Court holds that proceedings under CGST Act Section 74 addressing fraudulent ITC claims are distinct from State GST proceedings under Section 73, dismisses writ petition, and directs statutory appeal route for grievances.
In a significant judgment delivered on September 18, 2026, the Delhi High Court (Division Bench comprising Justices Anil Kshetarpal and Shail Jain) clarified the scope and interplay between proceedings initiated under Sections 73 and 74 of the Central Goods and Services Tax Act, 2017 ("CGST Act"). The Court ruled that proceedings initiated by Central GST authorities under Section 74, which relate to fraudulent availment of Input Tax Credit (ITC), are not barred by earlier proceedings initiated by State GST authorities under Section 73 for similar ITC claims, if the subject matter and nature of allegations differ materially.
The judgment arose from a writ petition filed by Shri Krishna Industries, challenging Show Cause Notices and Orders issued by the Central GST authorities demanding recovery of Rs. 6,12,000 on grounds of allegedly inadmissible ITC claimed from M.R. Enterprises. The petitioner contended that since the State GST authorities had already initiated and adjudicated proceedings for the same financial year and ITC claim under Section 73, the Central GST proceedings under Section 74 were barred by Section 6(2)(b) of the CGST Act, which prevents multiple proceedings on the same subject matter by different tax authorities.
The Court examined the principle enunciated by the Supreme Court in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate and distinguished that while Section 6(2)(b) prohibits proceedings on the same liability or contravention, distinct infractions, even if related to the same assessee and financial year, do not amount to "same subject matter." The Court noted that the State GST proceedings under Section 73 primarily dealt with ITC claims, whereas the Central GST proceedings under Section 74 were based on investigation and intelligence revealing fraudulent transactions involving invoices without actual supply of goods.
Furthermore, the Court highlighted that the two Central proceedings themselves concerned M.R. Enterprises entities with different GSTINs, reinforcing that the proceedings were not identical. The petitioner's objections regarding non-consideration of replies and non-supply of investigation material were held to be issues suitable for statutory appellate proceedings under Section 107 of the CGST Act, rather than grounds for writ interference.
The Court dismissed the writ petition, holding that the statutory bar in Section 6(2)(b) did not apply and that the petitioner could raise all contentions, including duplication of proceedings and merits of the demand, before the appellate authority. The judgment emphasized that extraordinary writ jurisdiction is discretionary and ordinarily not exercised when effective statutory remedies are available.
This ruling provides clarity on the interpretation of "same subject matter" in GST proceedings and reinforces the distinct roles of State and Central GST authorities in investigating and adjudicating tax liabilities, particularly in cases involving allegations of fraudulent availment of ITC.
Bottom Line:
Proceedings initiated by Central GST authorities under Section 74 of CGST Act are not barred by Section 6(2)(b) of CGST Act merely because prior proceedings were initiated by State GST authorities under Section 73 for the same assessee and similar ITC claim, as the subject matter and nature of contraventions alleged were materially different.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 - Sections 6(2)(b), 73, 74, 75(3), 107
