Delhi HC Restrains DGGI from Coercive Action on SCN

Delhi HC Restrains DGGI on Coercive Steps for SCN

The Delhi High Court has taken a significant step in protecting taxpayer rights by restraining the Director General of GST Intelligence (DGGI) from taking coercive action pursuant to a Show Cause Notice (SCN). This decision highlights critical procedural issues in GST enforcement and ensures transparency by involving State GST Authorities.

Background of the Case

In the case of Aastha Apparels Pvt Ltd vs. Director General of GST Intelligence [W.P.(C) 16293/2024], the Delhi HC addressed procedural challenges involving retrospective cancellations and the invocation of specific GST provisions. The petitioner contended that DGGI’s proceedings were impermissible under Section 6(2)(b) of the CGST Act.

Key Points of the Judgment

1. Cooperation Between Authorities: The Court directed the DGGI to transmit all relevant material associated with the SCN to the State GST Authorities (SGST). This promotes inter-authority coordination and prevents jurisdictional conflicts.
2. Invocation of Sections 73 and 74: The petitioner argued that the DGGI invoked Section 74 of the CGST Act despite the SGST authorities having already initiated action under Section 73. This raised concerns about double jeopardy and procedural fairness.
3. Retrospective Cancellation of Suppliers’ Registrations: Allegations stemmed from the retrospective cancellation of certain suppliers’ GST registrations, complicating compliance for the petitioner.
4. Next Steps: The Court granted time for filing counter and rejoinder affidavits and scheduled the next hearing for January 20, 2025. Until then, no coercive action can be taken.

What Section 6(2)(b) of CGST Act Says

Section 6(2)(b) restricts overlapping jurisdiction between Central and State GST authorities. If one authority initiates proceedings, the other cannot duplicate enforcement efforts on the same subject matter. This ensures fairness and prevents harassment of taxpayers.

Why This Judgment Matters

1. Prevents Dual Proceedings: This decision upholds taxpayers’ rights by preventing parallel proceedings under different authorities for the same issue.
2. Transparency in Enforcement: By mandating that the DGGI share material with SGST authorities, the Court promotes transparency and procedural integrity.
3. Protecting Business Interests: Businesses facing retrospective cancellations can now seek relief against unfair enforcement actions.

Conclusion

This case underscores the importance of procedural safeguards in GST enforcement. The Delhi High Court’s intervention ensures that taxpayers are not subjected to coercive actions without due process. The decision also strengthens the collaborative framework between Central and State GST authorities.