5, 2018, adds to the issues raised by the petitioner herein and manifestly crystallizes that since all the proceedings are interrelated, the State authorities should continue with the proceedings.

The issue since has also been raised with attachment of bank account, which we failed to understand as to what had become so emergent that prior to any determination or finding of any irregular/inadmissible/wrong availment of input-tax credit, the bank account had to be attached, which appears to be an “arm twisting method” to make the petitioner succumb to the particular authority, which cannot be the dictum of the Act and we deprecate the same.

16. We are therefore of the opinion that the Preventive Wing of the CGST and DGGI Wing of the CGST, shall forward all their investigation carried out as against the petitioner and inter-related transaction to the State authorities, who shall continue with the proceedings from the same stage”

12. As is evident from the above, there was, in that particular case, a parallel inquiry which was being undertaken with both sets of authorities constituted under the Act calling upon the assessee to reverse input tax credit. The State GST authorities had already initiated investigation pursuant to a search which had been conducted. It was in that background that the Jharkhand High Court found itself unable to uphold the action initiated by the Central authorities. The facts which obtained in Vivek Narsaria are thus clearly distinguishable.

13. Of equal significance are the observations of the High Court in Vivek Narsaria when it held that Section 6(2)(b) is principally concerned with “a chain of a particular event…” and of proceedings being “interrelated”. The search which constitutes the basis for the issuance of summons cannot possibly be construed as being related to the earlier assessments or the pending notice proceedings since, undisputedly, it was undertaken post those events.

14. We thus find no justification to interdict the summons which have been issued and which, as was noticed above, are only in aid of proceedings that may be ultimately drawn or initiated.

15. Consequently, the challenge fails. The writ petition shall stand dismissed.

16. Insofar as the prayer with respect to access to systems and data stored on the electronic devices which were seized is concerned, we accord liberty to the writ petitioner to move the competent Central GST authority for being provided a copy of the data which is stored on those systems in order to enable it to effectively respond and participate in the investigation.

YASHWANT VARMA, J.

HARISH VAIDYANATHAN SHANKAR, J.

FEBRUARY 07, 2025