GST Enforcement, Dual Summons and “Reason to Believe” – How Bonafide Taxpayers Are Being Pushed into Criminal Space
Summary:The article examines concerns surrounding GST enforcement where taxpayers face repeated summons from both State and Central authorities for the same period and issues, despite earlier enquiries. While Section 6 of the CGST Act and judicial rulings recognise cross-empowerment and permit parallel investigations at the summons stage, courts have indicated that only one authority should adjudicate the same matter once a show cause notice is issued. The article highlights that bona fide taxpayers are often subjected to repeated demands for old documents, and the absence of minor records such as lorry receipts or gate passes is sometimes treated as evidence of fake input tax credit (ITC), leading to forced reversals and threats of arrest under Sections 69 and 132. It discusses judicial trends favouring a holistic evaluation of evidence, emphasising invoices, bank payments, e-way bills and stock records over missing petty vouchers, while stressing that “reason to believe” must rest on credible material and enforcement should comply with principles of natural justice.
1. Background: One taxpayer, two authorities, repeated summons
Since implementation of GST, many taxpayers face a typical, painful pattern:
State enforcement initiates enquiry under Section 70, issues repeated summons, collects documents, records statements and “closes” the enquiry at field level.
After some time, Central enforcement (DGGI / Central Superintendent) issues fresh summons on the same period and same subject, again insisting on old purchase and receipt documents, lorry receipts, goods receipt notes and proof of movement of goods.
If some documents for older years (3+ years) are not traceable – petty vouchers, old GRNs, transporter bills – officers straightaway treat ITC as “fake”, forcibly obtain reversals, push liability beyond ₹5 crore and then start talking about arrest and criminal prosecution under Sections 69 and 132, invoking “reasons to believe”.
I have rightly pointed out the ground reality: business records perish, offices change, small dealers do not preserve every petty voucher forever, and no one knows which officer will walk in after 5–6 years and demand “original proof of receipt of every consignment”. Courts have started recognising this reality, but field officers often behave as if every missing voucher is equal to a fake invoice.
2. Cross‑empowerment and dual investigations: what the law really says
The first question is: How can Central enforcement issue fresh summons when State enforcement has already investigated the same matter?
(a) Section 6 and CBIC clarification on cross‑empowerment
Section 6 of CGST Act gives cross‑empowerment: Central and State officers are both “proper officers” for enforcement, subject to some administrative allocation.
CBIC’s 22‑06‑2020 clarification expressly states that this cross‑empowerment is absolute, not conditional – there is no need for a separate notification for Central officers to act, even if the taxpayer is “assigned” to State.
High Court of J&K and Ladakh in R.K. ISPAT Ltd. v. Union of India (2024–25) held that cross‑empowerment between CGST and SGST officers is automatic and concurrent, and jurisdictional “assignment” is only an administrative arrangement. Intelligence‑based enforcement – searches, summons, investigations – can be initiated by either administration, regardless of administrative assignment.
In other words, legally, Central officers are not barred from issuing summons simply because State officers have already done so. They will say: “We have independent power; State enquiry does not prevent us from investigating.”
(b) Supreme Court: Summons are not “proceedings”
A very important Supreme Court ruling has clarified the difference between summons and proceedings:
The Court has held that a summons under Section 70 is only an information‑gathering tool, not “proceedings” in the sense of Section 6(2)(b).
Formal “proceedings” against the taxpayer start only when a show cause notice (SCN) under Sections 73 or 74 is issued.
Therefore, both Central and State officers may issue summons, carry out searches or enquiries on the same taxpayer and same period; the bar comes only when two different authorities try to adjudicate the same matter by issuing parallel SCNs.
This explains why you are seeing repeated summons: enforcement officers rely on this Supreme Court view and say: “We are only investigating, not starting parallel proceedings.”
(c) Judicial discomfort with parallel harassment
At the same time, High Courts are clearly uncomfortable with parallel harassment:
Patna High Court has recently emphasised that while cross‑empowerment exists, taxpayers cannot be subjected to multiple overlapping demands and adjudications for the same period and same issue; only one authority can adjudicate once SCN is issued.
Articles and case law analysis from 2025 onward recognise that parallel GST investigations significantly increase taxpayer burden and call for stricter coordination between Central and State authorities.
So, legally, dual summons may be permissible, but dual harassment is not. There is a clear judicial trend saying that either the Centre or the State should take the lead and the other should rely on that material, rather than dragging the taxpayer into endless rounds of document‑collection and statements.
3. Old documents, petty vouchers and ITC denial: burden of proof in the real world
our core grievance is on ITC and proof of receipt of goods for old transactions from “non‑existent” suppliers.
(a) Section 16(2): the four conditions
Section 16(2) requires the recipient to satisfy four main conditions: possession of tax invoice, receipt of goods or services, tax payment to Government by the supplier, and filing of return by recipient.
In practice, enforcement officers stretch the second condition (“receipt of goods”) to an extreme: they insist that unless the recipient can produce every petty voucher – GRN, weighment slip, lorry receipt, gate pass, stock register entry – they will treat the invoice as bogus and ITC as fake.
(b) Madras High Court line: petty vouchers and retrospective cancellation
Recent Madras High Court decisions are very useful for bonafide recipients:
Madras HC has held that ITC cannot be denied solely because the supplier’s registration was cancelled retrospectively, if at the time of transaction, the supplier was validly registered and tax invoice and tax payment exist. Authorities must examine the actual genuineness of supply rather than blindly relying on retrospective cancellation.
The Court has emphasised that revenue must consider real‑world evidence: tax invoices, e‑way bills, transport documents, stock registers, purchase ledger, and bank payments, and cannot mechanically deny ITC simply because some minor vouchers are not traceable after several years.
our reference to “petty vouchers not available – ITC cannot be denied only for this reason” fits into this judicial thinking. The Court is slowly telling the department: a missing petty voucher is not equal to fake goods.
A useful illustration:
A textile trader buys yarn in 2018 from a registered supplier, pays through bank, reflects purchase and ITC in GSTR‑3B, goods are used in manufacturing and sold with output GST. In 2024, enforcement asks for every weighment slip and gate pass. Some slips and GRNs are missing due to office shifting. If the department ignores invoices, bank payment, e‑way bills and stock records, and denies ITC only because petty vouchers are missing, Madras HC jurisprudence supports the trader.
(c) Case law trend on burden of proof
Different High Courts have taken slightly different approaches, but some common threads emerge:
Where the supplier is found to be part of a fake invoice network and never paid GST, courts are more willing to hold recipients responsible, especially if the recipient’s entire liability is discharged only through such ITC and there is no serious evidence of receipt of goods. Madras HC’s ruling in R.M.K Enterprises (11‑04‑2025) is an example: the assessee was treated as an accessory in a layered fake ITC chain; ITC denial was upheld.
However, where transactions were genuine, taxes were paid, and only minor evidentiary gaps exist due to passage of time, courts criticise mechanical ITC denial and insist on a nuanced, holistic view of evidence.
This is the space where bonafide taxpayers must fight: show the court they are not part of a fake network, but genuine buyers who are being punished merely for not storing every old voucher forever.
4. “Reason to Believe” and NGTP: misuse in enforcement practice
(a) Legal meaning vs field‑level misuse
“Reason to believe” comes mainly in Section 69 (power to arrest) and in search/inspection provisions. Legally:
It must be based on credible material, not mere suspicion, prejudice or assumption. Courts have repeatedly insisted that it is higher than “reason to suspect” but lower than proved guilt.
Gujarat HC and other courts have allowed arrest even before adjudication, but with the condition that revenue has some concrete material pointing to fake invoices/ITC or serious evasion.
On the ground, however, officers often treat “reason to believe” as a blank cheque. Once they label a case as “NGTP” (Non‑Genuine Taxpayer – typically used for suspected fake invoice entities), every recipient dealing with that supplier is painted with the same brush, and the burden is shifted entirely on the recipient:
“You prove physical receipt of every consignment, otherwise your ITC is fake.”
“You cannot produce petty vouchers – therefore we have reason to believe it is fake.”
“Your liability crosses ₹5 crore – hence we can arrest you under Section 69/132.”
This approach converts every documentation gap into a criminal allegation, which is fundamentally against the spirit of natural justice.
(b) Natural justice concerns
Key violations of natural justice seen repeatedly:
No clear show cause notice; instead, “voluntary” reversals of ITC are forced through statements under summons and pressure of arrest.
No proper opportunity to cross‑examine suppliers, transporters or departmental witnesses on whom the allegation of “non‑existence” is built.
Threat of arrest is used to avoid the standard adjudication process under Sections 73/74, bypassing SCN, reply, personal hearing and reasoned order.
High Courts are increasingly sensitive to these problems. There are rulings where:
Involuntary payments taken during investigation have been ordered to be refunded or treated as pre‑deposit, not final liability.
Assessment orders passed without proper SCN and hearing have been set aside and remanded for fresh adjudication.
But taxpayers need to assert these rights instead of silently signing whatever is put before them under threat.
5. Why Central officers insist on independent summons even after State enquiry
From the taxpayer’s side, this looks like harassment. From the department side, these are the main reasons they claim:
Intelligence‑based enforcement: DGGI or Central enforcement often acts on independent intelligence (data analytics, DGARM alerts, third‑party statements) and considers itself bound to verify facts independently, even if State has already recorded statements.
Different focus: State enquiry may have focused on routine compliance; Central enquiry may be focused specifically on fake ITC network, non‑existent supplier, accommodation entries. They argue that the subject matter is “different”, even if the period and supplier are same.
No access or trust in State records: Field‑level officers sometimes say, as in our example, “We don’t know what State has done; we must verify ourselves.” This is not a legal argument, but a practical excuse arising from poor coordination and data‑sharing between administrations.
However, once an SCN is issued for that period and that ITC, Supreme Court has clearly said there cannot be parallel adjudication by another authority on the same subject matter.
Therefore, your defence strategy should always map:
Has an SCN already been issued (by Centre or State) for this ITC?
If yes, any fresh SCN on the same ITC by another authority is vulnerable to challenge.
Even at summons stage, repeated harassment can be attacked as abuse of process, though law formally allows dual investigations.
6. Practical suggestions for bonafide taxpayers and professionals
Given this environment, what can a bonafide taxpayer or practitioner realistically do?
(a) At summons stage
Attend every summons; place on record that State enquiry has already been conducted on the same issue and period, and submit copies of the statements and documents already given.
Give a written representation to Central officer summarising compliance already made to State enforcement, citing Section 6 and Supreme Court ruling on cross‑empowerment, and politely requesting that duplicate summons and overlapping document demands be minimised.
Wherever petty vouchers are missing due to age, explain in writing the practical constraints (change of premises, fire, water damage, system migration) and offer alternative evidence: invoices, bank payment, GSTR‑2A/2B, e‑way bills, stock records, internal purchase registers.
(b) At adjudication stage (SCN)
If dual SCNs are issued for the same ITC and same period by different authorities, rely on Supreme Court and Patna HC rulings to challenge parallel proceedings; insist that only one authority can adjudicate that subject matter.
In reply and personal hearing, strongly highlight Madras HC and other judgments where courts refused to deny ITC merely on retrospective cancellation or minor documentation gaps, and emphasised the need to evaluate overall genuineness of supply.
(c) In writ / bail / criminal defence
If threat of arrest is used aggressively, challenge the “reason to believe” on facts: show that tax was paid, supplies were genuine, business records substantiate receipt, and the case is at best a documentation issue – not a fake invoice racket.
Assert violation of natural justice where there is no proper SCN, no fair hearing, or coercion to reverse ITC during investigation.
A simple, human‑level example:
A hardware dealer in 2017–18 buys goods from a supplier later branded NGTP. He pays through bank, files return, and sells goods onward. In 2023, State enforcement issues summons; he produces invoices, bank statements and stock records; enquiry is marked as “closed”. In 2025, Central enforcement again issues summons for the same period, insists on every lorry receipt, some of which are missing, and forces him to sign statements reversing ITC with threat of arrest. Here, the dealer should:
– Put in writing that State enquiry has already taken documents and closed the matter.
– Show alternative evidence of receipt and genuine business.
– If SCN is issued, challenge denial of ITC and any parallel proceedings, relying on cross‑empowerment case law and Madras HC line on documentation gaps.
Conclusion: Need for disciplined enforcement and respect for natural justice
The present GST enforcement climate, especially at Central level, is drifting away from balanced tax administration and towards a style reminiscent of old‑era raids, where “reason to believe” becomes a catch‑all phrase to justify intrusive investigation, forced reversals and threat of arrest, even against bonafide taxpayers.
Law on cross‑empowerment and summons is clear: both Centre and State can investigate, but only one should adjudicate a given subject matter; repeated, overlapping summons in the same year and same issue, without sharing past material, effectively convert cross‑empowerment into cross‑harassment.
Equally, jurisprudence on ITC – especially from Madras High Court and other High Courts – is evolving to recognise that missing petty vouchers, retrospective cancellation of supplier registration, and real‑world record‑keeping limitations cannot, by themselves, justify treating every transaction as fake and every taxpayer as part of an NGTP network. Genuine evidence of business – invoices, bank payments, e‑way bills, stock movements – must be given primacy, and the criminal machinery under Sections 69 and 132 should be reserved for clear, well‑documented fraud, not routine documentation issues.
If these principles are not internalised by enforcement officers, GST’s promise of a “good and simple tax” will continue to be overshadowed by the fear of arbitrary summons, forced reversals and arrest threats, undermining taxpayer trust and violating the basic doctrine of natural justice which requires fair notice, genuine opportunity of defence, and decisions based on the whole picture – not just on one missing voucher or one label of “NGTP”.
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