One Assessee -One Tax- Multiple Assessing Authorities

GST law is a classical example of cooperative federalism which facilitates fiscal growth of all the states in the country. It has curtailed the levy of multiple taxes and promoted transparency, accountability, and reduced human interface in relation to its execution and implementation.

In the Pre GST regime, there are multiple disputes with respect to levy of taxes between the central & state governments under deemed sale transactions enlisted under Article 366(29A) of Indian constitution viz. work contract services, restaurant services, transfer of right to use goods, hire purchase transactions, etc….The same was put to a logical end by incorporating deemed sale transactions under Schedule II of CGST Act.

On the flip side, the GST law is throwing challenge to the assessee in relation to departmental proceedings/enquiry/Audit due to issues involved in sharing of power between States and Union Government. The political ecosystem among States and central representatives in GST council should ensure fulfillment of laudable objects enshrined in preamble to this historic piece of legislation  i.e One Nation, One Tax and One Market. In this article we shall discuss in brief –How the parallel proceedings initiated by State GST and Central GST Authorities hampering these noble objects .

In any taxing statute, the Legislature Bodies empower the Law Enforcement Authorities to ensure the statutory compliance by various stake holders. Even in the GST law under 2(13) read with Section 65, the departmental officers can determine the correctness of turnover, tax payment refund claim and ITC availed by the assesses. Further the authorities are empowered for the assessment, re-assessment, review and revision of the original assessment order.

The intention of the legislature is to empower quasi-judicial authorities to prevent the revenue leakage and to establish checks and balances for smooth execution of provisions of the GST law. In the GST law, the proper officer u/s 2(91) can be the state officer or a central officer as the case may be.

Now the problem arises with respect to execution of this assessment proceedings, departmental enquires or investigations by the GST authorities. Ironically parallel proceedings sought to be initiated against the same assesse by state GST department, central GST department, anti evasion department, Director General of GST intelligence.

The parallel proceedings is fixing the assessee in cross roads and thereby putting unnecessary hardship on business community. These parallel proceedings force the supplier to move pillar to post. They are wading through official desks of different quasi-judicial authorities and there by denied of much promised ease of doing business, faceless proceedings, relief from protracted tax litigations. The blocking of working capital due to pre deposit of taxes is another nightmare to suppliers.

In  this regard I wish to draw attention to Chapter 9 of 2018 economic survey report where in it was observed that in the indirect tax arena around 1.45 lakh appeals are pending with Commissioner Appeals, CESTAT, High Courts and Supreme court which is aggregated to  value Rs.2.62 lakh crores .

Having understood the different facets of the issues involved now let us try to examine the judicial interpretation in this respect.

No parallel proceedings on same subject matter

As per Section 6(2)(b) of CGST Act, no parallel proceedings should be initiated by the proper officer of the GST law on  the same subject matter. In other words initiation of proceedings by two different authorities on same subject matter is not tenable. In this regard reliance can be placed on

• Bhawani textiles vs addition DG 2020 –VIL-125-Gujarat.
• Raj metals industries Vs Union of India 2021 -127 taxmann.com 546 (Calcutta)
• Himanshu balaram gupta VS Union of India 2021 -124 taxmann.com 96(Gujarat)

Meaning of the phrase “subject matter” or “ same subject matter”

The word “subject matter” used in Section 6(2)(b) of the Act has not been defined under the GST Act. In the case of Ballabh Das v. Dr. Madanlal [1970] 1 SCC 761 (para-5), Hon’ble Supreme Court interpreted the words “subject-matter” in the context of Civil Procedure Code where also these words have not been defined. Hon’ble Supreme Court held held that:

“The expression ‘subject-matter’ has a reference to a right in the property which the plaintiff seeks to enforce. That expression includes the cause of action and the relief claimed. Unless the cause of action and the relief claimed in the second suit are the same as in the first suit it cannot be said that the subject-matter of the second suit is the same as that in the previous suit. …………. ……… Mere identity of some of the issues in the two suits did not bring about an identity of the subject-matter in the two suits. As observed in Rakhma Bai v. Mahadeo Narayan (I.L.R. 42 Bom.1155), the expression “subject-matter” in Order XXIII, Rule 1, Code of Civil Procedure means the series of acts or transactions alleged to exist giving rise to the relief claimed. In other words “subject-matter” means the bundle of facts which have to be proved in order to entitle the plaintiff to the relief claimed by him. We accept as correct the observations of Wallis C.J. in Singa Reddi v. Subba Reddi (ILR 39 Mad. 987), that where the cause of action and the relief claimed in the second suit are not the same as the cause of action and the relief claimed in the first suit, the second suit cannot be considered to have been brought in respect of the same subject-matter as the first suit.” 

Thus, the phrase “subject-matter”, or the phrase “on the same subject-matter”, used in section 6(2)(b) of the State G.S.T. Act/C.G.S.T. Act with reference to any proceedings, means same cause of action for the same dispute involved in a proceeding before proper officer under the State GST Act and the C.G.S.T Act. 

Inititiation of intelligence based enforcement action

It is pertinent to note hear that letter D.O.F No CBEC/20/43/01/2017 GST dated 5-10-2018 has addressed in relation to parallel empowerment of central officers & state officers where in both the central & state officers have the power to initiate intelligence based enforcement action on the entire tax payers base irrespective of the administrative assignment of tax period of any assessment. The authority which initiates such actions is empowered to complete the entire process of investigation i.e issuance of show cause notice adjudication, recovery, appeals etc.. That may arise out of such action.

In other words even an officer of a central authority initiates intelligence based enforcement action against the tax payer administratively assignees to states authorities, the officer of the central tax authority would not transfer the said case to its state counterpart and would themselves take the case to its legal conclusion. In this regard we place reliance on

• Suresh Bhai gadecha Vs state of Gujarat 2020 -114 taxmann.com  478 (Gujarat)
• Siddi vinayak trading company Vs union of India 2021- 128 taxmann.com 47(Allahabad)

Section 6(2)(b) is not a rescue in relation to serious offences           

However in protection of revenue and in the cases of serious offences the parallel proceedings can be initiated by the GST authorities and the same cannot be regard as overlap or limitation under Section 6(2)(b) of CGST act

• Dadhchi Iron & Steel (P) ltd Vs Chhattisgarh GST (2020) 116  com 334(Chhattisgarh)

Section 70 Inquiry is not barred by Section 6(2)(b) of CGST Act

It is also very interesting to note here that the word ‘proceedings’ under Section 6(2)(b) is not synonymous with  the word ‘inquiry’ u/s 70 of CGST 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).

Section 70 provisions are enacted for collection of evidence in matter of tax evasion and may result in confiscation.

Subsequent to inquiry under Section 70, the proceedings referred under Section 6(2)(b) shall be initiated i.e. assessment proceedings/ penalty proceedings/ demand/ recovery proceedings. The proceedings under Section 6(2)(b) are subsequent to inquiry under Section 70. Therefore, Section 70 inquiry is not barred by Section 6(2)(b) of CGST Act. Reliance  is placed on-

• K trading company Vs union of India (2021) 126 taxmann.com 2011(Allahabad)
• Siddi vinayak trading company Vs union of India 2021- 128 taxmann.com 47(Allahabad)

In the similar note, the audit proceedings and investigation proceeding can be initiated simultaneously by two different authorities and same was affirmed by the Honorable supreme court of India in the case of Suresh kumar P.P Vs Deputy director general of GST intelligence (2021) 125 taxmann column 61(SC)

Whether DGGI officers Lacks Jurisdiction ??

In light of Quantum of Coal Energy (P) Ltd  v. Commissioner Officer of the Commission of Customs (2021) 125 taxmann.com 378 (Mad) and Canon India (P.) Ltd v. Commissioner of Customs (2021) 125 taxmann.com 188 (SC) judicial pronouncements, the department need to provide a clarification with respect to whether DGGI is a ‘proper officer’ or not under Section 2(91) of CGST Act ?

Irrespective of whether proceedings are of same subject matter or not under Section 6(2)(b) or whether proper officer lacks jurisdiction or not, if the different officers are stepping  into business premises of the assesses through different nomenclature i.e. inquiry , Audit , summons , proceedings , investigations etc. it would hinder the smooth  flow of the business operations of the assesses in general .Small & medium enterprises  cannot afford to have separate legal counsel to address departmental proceedings and thereby exposing them to avoidable litigation coupled with cost.

It is also relevant to note here that multiple assessments under GST Law may also hamper the ranking of our country in ‘Ease of Doing Business’ and ‘World Competitiveness Index’ so the same need to be addressed on priority basis to attract global investors otherwise it may promote bribery and belittle the foreign/domestic investment opportunities in the country and also curtailing employment opportunities as well.

So the state & central authorities should design and formulate a modus operandi to ensure harmonious application of above provisions without any compromise in fulfillment of broader objects this historic piece of legislation. Any laxity may cause unnecessary tussle among officers concerned across the board.

Now I conclude with my humble opinion that for achieving the object of one nation one tax and one market we need to open only one window for entire assessment proceedings.

( The views expressed in this article are strictly personal)