S.6(2)(b) CGST Act | Central Authority Can Issue Summons Despite State Authority Initiating Proceedings : Supreme Court

In a significant ruling, the Supreme Court on Thursday (Aug. 14) held that a summons issued by the Central GST authorities under Section 70 of the Goods and Services Tax Act does not constitute “initiation of proceedings" under Section 6(2)(b) of the CGST Act.  Therefore, there's no bar to issuing a summons where the State GST authorities have already issued a show cause notice on the same subject matter.

The Court clarified that the bar under Section 6(2)(b) of the CGST Act, to avoid duplicity of proceedings, would be applicable only when the Central and State GST authorities initiate proceedings on the same subject matter. The Court reasoned that since the summons served are meant to be investigative, not adjudicative, they fall outside the bar Section 6(2)(b) of the CGST Act.

"At the stage of issuing a summons, the Department is yet to determine whether proceedings should be initiated against the assessee. Such evidence-gathering and inquiry do not constitute “proceedings” within the meaning of Section 6(2)(b) of the CGST Act. The mere issuance of a summons cannot be equated with proceedings barred under the Act, as the subject matter cannot be ascertained solely through summons."

Holding thus, the bench comprising Justices JB Pardiwala and R Mahadevan upheld the summons issued by the CGST authorities to the Petitioner, who protested against the issuance of such summons when the proceedings were already initiated by the State GST authorities.

Citing the bar under Section 6(2)(b) of the CGST Act, the Petitioner resisted the CGST summons arguing that the subject matter of the proceedings pertained to the availability of input tax credit in respect of cancelled dealers. However, the Court noted that the Petitioner's claim failed on two counts i.e., 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 Court found that the Petitioner's claim about the subject matter being the same to be illusory.

Real Time Data Sharing Should Be Encourage Between Departments To Avoid Overlapping Of Proceedings

The Court also raised apprehensions about the lack of real-time data sharing mechanism between the CGST and SGCT authorities, which often results in initiating multiple proceedings on same subject matter in breach of Section 6(2)(b) of CGST Act.

“It is imperative that the Departments act in harmony and maintain heightened vigilance with respect to intelligence inputs received by them, so as to give full effect to the legislative intent underlying the GST regime. Such coordination would also serve to mitigate the unnecessary hardship caused to taxpayers by overlapping proceedings and lack of inter-Departmental communication.”, the court said.

The court further recommended the Directorate General of GST Intelligence (DGGI) to “consider adopting necessary measures to develop a robust mechanism for seamless data and intelligence sharing between the Central and State authorities, including provision for real-time visibility to both authorities of any action taken pursuant to an intelligence input, thereby advancing the objectives of harmony and cooperative federalism.”

The 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.

Background

The Court was hearing the matter where the petitioner, a GST-registered security services provider, challenged summons issued by CGST Delhi East Commissionerate while the State GST authorities had already issued a show-cause notice regarding alleged wrongful ITC claims from cancelled dealers.

The issue was whether such summons issued by the CGST authorities was barred under Section 6(2)(b) of the CGST Act as “proceedings” was already initiated by the State GST authority on issuing the show cause notice.

Answering in the negative, the judgment authored by Justice Pardiwala upheld the CGST summons, stating that the same are not proceedings to attract the bar under Section 6(2)(b) of the CGST Act.

"In the facts of the present case, the mere issuance of summons does 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.”, the court said.

“The statutory bar (under Section 6(2)(b) of CGST Act) 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.”, the court added.

Cause Title: M/S ARMOUR SECURITY (INDIA) LTD. VERSUS COMMISSIONER, CGST, DELHI EAST COMMISSIONERATE & ANR.

Citation : 2025 LiveLaw (SC) 805

Click here to read/download the judgment

Appearance:

For Petitioner(s) :Mr. Sridhar Potaraju, Sr. Adv. Mr. Srinivas Kotni, Adv. Mr. Rishabh Dev Dixit, Adv. Mr. Rohit Dutta, Adv. Mr. Gaichangpou Gangmei, AOR Mr. Akshay Kumar, Adv. Mr. Aayush, Adv. Mr. Lalit Mohan, Adv. Ms. Niharika Singh, Adv. Mr. Sai Swaroop, Adv. Mr. Gurdeep Singh, Adv.

For Respondent(s) : None