It is stated that the GST Council in its 9th meeting held on 16.01.2017 had discussed and it is clarified that the officers of both Central tax and State tax are authorized to initiate intelligence-based enforcement action on the entire taxpayer’s base irrespective of the administrative assignment of the taxpayer to any authority. However, what is intelligence-based enforcement is not clarified leaving the option open for both Central & State offices to initiate the proceedings irrespective of allocated jurisdiction.
The authority which initiates such action is empowered to complete the entire process of investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action. It may so happen that while investigation is ongoing, the taxpayers may be getting notices from another office. In this regard, it is stated that there cannot be two parallel proceedings under the State Act as well as the Central Act. As per clause (b) of sub-section (2) of section 6 of the Goods and Services Tax Act, 2017 (“CGST Act, 2017”) it is provided that where a proper officer under CGST Act, 2017 has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under that Act on the same subject matter.
First, it would be better to see the requite provisions provided under GST law in this regard in respect of power of officer and authorisation of officers.
Section 5 of the CGST Act, 2017 provides for powers of officers to discharge functions under this Act. The commissioner may delegate his powers to any other officer who is subordinate to him. An Appellate Authority shall not exercise the powers and discharge the duties conferred on any other officer of Central Tax. Vide Notification No. 2/2017-Central Tax, dt 19-06-2017, w.e.f. 22.06.2017, the Central Board of Excise and Customs appoints certain officers to exercise powers and discharge the duties under this Act.
The provisions of Section 5 of the CGST Act, 2017 may be read as under:
“Section 5: Powers of Officers –
(1) Subject to such conditions and limitations as the Board may impose, an officer of Central tax may exercise the powers and discharge the duties conferred or imposed on him under this Act.
(2) An officer of Central tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of Central tax who is subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other officer who is subordinate to him.
(4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of Central tax.
The provisions of Section 5 of the Delhi Goods and Services Tax Act, 2017 (“DGST Act, 2017”) may be read as under:
“Section 5: Powers of Officers –
(1) Subject to such conditions and limitations as the Commissioner may impose, an officer of State tax may exercise the powers and discharge the duties conferred or imposed on him under this Act.
(2) An officer of State tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of State tax who is subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other officer who is subordinate to him.
(4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of State tax.
Further, Section 6 of the CGST Act, 2017 provides for authorisation of State Tax and Union Territory Tax Officer, subject to conditions as shall be notified by the Central Government on recommendations of the Council to be the proper officers for the purpose of this Act. Vide Notification No. 39/2017-Central Tax dt. 13-10-2017, the Central Government hereby specifies that the officers appointed under the respective State Goods and Services Tax Act, 2017 or the Union Territory Goods and Services Tax Act, 2017 (hereafter in this notification referred to as “the said Acts”) who are authorised to be the proper officers for the purposes of Section 54 or Section 55 of the said Acts (hereinafter in this notification referred to as “the said officer”) by the Commissioner of the said Acts, shall act as proper officers for the purpose of sanction of refund under section 54 or section 55 of the CGST Act read with rules made thereunder except sub-rules (1) to (8) and sub-rule (10) of rule 96 of the Central Goods and Services Tax Rules, 2017, in respect of a registered person located in the territorial jurisdiction of the said officers who applies for the sanction of refund to the said officers.
The provisions of Section 6 of the CGST Act, 2017 may be read as under:
Section 6: Authorisation of officers of State tax or Union territory as proper officer in certain circumstances–
(1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify.
(2) Subject to the conditions specified in the notification issued under sub-section (1),-
(a) where any proper officer issues an order under this Act, he shall also issue an order under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act as authorised by the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, under intimation to the jurisdictional officer of State tax or Union territory tax;
(b) 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.
(3) Any proceedings for rectification, appeal and revision, wherever applicable, of any order passed by an officer appointed under this Act, shall not lie before an officer appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act.”
The provisions of Section 6 of the DGST Act, 2017 may be read as under:
Section 6: Authorisation of officers of central tax as proper officer in certain circumstances–
(1) Without prejudice to the provisions of this Act, the officers appointed under the Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017) are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify.
(2) Subject to the conditions specified in the notification issued under sub-section (1),-
(a) where any proper officer issues an order under this Act, he shall also issue an order under the Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017) as authorised by the said Act under intimation to the jurisdictional officer of central tax;
(b) where a proper officer under the Central Goods and Services Tax Act, 2017(Central Act 12 of 2017) 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.
(3) Any proceedings for rectification, appeal and revision, wherever applicable, of any order passed by an officer appointed under this Act, shall not lie before an officer appointed under the Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017)”
It is submitted that there are no guidelines prescribed under the Act or the Rules regarding cross empowerment of the Central and the State authorities, however, in this context, the letter issued by the Central Board of Indirect Taxes and Customs dated 5th October, 2018 may be read as under:
“LETTER D.O.F. NO. CBEC/20/43/01/2017-GST(FT.)
CLARIFICATIONS ON AMBIGUITY REGARDING INITIATION OF ENFORCEMENT ACTION BY CENTRAL TAX OFFICERS IN CASE OF TAXPAYERS ASSIGNED TO STATE TAX AUTHORITY AND VICE VERSA
LETTER D.O.F. NO. CBEC/20/43/01/2017-GST(PT), DATED 5-10-2018
It has been brought to the notice of the Board that there is ambiguity regarding initiation of enforcement action by the Central tax officers in case of taxpayer assigned to the State tax authority and vice versa.
2. In this regard, GST Council in its 9th meeting held on 16-1-2017 had discussed and made recommendations regarding administrative division of taxpayers and concomitant issues. The recommendation in relation to cross-empowerment of both tax authorities for enforcement of intelligence based action is recorded at para 28 of Agenda note no. 3 in the minutes of the meeting which reads as follows:-
“viii. Both the Central and State tax administrations shall have the power to take intelligence based enforcement action in respect of the entire value chain”.
3. It is accordingly clarified that the officers of both Central tax and State tax are authorized to initiate intelligence based enforcement action on the entire taxpayer’s base irrespective of the administrative assignment of the taxpayer to any authority. The authority which initiates such action is empowered to complete the entire process of investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action.
4. In other words, if an officer of the Central tax authority initiates intelligence based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of Central tax authority would not transfer the said case to its Sate tax counterpart and would themselves take the case to its logical conclusions.
5. Similar position would remain in case of intelligence based enforcement action initiated by officers of State tax authorities against a taxpayer administrative assigned to the Central tax authority.
6. It is also informed that GSTN is already making changes in the IT system in this regard.”
Further, a clarity on the issue of cross-empowerment of State GST and Central GST officers is also visible in a recent letter issued by the Central Board of Indirect Taxes and Customs being No. CBEC-20/10/07/2019-GST dated 22th June, 2020 which reads as follows-
“F. No. CBEC-20/10/07/2019-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes Customs
GST Policy Wing
***
Dated: 22nd June, 2020
The Principal Director General,
Directorate General of GST Intelligence,
2nd Floor. Wing- VI, West Block- VIII
R.K. Puram,
New Delhi- 110066
Sir,
Subject: Reference form DGGI on Cross empowerment under GST. reg.
I am directed to refer to DGGI letter F.No.574/CE/66/2020/Inv./15308 dated 26.05.2020 on the issues related to cross empowerment of officers in terms of provisions of section 6 of the CCentral Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”).
2. Issue raised in the reference is whether intelligence based enforcement actions initiated by the Central Tax officers against those taxpayers which are assigned to the State Tax administration gets covered under section 6(1) of the CGST Act and the corresponding provisions of the SGST/UTGST Acts or whether a specific notification is required to be issued for cross empowerment on the same lines as notification No. 39/2017-CT dated 13.10.2017 authorizing the State Officers for the purpose or refunds under section 54 and 55 of the COST Act.
3.1 The issue has been examined in the light of relevant legal provisions under the CGST Act, 2017. It is observed that Section 6 of the CGST Act provides for cross empowerment of State Tax officers and Central Tax officers and reads as:-
“6. (1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes- of this Act, Subject to such conditions as the Government shall, on the recommendations of the Council, by Notification specify.”
3.2 Thus in terms of sub-section (1) of section 6 of the CGST Act and subsection (1) of section 6 of the respective State GST Acts respective State Tax officers and the Central Tax officers respectively are authorised to be the proper officers for the purposes of respective Acts and no separate notification is required for exercising the said powers in this case by the Central Tax Officers under the provisions of the State GST Act. It is noteworthy in this context that the registered person in GST are registered under both the CGST Act and the respective SGST/UTGST Act.
3.3 The confusion seems to be arising from the fact that, the said subsection provides for notification by the Government if such cross empowerment is to be subjected to conditions. It means that notification would be required only if any conditions are to be imposed. For example, Notification No. 39/2017-CT dated 13.10.2017 restricts powers of the State Tax officers for the purposes of refund and they have been specified as the proper officers only under section 54 and 55 of the CGST Act and not under rule 96 of the CGST Rules, 2017 (IGST Refund on exports). If no notification is issued to impose any condition, it means that the officers of State and Centre have been appointed as proper officer for all the purpose of the CGST Act and SGST Acts.
4. Further, it may kindly be noted that a notification under section 6(1) of the CGST Act would be part of subordinate legislation which instead of empowering the officer under the Act, can only be used to impose conditions on the powers given to the officers by the section. In the absence or any such conditions, the power of Cross- empowerment under section 6(1) of the CGST Act is absolute and not conditional.”
The issue of cross empowerment under GST was also discussed in RCI Industries and Technologies Ltd. Vs. Commissioner DGST, Delhi Ors. In the aforesaid matter, the Hon’ble High Court vide order dated 07.01.2021 observed in the matter that “ it is thus apparent that if an officer of the Central GST initiates intelligence- based enforcement action against a taxpayer administratively assigned to State GST, the officers of the former would not transfer the said case to their counterparts in the latter department and they would themselves take the case to its logical conclusion. At this stage, we are only concerned with the search action initiated and the ultimate logical conclusion would have to be gone into at the appropriate stage, when the Revenue proceeds for determination of tax. The Respondents would be bound by the aforenoted circulars and we reiterate that in case the action of the State and Central Authorities is overlapping, the Petitioner would be at liberty to take action to impugn the same in accordance with law.
No two parallel proceedings on subject matter under GST but summon u/s 70 of CGST Act, 2017 may be issued for inquiry.
There cannot be two parallel investigations under the State Act as well as the Central Act. As per clause (b) of sub-section (2) of section 6 of the Goods and Services Tax Act, it was provide that where a proper officer under Central Goods and Services Tax Act has initiated any ‘proceedings’ on a subject matter, no proceedings shall be initiated by the proper officer under that Act on the same subject matter. Further, reference was made to the D.O.F. No. CBEC/20/43/01/2017-GST (Pt.) dated 5.10.2018 issued by the Central Board of Indirect Taxes and Customs, wherein it has been clarified that if an officer of the Central tax authority initiates intelligence based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of the Central tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its logical conclusions. [Sureshbhai Gadhecha Vs State of Gujarat (Gujarat High Court) dt 27.12.2019]
However, the issue arose for consideration before the Hon’ble Allahabad High Court in the matter G.K.Trading Company Vs Union Of India And 4 Others dated 02.12.2020, was that once inquiry has been initiated under U.P.GST Act, 2017 the officer could neither initiate any inquiry nor summon could be issued under Section 70 of the CGST Act, 2017 against assessee in view of the provisions of Section 6 (2) (b) of U.P. GST Act, 2017.
It was held that the words “subject-matter”, “proceedings” and “inquiry” have not been defined either under the State G.S.T. Act or the Union Territory G.S.T. Act or the C.G.S.T. Act. Therefore, these words have to be interpreted in the context of the aforesaid Acts. The word “inquiry” in Section 70 has a special connotation and a specific purpose to summon any person whose attendance may be considered necessary by the proper officer either to give evidence or to produce a document or any other thing. The process of inquiry under Section 70 is specific and unified by the very purpose for which provisions of Chapter XIV of the Act confers power upon the proper officer to hold inquiry.
The word “inquiry” in Section 70 is not synonymous with the word “proceedings”, in Section 6(2)(b) of the U.P.G.S.T. Act/ C.G.S.T. Act. Provisions of Section 70 has been enacted for collecting evidence in matters involving tax evasion which may also lead to confiscation. After inquiry is completed and materials for tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized, by reason of fraud or wilful misstatement or suppression of facts or otherwise are found, then it may lead to demands and recovery under Section 73 or Section 74, as the case may be. When action for assessment, demand and penalty etc. including action under Section 73 or74 is taken, that shall amount to proceedings referable to Section 6(2)(b) of the Act but the inquiry under Section 70 is not a proceeding referable to Section 6(2)(b) of the Act.
Thus, Section 6(2)(b) of the C.G.S.T. Act prohibits separate initiation of proceedings on the same subject-matter by the proper officer under the C.G.S.T. Act when proceeding on the same subject-matter by the proper officer under the State Act has been initiated, whereas Section 70 of the U.P.G.S.T./ C.G.S.T. Act merely empowers the proper officer to summon any person in any inquiry. The word “proceedings” used in Section 6(2)(b) is qualified by the words “subject-matter” which indicates an adjudication process/ proceedings on the same cause of action and for the same dispute which may be proceedings relating to assessment, audit, demands and recovery, and offences and penalties etc. These proceedings are subsequent to inquiry under Section 70 of the Act. The words “in any inquiry” used in Section 70 of the Act is referable to the provisions of Chapter XIV, i.e. Section 67 (power of inspection, search and seizure), Section 68 (inspection of goods in movement), Section 69(power to arrest), Section 71 (access to business premises) and Section 72 (officers to assist proper officers).
Therefore, proper officer under the U.P.G.S.T. Act or the C.G.S.T. Act may invoke power under Section 70 in any inquiry. Prohibition of Section 6(2)(b) of the C.G.S.T. Act shall come into play only when any proceeding on the same subject-matter has already been initiated by a proper officer under the U.P.G.S.T. Act. Thus, the words “any proceeding” on the same “subject-matter” used in Section6(2)(b) of the Act, which is subject to conditions specified in the notification issued under sub-Section (1); means any proceeding on the same cause of action and for the same dispute involving some adjudication proceedings which may include assessment proceedings, proceedings for penalties etc., proceedings for demands and recovery under Sections 73 and74 etc.
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very good article. Please comment in this regard with reference to the latest order of the hon’ble supreme court of India in case Canon India Private limited