Supreme Court issues guidelines in case of common enquiry/investigation by two different GST authorities
Supreme Court issues guidelines where after the commencement of an inquiry or investigation by one GST authority, another inquiry or investigation on the same subject matter is initiated by a different GST authority.
ABCAUS Case Law Citation:
4697 (2025) (08) abcaus.in SC
The petitioner was a public limited company. In 2024 the petitioner received a show cause notice issued by State GST Authority under Section 73 of the CGST Act. The show cause notice raised a demand alongwith the applicable interest and penalty under Sections 50 and 74 of the CGST Act respectively. The said show cause notice was served on the ground of net tax under declared due to non reconciliation of turnovers in other returns and e-way bill information and excess claim of ITC.
Later in 2025, a search was conducted at the registered premises of the petitioner under Section 67(2) of the CGST Act. A panchnama was drawn seizing electronic gadgets and documents. Thereafter, summons under Section 70 of the CGST Act was issued to four directors of the petitioner company requiring them to produce documents.
Within a week, the petitioner received one another summons under Section 70 of the CGST Act issued by the office of CGST, directing one of the directors of the petitioner to produce relevant documents. The petitioner submitted a letter stating that the petitioner is being investigated by another GST authority on similar grounds, including ITC claimed from cancelled suppliers. The petitioner also sought release of the seized electronic devices and documents.
Aggrieved by the summons issued in 2025, the petitioner preferred a writ petition before the High Court on the ground that as the State GST authority had already made the investigation in respect of the same issue and the CGST Commissioner does not have the jurisdiction in view of Section 6(2)(b) of the CGST Act.
The High Court dismissed the writ petition and declined to interfere with the summons issued in 2025. The Court held that the expression “any proceeding” in Section 6(2)(b) cannot be construed to include a search or investigation. The High Court took the view that a summons or investigation pursuant to a search constitutes only a precursor to the formal proceedings. It distinguished such summons from assessment, noting that summons is primarily intended to elicit information.
The Hon’ble Supreme Court observed that the question falling for consideration was whether the summons issued under section 70 by action of CGST Commissioner amounted to an “initiation of proceedings” in respect of the “same subject matter” for the purposes of Section 6(2)(b) of the CGST Act.
The Hon’ble Supreme Court also observed that there were contrary decisions of various High Courts. The Allahabad High Court had held that the term “inquiry” as used in Section 70 of the CGST Act is not synonymous with “proceedings” under Section 6(2)(b). The High Court of Madras held that the scope of Sections 6(2)(b) and 70 respectively, are different and distinct, as the former deals with any proceedings on a same subject matter, whereas, the latter deals with power to summon in an inquiry and therefore, the words “proceedings” and “inquiry” cannot interchangeably be used to say that there is a bar to invoke the power under Section 70 of the CGST Act. The High Court of Orissa quashed the SCN and subsequent orders issued by the State GST authority where there was an overlap in the periods under scrutiny by Central GST Authority. The High Court of Kerala held that the initiation of an enquiry or issuance of summons under Section 70 cannot be equated with the initiation of proceedings for the purposes of Section 6(2)(b) of the CGST Act. The High Court of Rajasthan observed that the terms “proceedings” under Section 6(2)(b) of the CGST Act and “inquiry” under Section 70 cannot be conflated to imply a bar on the issuance of summons. It held that the mere issuance of summons does not amount to the initiation of proceedings under Section 6(2)(b). The High Court of Calcutta observed that different wings of the same Department had initiated action for the same period and held that audit falls within the ambit of “proceedings” under Section 6(2)(b). Accordingly, it directed that the two wings which had initiated proceedings subsequently be restrained from proceeding further in respect of the said financial years. The High Court of Punjab & Haryana held that any action taken by any Department amounts to judicial proceedings but the Departments are within their right to initiate proceedings and take them to their logical conclusion. The High Court of Himachal Pradesh held that Section 6(1) of the CGST Act empowers the officers appointed under the State enactment to act as proper officers for the purposes of the CGST Act as well. It observed that the object of Section 6(2)(b) of the CGST Act is to prevent the cross empowerment in a manner that results in taxpayers being subjected to parallel proceedings.
The Hon’ble Supreme Court observed that at the time of the framing of the Goods and Services Tax Act, it was consciously decided that taxpayers should not be subjected to the jurisdiction of both the Central and State tax authorities simultaneously. To prevent the burden of dual administrative control and to streamline compliance, the concept of a “single interface” was introduced. Under this model, only one tax administration would exercise exclusive control over a taxpayer in relation to all aspects of GST compliance. This included matters pertaining to Central GST (CGST), State GST (SGST), and Integrated GST (IGST).
The Hon’ble Supreme Court also observed that GST Council in its 9th Meeting resolved that a clear division of taxpayers between the Central and State tax administrations be effected for all administrative purposes. To ensure cross-empowerment across the CGST, SGST, and IGST Acts, Section 6 was incorporated into the statute. Sub-section (1) of Section 6 authorizes the officers appointed under the SGST Act or the Union Territory Goods and Services Tax Act (UTGST) to be “proper officer” for the purposes of the CGST Act.
The Hon’ble Supreme Court further observed that clause (a) of sub-section (2) of Section 6 mandates that where a proper officer issues an order under the CGST Act, he has to pass an order under the SGST or UTGST Act respectively, under an intimation to the jurisdictional officer of the State and Union Territory tax authorities. Further, clause (b) of sub-section (2) bars a proper officer under the CGST Act to initiate proceedings on a subject matter where a proper officer under the SGST Act and UTGST Act has initiated proceedings on the same subject matter.
The Hon’ble Supreme Court also took note that in furtherance of the Council’s decision regarding the administrative division of taxpayer base, the CBIC issued Circular No. 01/2017 dated 20.09.2017, laying down the framework for allocation of taxpayer between the Centre and the States. It was observed that Section 6 of the CGST Act provides for the cross empowerment of powers between the Central and State tax administrations. However, for the purpose of administrative convenience, the GST Council has sought to divide the taxpayer base between the two administrations through a circular. However, with respect to intelligence-based enforcement actions, both the Central and the State tax authorities are empowered to act across the entire value chain.
The Hon’ble Supreme Court upheld the view taken by the High Court of Allahabad that the issuance of summons cannot be conflated with a statutory step taken upon conclusion of an inquiry. Similarly, the High Court of Kerala was correct in holding that initiation of inquiry or the issuance of summons does not amount to the initiation of “any proceedings”. The phrase “initiation of any proceedings” refers specifically to the issuance of a notice under the relevant provisions of the GST enactment.
The Hon’ble Supreme Court clarified the term “initiation of any proceedings” within the meaning of Section 6(2)(b) of the CGST Act by stating that the statutory framework of the CGST Act does not admit of any interpretation of the phrase “initiation of proceedings” under Section 6(2)(b) other than one which ties it to the issuance of a show cause notice. An action qualifies as ‘proceedings’ only when it is undertaken with the object of attaining a determinate outcome.
In the instant case, the Hon’ble Supreme Court opined that the mere issuance of summons did not imply that the Department has decided to proceed against the taxpayer for recovery of liability. Therefore, issuance of summons, by no stretch, can be considered as the initiation of proceedings, since at that stage, the Department still retains the discretion not to initiate any proceedings. A mere contemplation or possibility of initiating action cannot be equated with “proceedings”, as doing so would undermine the framework of cross-empowerment under the Act. Even when a discovery is made during the search proceedings under Section 67 of the CGST Act, the Department is required to bring such proceedings to a definitive conclusion, either by issuing a show cause notice under Section 74 or by dropping the matter altogether.
The Hon’ble Supreme Court further observed that in the 11th GST Council Meeting, the Council agreed that in respect of any dispute involving tax liability under both the CGST Act and the SGST Act, only a single order shall be passed. Accordingly, where a Central tax officer passes an order, necessarily encompassing the demand for tax under the SGST Act, the corresponding State tax officer shall be precluded from passing a separate order on the same dispute. It was in furtherance of this understanding that Section 6 of the CGST Act was enacted.
The Hon’ble Supreme Court interpreted the term “subject matter” as employed in Section 6(2)(b) of the Act. It was pointed out that the purport of the said section that “subject matter” needs to be understood in perspective of initiation of proceedings. In other words, subject matter of the proceedings. The subject matter of the proceedings lies in the contents of the notice. Hence, it ought to be exhaustive, so much so that it is capable of presenting the case of the Revenue in a nutshell.
The Hon’ble Supreme Court stated that a show cause notice delineates the scope of the proceedings in the expression of subject matter with which the authority would be dealing. It would be impermissible for an authority to invoke such rules, claims or grounds at a later stage which do not figure in the show cause notice. That is to say, any ground, reasoning or claim which does not figure out in the show cause notice cannot be permitted to adversely affect the noticee. Such recognition has even been made statutorily, as per sub-section (7) of Section 75 of the Act.
The Hon’ble Supreme Court opined that under Section 6(2)(b), the “subject matter” is intrinsically tied to the determination of the specific violation under scrutiny or the liability alleged to be unpaid. The statutory bar is triggered only when the two proceedings against the same taxpayer are, in substance, directed towards the very same or overlapping deficiency in tax discharge or the identical contravention alleged. Where the proceedings concern distinct infractions, each Department is entitled to proceed within its respective statutory remit without infringing the prohibition. Where the proceedings concern distinct infractions, each Department is entitled to proceed within its respective statutory remit without infringing the prohibition.
In the instant case, the Hon’ble Supreme Court observed that the petitioner contended that the subject matter of the proceedings pertained to the availability of input tax credit in respect of cancelled dealers. However, this contention failed for two reasons: first, the summons, on its own, cannot reveal the subject matter; and secondly, the subject matter can be ascertained only from the show cause notice. The apprehension of the petitioner cannot be countenanced merely because a facet of the ongoing inquiry overlaps with the subject matter of the show cause notice already issued.
The Hon’ble Supreme Court stated that inasmuch as the CGST Act vests the proper officer with authority to issue “orders” under various provisions, it becomes imperative that such officer duly apprises the jurisdictional counterpart of any action initiated by the Department in relation to a taxable person who may otherwise fall within the administrative domain of that officer. Given that the statutory framework envisages a regime of cross-empowerment amongst officers, the obligation so cast operates as a safeguard against the prejudice which may arise from the initiation of parallel or overlapping proceedings against the same taxpayer by different wings of the Department.
The Hon’ble Supreme made the following final conclusion:
(i) Clause (b) of sub-section (2) of Section 6 of the CGST Act and the equivalent State enactments bars the “initiation of any proceedings” on the “same subject matter”.
(ii) Any action arising from the audit of accounts or detailed scrutiny of returns must be initiated by the tax administration to which the taxpayer is assigned.
(iii) Intelligence based enforcement action can be initiated by any one of the Central or the State tax administrations despite the taxpayer having been assigned to the other administration.
(iv) Parallel proceedings should not be initiated by other tax administration when one of the tax administrations has already initiated intelligence-based enforcement action.
(v) All actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute “proceedings” within the meaning of Section 6(2)(b) of the CGST Act.
(vi) The expression “initiation of any proceedings” occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc.
(vii) The expression “subject matter” refers to any tax liability, deficiency, or obligation arising from any particular contravention which the Department seeks to assess or recover.
(viii) Where any two proceedings initiated by the Department seek to assess or recover an identical or a partial overlap in the tax liability, deficiency or obligation arising from any particular contravention, the bar of Section 6(2)(b) would be immediately attracted.
(ix) Where the proceedings concern distinct infractions, the same would not constitute a “same subject matter” even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted.
(x) The twofold test for determining whether a subject matter is “same” entails, first, determining if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts, and secondly, if the demand or relief sought is identical.
The Hon’ble Supreme Court issued the following guidelines to be followed in cases where, after the commencement of an inquiry or investigation by one authority, another inquiry or investigation on the same subject matter is initiated by a different authority:
a. Where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response, as the case may be. We say, so because, mere issuance of a summons does not enable either the issuing authority or the recipient to ascertain that proceedings have been initiated.
b. Where an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation.
c. Upon receipt of such intimation from the assessee, the respective tax authorities shall communicate with each other to verify the veracity of the assessee’s claim. We say, so as this course of action would obviate needless duplication of proceedings and ensure optimal utilization of the Department’s time, effort, and resources, bearing in mind that action initiated by one authority enures to benefit of all.
d. If the claim of the taxable person regarding the overlap of inquiries is found untenable, and the investigations of the two authorities pertain to different “subject matters”, an intimation to this effect, along with the reasons and a specification of the distinct subject matters, shall be immediately conveyed in writing to the taxable person.
e. The taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice. Any show cause notice issued in respect of a liability already covered by an existing show cause notice shall be quashed.
f. However, if the Central or the State tax authority, as the case may be finds that the matter being inquired into or investigated by it is already the subject of inquiry or investigation by another authority, both authorities shall decide inter-se which of them shall continue with the inquiry or investigation. In such a scenario the other authority shall duly forward all material and information relating to its inquiry or investigation into the matter to the authority designated to carry the inquiry or investigation to its logical conclusion. We say, so because, the taxable person except for being afforded the statutory protection from duplication of proceedings, otherwise has no locus to claim which authority should proceed with the inquiry or investigation in a particular matter.
g. However, where the authorities are unable to reach a decision as to which of them shall continue with the inquiry or investigation, then in such circumstances, the authority that first initiated the inquiry or investigation shall be empowered to carry it to its logical conclusion, and the courts in such a case would be competent to pass an order for transferring the inquiry or investigation to that authority.
h. If it is found that the authorities are not complying with these aforementioned guidelines, it shall be open to the taxable person to file a writ petition before the concerned High Court under Article 226 of the Constitution of India.
i. At the same time, taxable persons shall ensure complete cooperation with the authorities. It is incumbent upon them to appear in response to a summons and/or reply to a notice.
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