Article on Two Parallel Proceedings Under GST

Two Parallel Proceedings Under GST

Under GST law, both the Central Tax officer & State Tax officer has the power to initiate the proceeding against the taxpayer. Some times the proceeding are initiated by the State tax officers and such proceedings are under process, meanwhile the Central tax officer also send the notice to the same taxpayer for same ground for same tax period. Hence the main question that arises here is whether two parallel proceedings in respect of the same period is permissible under GST Law. In this article we will discuss this issue in details.

The clause (b) of Sub section 2 of section 6 of CGST Act 2017 states that “where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter”.

Hence as per section 6(2)(b) of CGST Act 2017 where any proceedings are initiated by the proper officer under SGST Act then on the same matter no proceedings shall be initiated by the proper officer under CGST Act. In other words, section 6(2)(b) imposes a restriction on the officers to initiate a parallel proceedings on the same matter.

For example, A Company has received the Notice for Investigation from Central Officer and all the relevant documents/statements are submitted by the company to the Central Officer. The proceedings are under process but Show Cause Notice yet to be issued. In the same matter Company has got another Notice for Investigation from State GST. In this case the investigation is already initiated by the Central officers and the proceedings of which are not yet concluded. However, the State officers also issued the notice on the same matter. As the proceedings were already initiated by Central officers, the state officers can't do the parallel proceedings for the same matter by virtue of section 6(2)(b) of CGST Act 2017.

The Hon’ble Guwahati High Court in the case of Subhash Agarwalla v. State of Assam [2024(02)LCX0288] also held that once a proceeding is initiated under either in Central Goods and Services Tax Act, 2017 or State Goods and Services Tax Act, 2017 another proceeding for same period under other Act cannot to be initiated. The detailed discussions about the said case is as follows;

Facts of the above case: Under the SGST Act, the department has issued a Demand-cum-Show Cause Notice under Section 73 of the SGST Act to the petitioner Subhash Agarwalla to show cause as to why the amount shown in the notice, would not be asked and recovered from the petitioner for the FY 2017-2018. Subsequently under the CGST Act, the authority also issued a demand-cum-show cause notice under Section 73 of the CGST Act seeking the petitioner as to why the amount shown would not be ordered and recovered from the petitioner for the FY 2017-2018, 2018-2019, and 2019-2020. Both the notices had alleged that during the said period, the petitioner assessee availed and utilized Input Tax Credit (ITC) for the amounts, indicated therein, which were inadmissible in terms of Section 16(4) of the CGST Act/SGST Act. Pursuant to the Show Cause Notice dated 27.04.2023, the authority under the CGST Act has passed an Order-in-Original on 14.11.2023. Subsequently, the authority under the SGST Act has passed an Order-in-Original on 11.12.2023. Accordingly, the petitioner filed a writ petition that two parallel proceedings in respect of the same period, that is, 2017-2018 is not permissible under the provisions of Section 6 of the CGST Act, 2017 and SGST Act, 2017.

Decision of High Court: The Hon’ble Guwahati High Court in this Case held that having regard to the provisions contained in Section 6 of the CGST/SGST Act, more particularly, Section 6(2) which inter alia indicates that once a proceeding is initiated either of the above two Acts, another proceeding for the same period under the other Act is not to be initiated, the operation of the impugned order shall remain suspended till the returnable date.

There are various other Judgements of Hon’ble High Courts wherein it was held that two parallel proceedings in respect of the same tax period would not permissible under GST. Like in case of Sanjay Casting & Eng. Co. Versus The Assistant Commissioner of State Tax [2024(01)LCX0197] the Hon’ble Calcutta High Court held that Audit wing of SGST Authority shall keep all proceedings in abeyance if the subject matter is pending before the CGST Authority.

Facts of the above case: The appellant was issued an audit memo in which several discrepancies have been pointed out and the assessee/appellant on receiving the said audit notice informed the SGST Authority that over the same issue a show cause notice has been issued by the anti-evasion wing of CGST Department dated 28.03.2023 for the financial years 2017-2018 to 2021-2022 wherein all the points as mentioned in the audit memo have been considered and the same is under adjudication. The assessee/appellant has given a reply to the said show cause notice on 04.05.2023 and the matter was pending for adjudication. Over such reply given by the assessee/appellant the audit wing of the State GST Authority was of the opinion that it is not clear from the reply given by the appellant/assessee that discrepancy has been settled. The audit authority has failed to take note of the submission made by the assessee and the subject matter is pending adjudication by the CGST Authority who issued the show cause notice dated 28.03.2023 which reply has been submitted by the appellant/assessee on 02.05.2023.

Decision of High Court: In this case, the Hon’ble High Court held that the audit wing of the State GST Authority ought to keep the matter abeyance so far as the discrepancy note is concerned. The authority has now issued a show cause notice dated 29.12.2023 since the discrepancy pointed out by the Audit Wing of the State GST authority is the subject matter of adjudication of CGST Authority. Pursuant to the show cause notice dated 28.03.2023 the audit wing of the SGST Authority should not proceed. Accordingly, the appeal along with the connected application and the writ petition are disposed of by directing the audit wing of the SGST Authority to keep in abeyance all proceedings in respect of the discrepancy note no.3 alone including the show cause notice dated 29.12.2023 and abide by the adjudication order to be passed by the CGST Authority, on the show cause notice dated 28.03.2023.

From the above discussion it is clear that no parallel proceedings can be initiated by the State & Central tax officer simultaneously.

Conclusion: Due to restriction provided under section 6(2)(b) of CGST Act 2017 the two department s Central and State can not initiate the parallel proceedings against the same taxpayers on same grounds & for same period.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.