Parallel GST Actions Curbed: Key Takeaways from Saraswati Spinning And Weaving Mills vs State of Himachal Pradesh

Background of the Dispute

In Saraswati Spinning And Weaving Mills vs State of Himachal Pradesh, the Himachal Pradesh High Court examined the legality of parallel proceedings initiated by Central and State GST authorities for the same financial year and on the same subject matter.

The assessee, engaged in manufacturing activities, was issued:

  • Intimation of liability in DRC-01A dated 10.10.2023, and
  • A detailed Show Cause Notice in DRC-01 dated 22.11.2023

by the Deputy Commissioner, State Taxes & Excise, District Sirmour at Nahan, for the Financial Year 2019-20. The primary allegation was ineligibility of Input Tax Credit (ITC) under Section 16(2)(c) of the CGST Act and the corresponding Himachal GST enactment.

The writ petition originally sought three main forms of relief:

  1. Quashing of DRC-01 dated 22.11.2023 for FY 2019-20, issued on the basis of Section 16(2)(c).
  2. A declaration that Section 16(2)(c) of the Central GST Act / Himachal GST Act, 2017 is unconstitutional, being violative of Articles 14, 19(1)(g), 265 and 300A of the Constitution of India.
  3. A direction to the authorities not to pass final orders, aligning with similar interim orders in other writ petitions such as CWP No.17651 of 2025, CWP No.20018 of 2025, and CWP No.17742 of 2025.

Limited Relief Pressed Before the High Court

During arguments, counsel for the assessee expressly stated that the constitutional challenge to Section 16(2)(c) (Relief No. ii) was not being pressed at this stage. The assessee reserved the right to question the constitutional validity in a separate proceeding, if required.

The focus in this petition, therefore, narrowed to:

  • The legality and fairness of the action taken pursuant to DRC-01A and DRC-01; and
  • The objection to parallel proceedings initiated by both the State and Central authorities for FY 2019-20 on the same ITC issue.

Assessee’s Grievances on ITC Adjudication

The assessee had already submitted detailed replies along with voluminous supporting records in response to DRC-01A and DRC-01. It claimed entitlement to ITC on the ground that all statutory conditions stood fulfilled.

The assessee requested that the authorities reconsider the matter afresh, with particular emphasis on the following factual aspects:

  • Whether GST on the contested purchases was actually paid to the supplier (RTP) along with the basic value.
  • Whether the underlying transactions and purchases were genuine, properly supported by invoices, e-way bills and other valid documentation.
  • Whether purchases were made before or after the cancellation of the supplier’s registration, which is often determinative in ITC disputes.
  • Whether the assessee fulfilled its legal duties regarding supplier verification, such as confirming GST registration details, filing status and other statutory checks.

The core plea was that these issues had not been examined in a meaningful or reasoned manner before issuance of the impugned notices.

Allegation of Parallel Proceedings Under Section 6(2)(b)

Another major plank of the challenge related to simultaneous action by the Central GST authority.

For the same financial year 2019-20, the Additional Commissioner, Central Goods & Services Tax Commissionerate, Chota Shimla had issued a Show Cause Notice dated 30.09.2025 (Annexure P-8). The subject matter of this Central notice overlapped with the State proceedings—essentially, the same ITC dispute for the same period.

The assessee argued: