Blocked ITC ledger and summons quashed as parallel proceedings by DGGI held impermissible under Section 6(2)(b) of CGST Act

Case: M/s Kundlas Loh Udyog v. State of H.P. & Anr.

Court: High Court of Himachal Pradesh, Shimla
Petition No.: CMPMO No. 273 of 2024
Date of Judgment: 17.09.2024 (Reserved on 13.09.2024)
Category of Dispute: Input Tax Credit – Blocking of Credit Ledger and Parallel Proceedings
Relevant Provisions:

• Section 16, 70, 6(2)(b) of CGST/HPGST Act, 2017

• Rule 86A of the CGST Rules, 2017

Facts (Paras 2–8)

The petitioner, a manufacturer and distributor of iron and steel in Himachal Pradesh, purchased raw materials from registered suppliers after verifying their genuineness under Section 16 of the CGST Act. On 14.02.2024, the State GST authorities issued summons under Section 70 seeking details of suppliers and documents for the period 2019–2023. The petitioner submitted the documents on 12.03.2024. However, on 16.03.2024, the DGGI, Rohtak, also issued summons on the same suppliers and subsequently blocked the petitioner’s ITC worth ₹1.02 crore on 16.05.2024 under Rule 86A. The petitioner contended this action amounted to parallel proceedings on the same subject matter, violating Section 6(2)(b).

Questions before the Court (Paras 7–8, 16–17)

1. Whether respondent No. 2 (DGGI) could initiate proceedings and block ITC when State GST authorities had already issued summons on the same suppliers?

2. Whether blocking of ITC without due process violated principles of natural justice and Article 14?

Observations (Paras 18–33)

• Section 6(2)(b) of the CGST Act bars initiation of parallel proceedings on the same subject matter by State and Central GST officers.

• The objective is to prevent harassment of taxpayers and ensure single investigation reaches its logical conclusion.

• The 2018 CBIC Circular clarified that the authority first initiating action retains jurisdiction to complete it.

• Internal communications of CBIC (2020) further confirmed that once one authority begins proceedings, the other must not duplicate them.

• In this case, since the State authority had already issued summons (14.02.2024) and was seized of the matter, respondent No. 2 could not initiate separate proceedings or block ITC for the same subject matter.

Judgment (Paras 34)

The Court held that respondent No. 2 acted without jurisdiction. Accordingly:

• The blocked credit ledger dated 16.05.2024 and reflected on 20.05.2024 was quashed.

• The summons dated 16.03.2024 issued by DGGI were also set aside.

• Petition allowed with pending applications disposed of.

Cases Referred

Between Fine Lines (Practical Takeaway)

Businesses facing multiple GST investigations should note that Section 6(2)(b) of CGST Act protects them from dual proceedings. Once either State or Central GST authority initiates action, the other cannot reopen or parallelly investigate the same issue. ITC can only be blocked after due process, and arbitrary blocking by another authority is open to judicial challenge.

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