With increasing nationwide ongoing disputes on Cross empowerment, here is a Common relief order for a huge list of petitioners from Hon’ble Madras High Court, setting precedence on the issue. Do not miss to read the last two paras of the decision for ICING ON THE CAKE!
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A. Dispute:
7. Taxpayers assigned either to State or to Central Authorities for administrative purposes under the provisions of the respective GST Enactments are/were being subjected proceedings by their counterpart.
B. Arguments made by the petitioner:
8. In the absence of a proper Notification under Section 6 of the respective GST Enactments for cross-empowerment, the impugned proceedings by the respective counterparts were without jurisdiction.
15. GST Council meeting discussions on the issue regarding cross-empowerment vide Para.No.28 of the Minutes of the 9th GST Council Meeting held on 16.01.2017 – to ensure single interface under GST – “viii. Both the Central and the State tax administrations shall have the power to take intelligence-based enforcement action in respect of the entire value chain”
18. Text of Circular No.1/2017-GST (Council) dated 20.09.2017 bearing reference No. 166/Cross Empowerment/GSTC/2017 containing the guide lines for Division of Tax payers between the Centre and State Authorities to ensure single interface for the purpose of tax administration under the respective GST Enactment reads as below:-
“4. Suitable notifications regarding cross-empowerment of State and Central Tax officers under CGST/IGST and SGST Acts respectively are being issued separately.”
25. In line with the decision of the 22nd GST Council Meeting held on 06.10.2017, a separate Model Notification was also circulated for the purpose of Section 6 of the respective GST Enactments for other purpose which would have entitled cross-empowerment for other purpose. However, Model Notifications which was circulated during September, 2017 immediately after the GST Enactments came into force with effect from 01.07.2017 have not been notified either under the CGST Act, 2017 or under the SGST Act, 2017.
26. These Notifications remain as draft Notifications till date. They have not been notified.
27. During the aforesaid Meeting, it was highlighted that there was disagreement of issue under IGST Act in relation to place of supply rules. While the Secretary stated that investigation of cross-empowerment was urgently required to enable the tax payer and therefore, the notification can be issued. It highlighted that there was a persistent difference regarding the cross-empowerment for the Place of supply rules regarding IGST, Notification regarding the cross-empowerment in respect of other matters were to be deferred in 22nd GST Council Meeting held on 06.10.2017.
28. Thus, there is no cross-empowerment.
29. The learned counsel for the petitioners relied on the following decisions:- i. Pahwa Chemicals Pvt. Ltd., Vs. Commissioner of Central Excise, Delhi, 2005 (181) E.L.T. 339 (S.C.); ii. Duncan Agro Industries Ltd., Vs. Union of India, 1989 (39) E.L.T. 211 (Del.); iii. M/s.Muthu Metals represented by K.Bhommal, Proprietor, Madras – 3 Vs. State of Tamil Nadu represented by the Commissioner and Secretary to Govt., C.T. & R.E. Dept., Madras – 9 and others in W.P.Nos.4949 of 1986, etc., batch; iv. Raghunath International Ltd., Vs. Union of India, 2012 (280) E.L.T. 321 (All.); v. National Building Construction Co. Ltd., Vs. Union of India, 2019 (20) G.S.T.L. 515 (Del.); vi. Yasho Industries Ltd., Vs. Union of India, Manu/GJ/1470/2021; vii. Kuppan Gounder P.G.Natarajan Vs. Directorate General of GST Intelligence, New Delhi, 2022 (58) G.S.T.L. 292 (Mad.); viii.Ambika Food Industries Pvt. Ltd., Vs. Union of India Rep. by its Secretary, Ministry of Finance Department of Revenue, 2021 SCC Online TS 3390; ix. Ajay Verma Vs. Union of India and Ors., Manu/UP/1822/2022; x. M/s.VGN Projects Estates Private Limited Vs. Assistant Commissioner (State Taxes) and another in W.P.No.2391 of 2023 and xi. Tvl Metal Trade Incorporation Vs. The Special Secretary and others in W.P.No.3033 of 2023.
C. Hon’ble Madras High Court observations and conclusions:
The Court decision interestingly made a list of comparison of various provisions of the Central GST Act against the State TNGST Act. Further, comparisons are also made between the Model GST law vis-à-vis the enacted GST law with specific reference to Section 3, 4, 5 & 6. And, thus made the following observations and drawn decisions:
“59. Thus, the delegation only is to the officers under the respective GST Enactments, unlike in Section 6 of the Model GST Laws which contemplated wide powers with the Board/Commissioner under the respective Model GST Laws to delegate the powers to officers from their counterpart Department.
61. Thus, Section 6(1) of the respective GST Enactments empowers Government to issue notification on the recommendation of GST Council for cross-empowerment. However, no notification has been issued except under Section 6(1) of the respective GST Enactments for the purpose of refund although officers from the Central GST and State GST are proper officers under the respective GST Enactments.
62. Since, no notifications have been issued for cross-empowerment with advise of GST Council, except for the purpose of refund of tax under Chapter-XI of the respective GST Enactments r/w Chapter X of the respective GST Rules, impugned proceedings are to be held without jurisdiction. Consequently, the impugned proceedings are liable to be interfered in these writ petitions.
63. Thus, if an assessee has been assigned administratively with 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 20.09.2017, 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.
64. 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 20.09.2017, 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.
65. The manner in which the provisions have been designed are to ensure that there is no cross interference by the counterparts. Only exception provided is under Section 6 of the respective GST enactement. Therefore, in absence of a notification for cross-empowerment, the action taken by the respondents are without jurisdiction. Officers under the State or Central Tax Administration as the case may be cannot usurp the power of investigation or adjudication of an assesse who is not assigned to them.
66. Therefore, the proceedings initiated by the respondents so far against the respective petitioners by the Authorities other than the Authority to whom they have been assigned to are to be held as without jurisdiction. Therefore, the impugned proceedings warrants interference
D. Interesting Decision on Time Limitation for New Proceedings:
67. At the same time, it is noticed that there is possibly case made out against each of the petitioners and since same power ought to have been exercised by the respective counterparts of the respondents, namely the Central Authority/State Authority as the case may be, to whom the respective petitioners have been assigned, proceedings should be initiated against each of the petitioners by the Authority to whom they have been assigned for the purported loss of Revenue under the respective GST Enactments.
68. Therefore, while quashing the impugned proceedings, there shall be a direction to the Central Authority/State Authority as the case may be to whom the respective petitioners have been assigned for administrative purpose to initiate appropriate proceedings afresh against them strictly in accordance with the provisions of the respective GST Enactments and GST Enactments Rules and Circular issued thereunder. The time between the initiation of the proceedings impugned in these writ petitions and time during the pendency of the present writ petitions till the date of receipt of this order shall stand excluded for the purpose of computation of limitation.”
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