Where GST audit u/s 65 conducted, there can not be further scrutiny u/s 61

Where audit u/s 65 has already been conducted by GST authorities, there can not also a further scrutiny u/s 61 – High Court

In a recent judgment, Hon’ble High Court of Orrisa has held where audit u/s 65 has already been conducted by State GST authorities, there can not also a further scrutiny u/s 61 as the legislature intended there should not be overlap in making probe.

ABCAUS Case Law Citation:
4455 (2025) (03) abcaus.in HC

In the instant case, the assessee/Petitioner had challenged the impugned order passed by the Assistant Commissioner, GST and Central Excise, subject matter of which was scrutiny under Section 61 in Central Goods and Services Tax Act, 2017. Consequently, an order was made for demand under section 74 of the CGST Act 2017.

The scrutiny and demand were for periods of two financial years for which, the State GST authorities had already conducted audit and under section 65 and final audit report was disclosed.

Referring to section 6(2)(b) it was submitted by the assessee that the impugned order be interfered with because there already had been a concluded proceeding in respect of subject matter of the proceeding initiated by Central GST authorities, resulting in impugned order.

The Hon’ble High Court observed that Central GST Authorities had issued summons, after which State revenue had issued notice and got conducted audit and report was filed. Section 65 in State Goods and Services Tax Act, 2017 provides for audit. Subsection (7) therein permits the proper officer to initiate action, inter alia, under section 74, provisions correspond to provisions in Central Goods and Services Tax Act, 2017. petitioner had accepted relevant paragraphs in the audit report, to meet the short payment of tax.

The Petitioner contended that the summons was issued prior to notice issued by State Authorities. However, the show cause notice was issued after the audit report filed and the assessee having accepted it to pay the difference pointed out. In the circumstances, there stood a proceeding concluded before the show cause notice was issued by Central GST Authorities. The assessee relied upon judgment by a Division Bench of the High Court of Allahabad where their Lordships had dwelled upon the interpretation of words “subject-matter”, “proceedings” and “inquiry” under GST Acts. The Allahabad High Court had held that Section 6(2)(b) of the CGST Act prohibits separate initiation of proceedings on the same subject-matter by the proper officer under the CGST Act when proceeding on the same subject matter by the proper officer under the State Act has been initiated.

The Hon’ble High Court expressed agreement with the view taken by the Allahabad High Court and opined that the provisions in Central Goods and Services Tax Act, 2017 correspond to provisions in Odisha Goods and Services Tax Act, 2017. It follows that the legislature intended there should not be overlap in making probe.

The Hon’ble High Court opined that State GST authorities had probed by initiating audit. In the decision relied upon by the assessee, view taken includes audit to be a proceeding. Further, undisputed fact was that the show cause notice issued by Central GST Authorities was after commencement of audit. A summon issued under section 70 means the process of collection of evidence or gathering of material, as by interpretation of word ‘investigation’ given by the Supreme Court. There is also no dispute that subject matter of both proceeding were the same.

Accordingly, the Hon’ble High Court set aside and quashed the Impugned order passed by the Assistant Commissioner, GST and Central Excise.

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