Facts of the Case:

In this case, the petitioner challenged a Demand-cum-Show Cause Notice dated 22 July 2024 issued under Section 74(1) of the CGST/TSGST Act covering four financial years, namely FY 2017-18, 2018-19, 2019-20 and 2020-21, along with the consequential Order-in-Original dated 3 February 2025.

The challenge was primarily on two grounds. Firstly, it was contended that the proceedings for FY 2017-18 had been initiated beyond the limitation prescribed under Section 74(10) of the CGST Act. Secondly, for FYs 2018-19 and 2019-20, the petitioner argued that the Central GST authorities had initiated proceedings on alleged excess availment of Input Tax Credit (ITC), even though the State GST authorities had already initiated adjudicatory proceedings on the same issue, thereby attracting the statutory bar under Section 6(2)(b) of the CGST Act.

The respondents relied upon Notification No. 06/2020 issued under Section 168A and contended that the proceedings were within time and otherwise valid. They also argued that an earlier investigation initiated by the department constituted commencement of proceedings.

Issue:

Whether the extension of the due date for filing the annual return through Notification No. 06/2020 also extended the limitation available to the department for initiating proceedings under Section 74. Whether the Central GST authorities were barred under Section 6(2)(b) from initiating proceedings on excess ITC for FYs 2018-19 and 2019-20 when identical proceedings had already been initiated by the State GST authorities; and whether the remaining allegations relating to short payment of tax and FY 2020-21 could validly be adjudicated by the Central GST authorities.

Held That:

The High Court held that the proceedings relating to FY 2017-18 were wholly without jurisdiction as the show cause notice had been issued beyond the statutory period prescribed under Section 74(10).

The Court clarified that Notification No. 06/2020 merely extended the due date for filing annual returns for the benefit of taxpayers and did not enlarge the limitation available to the department for initiating proceedings under Section 74. Since no notification extending the limitation for Section 74 proceedings under Section 168A had been produced, the departmental action for FY 2017-18 was declared time-barred. The Court further held that the investigation notice issued in March 2021 did not amount to initiation of proceedings, observing that only a formal show cause notice commences adjudicatory proceedings and that investigation, scrutiny, summons or similar actions do not satisfy the requirement of Section 6(2)(b).

With respect to FYs 2018-19 and 2019-20, the Court held that the Central GST authorities lacked jurisdiction to initiate proceedings regarding excess availment of ITC because identical proceedings had already been initiated by the State GST authorities. Relying upon the Supreme Court’s decision in Armour Security (India) Ltd., the Court reiterated that Section 6(2)(b) prohibits parallel adjudicatory proceedings on the same subject matter. However, it clarified that allegations relating to short payment of GST constituted a distinct subject matter and could therefore be examined by the Central GST authorities. Similarly, for FY 2020-21, since the State GST proceedings related to mismatch between GSTR-1 and GSTR-3B whereas the Central proceedings concerned different issues, the statutory bar under Section 6(2)(b) was held inapplicable.

Consequently, the Court set aside the impugned Order-in-Original in its entirety, quashed the show cause notice to the extent it covered matters beyond the jurisdiction of the Central GST authorities, and remanded the matter for fresh adjudication confined only to the issues that legally survived, while permitting the petitioner to raise all available objections, including the absence of the statutory preconditions for invoking Section 74.

Case Name: Sri Shekhar Chandra Podder, Prop. of M/s. Shekhar Chandra Podder Versus The Union of India, The Director, Government of India, Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes and Customs, The Chief Commissioner of State Tax, Government of Tripura, The Joint Commissioner of State Tax, Government of Tripura, The Joint Commissioner, Ministry of Finance, Revenue Department, Government of India, Central Goods and Services Tax, Tripura, The Assistant Commissioner (Anti-Evasion), Tripura, The Superintendent of State Tax, Government of Tripura, The Superintendent (Enforcement), Central Goods and Services Tax, Tripura, The Superintendent (Anti-Evasion), Tripura. dated 30.06.2026

To read the complete judgement 2026 Taxo.online 1818