One of the key feature of GST is concurrent jurisdiction for levy & collection of GST by the Centre & the States. Only ‘proper officer’ has been empowered under GST law to execute and administer compliance of various sections and rules under GST law, to protect the revenue and to exercise rights relating to enforcement of various provisions of law. Although tax payer is covered by all the acts in GST eco-system, administrative powers with regards to each tax payer is assigned either to state or central GST officers. Hence it is very important to examine in every GST proceedings whether the officer initiating the said proceedings is authorized to do so. This issue gains more importance in cases of inspection, search, seizures and similar actions. Moot question is whether a State officer can search premises of a tax payer covered by central jurisdiction and vice versa? For this, Tax payer must first know the Jurisdiction under which he is covered and who is proper officer authorized under the act. To get insights of the issue, let us first discuss Section 6 of CGST Act which deals with issue of Cross empowerment .
Section 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.
(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.
(Section 6 of SGST Act is also similar worded for empowerment of Central Tax Officers)
Sub section 1 authorizes State Tax Officers to be proper officers for the purpose of CGST Act subject to such conditions as may be specified in notification. Hence this section empowers officer of state government to act as proper officer for Central Act and vice versa. However it is interesting to interpret and understand that whether separate recommendation by council and notification is required to be issued for each section wherever word “proper officer” is used or recommendation and notification is required only when government wants to put some conditions for cross-empowerment?
In order to get answer to this important question we can refer agenda and minutes of 22nd GST Council meeting held on 6th October 2017. Agenda Note 9 of said meeting proposed for issuing notifications on cross-empowerment for ensuring single interface under GST. Relevant extract of agenda read as under
“It is submitted that there is a broad agreement on cross empowerment under the CGST and SGST Acts. If notifications on cross empowerment are kept in abeyance for want of agreement on IGST Act’s cross empowerment, the effort to ensure single interface would be in vain. Taxpayers are increasingly feeling the heat of delay in grant of refund. If they are required to approach both Central and State Tax Authorities for refund of unutilized input tax credit for exports, it would further accentuate their grievances”
Even draft notifications were placed before the council for approval. However these notifications never saw light of the day due to differences over place of supply rules in IGST. Important point to note here is that even government felt that issue of notifications u/s 6(1) were necessary to cross-empower officers and without such notifications cross empowerment was not possible. Had powers under section 6(1) been absolute and not conditional this agenda item of issuing notifications for cross empowerment must not have come before council. At that time government felt that notifications must be issued urgently to cross-empower officers.
If we conclude that notification is required to make sub-section 1 operational, till date only notification no 39/2017-Central Tax,dt. 13-10-2017 is issued by central government u/s 6(1). This notification specifies that the officers appointed under the respective State Goods and Services Tax Act, 2017 are authorized to be the proper officers for the purposes of section 54 or section 55 (except rule 96) of the said Acts. Thus by this notification government has empowered state officers to grant refund of IGST and CGST respectively. Similar notification was issued under SGST also empowering central officers to grant refund of state tax. Issue of such notifications further suggests that there is requirement of issuing proper notifications for declaring central/state officers as proper officers for state tax/central tax respectively for each section. If it is interpreted that no notification is required to be issued and section itself gives cross rights to officers, then there would not have been any requirement to issue separate notification for the purpose of section 54 and 55.
Interestingly, no notification u/s 6(1) is issued for sections relating to inspection/ search, seizure arrest etc (section 67 to section 72). Still officers of central jurisdiction are exercising such powers on taxpayers covered by state jurisdiction. However state and central commissioners have issued letters to officers citing section 6 and minutes of 9th GST Council meeting where this issue was discussed. In para 28 of minutes, it is mentioned that both the central and state administrations have been empowered to take intelligence based enforcement action in respect of entire value chain. In said letter, based on minutes of council meeting, it is mentioned that there is clear mandate to both the state and central authorities to take intelligence based action against any entity. Officers are taking shelter of this letter and exercising rights given in section 67 to 72. Furthermore, GST policy wing in its letter dated 22nd June 2020 addressed to DGGI has stated that notification would be required only if any conditions are to be imposed. Said letter explains logic of issuing Notification No.39/2017 CT dt. 13.10.2017 stating that this notification is issued to restrict powers of state tax officers for the purpose of refund and they have been specified as the proper officers only under section 54 and 55 of CGST Act and not under rule 96 of CGST rule 2017 (IGST Refund on Exports). If no notification is issued to impose any condition, it means that the officers of state and center have been appointed as proper officer for all purposes of the CGST and SGST Acts. This letter goes one step ahead and states that notification u/s 6(1) of 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 section. In absence of any such conditions, the power of cross-empowerment under section 6(1) is absolute and not conditional.
However, going by wording of Notification 39/2017 it seems that intention of government was to exercise powers u/s 6(1) and authorize proper officers to exercise powers of section 54 and 55 (except rule 96). Even agenda and minutes of 22nd GST council meeting discussed above makes it clear that government at that time thought that issue of notifications was necessary for cross-empowerment. Also it is worthwhile to refer circular 1/2017 dated 20th September 2017 regarding guidelines of division of taxpayer base between centre and states. After mentioning the basis of division, point 4 of said circular clearly mentions that notifications regarding cross-empowerment are being issued separately. So from combined reading of minutes, notifications, and circular government itself took stand on various occasions that issue of notification is essential for cross empowerment. Now moot question is whether a letter having no legal validity can take place of and satisfy requirement of notification as specifically required by section or whether government has changed its stand and now it thinks that issue of notifications is not at all necessary as mentioned in letter issued by GST policy wings referred above. It will be wise on part of department to resolve this issue by issuing suitable notifications as proposed in council meetings or issue proper clarification on its earlier stand and reasons for change in stand. Timely clarification on this issue will prevent undue litigation in future.
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Nice Article written sir, indicates a deep and thorough analysis. Is there any case law which quashes inspection or search proceedings of tax authorities initiated in violation of cross empowerment.