The Delhi High Court has held that where parallel proceedings under the CGST and SGST enactments arise from distinct sources of material and distinct allegations of default, the Section 6(2)(b) CGST Act bar does not apply and the proceedings cannot be rendered non est. The Court also said that a taxpayer who fails to avail repeated opportunities of hearing cannot invoke natural justice, and the constitutional validity of Section 16(2)(c) of the CGST Act stands settled by the Gujarat High Court in Maruti Enterprise v. Union of India [2026 SCC OnLine Guj 4013].
The Division Bench comprising Justice Anil Kshetarpal and Justice Bharat Parashar examined Section 6(2)(b) of the CGST Act, 2017, which bars a proper officer under the CGST Act from initiating proceedings on a subject matter upon which a proper officer under the SGST Act has already initiated proceedings, and noted that this bar is attracted only if (i) the State proceedings were initiated prior in point of time, and (ii) the subject matter of both proceedings is the same.
The Court observed that the proceedings by Respondent No. 2 pertained to alleged wrongful availment of ITC arising from a reconciliation of turnover declared by the Petitioner in its GSTR-3B returns for FY 2017-18, whereas the proceedings by Respondent No. 1 were founded upon intelligence gathered by the Department and material emanating from the search conducted at the Petitioner’s premises.
The Impugned OIO recorded that the Petitioner was engaged in issuing invoices without any corresponding supply of goods, was not carrying out any actual business activity, had suppliers who were non-existent or whose registrations were cancelled retrospectively, had wrongfully availed and utilised ITC of Rs. 3.53 crores and had passed on ITC of Rs. 3.24 crores. The Court noted that the allegation of passing on ITC through invoices issued without any corresponding supply of goods had no connection with the turnover reconciliation undertaken by Respondent No. 2, and therefore the subject matter of the two proceedings could not be termed the same.
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Briefly, Star Traders, a proprietorship firm of Atimukt Jain, approached the Delhi High Court under Article 226 of the Constitution challenging the Show Cause Notice and the Order-in-Original passed under the CGST/DGST Act for AY 2017-18, and also seeking a declaration that Section 16(2)(c) of the CGST Act, 2017 is ultra vires Article 14 of the Constitution.
Pursuant to a letter from the Delhi East Commissionerate, CGST Delhi West Commissionerate initiated an investigation and conducted a search at the Petitioner’s premises, during which Rs. 11 lakhs were seized and the proprietor’s statement was recorded. The proprietor admitted that the firm was registered in 2017, had issued invoices without any corresponding supply of goods, was not carrying out any actual business activity, and that one Pawan Singla was engaged in dealing in such invoices for a commission of 0.25%.
The SCN under Section 74 of the CGST Act alleged that the Petitioner had utilised ITC of Rs. 3.53 crores on inward supplies from non-existent or retrospectively cancelled suppliers, and had passed on ITC of Rs. 3.24 crores by issuing invoices without any corresponding supply of goods, proposing an aggregate recovery of Rs. 6.78 crores along with interest and penalties. The Adjudicating Authority proceeded ex parte and confirmed the demands through the Impugned OIO.
