In a significant ruling, the Hon’ble Madras High Court in the case of Ram Agencies v. Assistant Commissioner of Central Tax [W.P. (MD) NO. 8674 of 2024 and W.M.P (MD) NOS. 7920 & 7921 of 2024 dated April 10, 2024] has quashed an impugned order issued by the Central Tax authorities. This judgment underscores the necessity of a proper cross-empowerment notification for initiating proceedings against assessees allocated to counterpart tax departments. The court’s decision addresses the jurisdictional boundaries between Central and State tax authorities, ensuring adherence to proper procedural requirements.
The Hon’ble Madras High Court held that in absence of a notification issued for cross empowerment, authorities from counterpart department cannot initiate proceedings where an assessee is assigned to other counterpart.
Facts:
M/s. Ram Agencies (“the Petitioner”) is assessed by the State Tax authorities pursuant to the allocation made by the Central Government in terms of Circular No.1/2017-GST(Council), dated September 20, 2017, however the order was passed by the Central Tax authorities in respect of the assessment years 2017-18, 2018-19, 2019-20.
The Petitioner is also aggrieved by the fact that the order has been passed despite stay being granted by the Principal Seat of the Madras High Court against the operation of notification extending the period of limitation vide G.O.(Ms)Nos.9 and 56 and G.O.(Ms)Nos.41 and 1, which has been stayed in W.P.No.33343 of 2023, on November 27, 2023.
Issue:
Whether proceedings can be initiated against an assessee from the counterpart department when the assessee is assigned to the other counterpart department?
Held:
The Hon’ble Madras High Court in W.P. (MD) NO. 8674 of 2024 and W.M.P (MD) NOS. 7920 & 7921 of 2024 dated April 10, 2024, held as under:
- Noted that, the issue regarding cross-empowerment and the jurisdiction of the counterparts to initiate proceedings when an assessee has been allocated either to Central Tax Authorities or to the state tax authorities was examined in detail by this Court in Vardhan Infraastructure’s case [W.P. No. 34792 & Ors. dated March 11, 2024].
- Wherein the hon’ble court has concluded that in absence of notification issued for cross empowerment, the authorities from the counterpart department cannot initiate proceedings where an assessee is assigned to the counterpart.
- Quashed the Impugned Order-in-Original passed by the Assistant Commissioner of Central Tax in the absence of notification issued for cross empowerment.
- However stated that, liberty is given to the State authorities to proceed against the petitioner.
Our Comments:
In Tvl. Vardhan Infrastructure v. The Special Secretary [W.P. No. 34792 & Ors. dated March 11, 2024] the Hon’ble Madras High Court held that if an assessee has been assigned to the Central Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017 dated September 20, 2017, the State Authorities have no jurisdiction to interfere with the assessment proceedings in absence of a corresponding Notification under Section 6 of the respective GST Enactments.
Similarly, if an assessee has been assigned to the State Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017 dated September 20, 2017, the officers of the Central GST cannot interfere although they may have such intelligence regarding the alleged violation of the Acts and Rules by an assessee.
Officers under the State or Central Tax Administration as the case may be, cannot usurp the power of investigation or adjudication of an assessee who is not assigned to them.
Therefore, the proceedings initiated by the Authorities other than the Authority to whom the assessees have been assigned to are to be held as without jurisdiction.
Conclusion: The ruling in Ram Agencies v. Assistant Commissioner of Central Tax serves as a crucial precedent in upholding jurisdictional integrity within the GST regime. It highlights the importance of adhering to procedural mandates and the necessity for explicit cross-empowerment notifications. This decision not only protects assessees from unauthorized proceedings but also strengthens the framework of tax administration by reinforcing clear jurisdictional demarcations.
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