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 ...

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

Yash Mittal

The Court also recommended greater coordination and intelligence-sharing between State and Central GST authorities.

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