This article delves into the intricate aspects of the cross empowerment of officers and their powers under the Goods and Services Tax (GST) Act, particularly focusing on the Central Goods and Services Tax (CGST) Act. It examines the authorization of officers, the issuance of orders under respective acts, investigations and proceedings by different authorities, and the concept of parallel proceedings.
Under the CGST Act, Section 5 and 6 throws light on such powers bestowed on the tax officers.
(A) AUTHORISATION OF OFFICERS –
(i) Sub-section (1) & (2) of Section 5 of the CGST Act, 2017 lays down that an officer of Central Tax may exercise the powers and discharge the duties conferred or imposed on him under the Act and can also exercise the powers of any other Central Tax Officer subordinate to him.
(ii) Sub-section (1) of Section 6 of the CGST Act, 2017 prescribes that officers appointed under the SGST Act or the UTGST Act are authorised to be the proper officers for the purposes of the CGST Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. There is a similar parallel provision in Section 4 of IGST Act.
There are similar parallel provisions in the UTGST and SGST Acts, authorising the CGST officers accordingly.
In terms of the provision of Section 6(1) of the CGST Act, notification no. 39/2017-CT dated 13.10.2017 has been issued authorising the SGST and UTGST officers to also act as proper officers for the purposes of Section 54 or Section 55 of the respective Acts to act as proper officers for the said purposes under the CGST Act read with rules made thereunder except sub-rules (1) to (8) and sub-rule (10) of Rule 96 of CGST Rules, 2017.
From the above provisions, it could be seen that not only are the officers of Central/State/UT authorised to exercise the powers conferred on him under the respective Acts he can also exercise the powers of officer’s subordinate to him. Moreover, there is a cross authorisation provision for the officers appointed under the SGST or UTGST Act, to act as proper officers, discharging the functions under the CGST Act and vice versa, related to specific provisions, as authorised by issuance of Notifications, for the said purpose.
(B) ISSUANCE OF ORDER UNDER RESPECTIVE ACTS –
Vide clause (a) of sub-section (2) to Section 6 of the CGST Act, where any proper officer issues an Order under the CGST Act, he shall also issue an Order under the SGST Act and UTGST Act and send a copy thereof to the jurisdictional officer of State Tax or Union Territory Tax.
There are parallel provisions laid down in the State GST Act and the UTGST Act. In other words, the officers of the Central/State and UT are not barred from adjudicating the liability under the other said Acts too, as prescribed under the said provisions and copy of the Order passed is to be duly intimated to the respective authorities.
(C) INVESTIGATION / PROCEEDINGS BY DIFFERENT AUTHORITIES –
Clause (b) of Section 6(2) of the CGST Act, lays down that, where a proper officer under the STGST Act or UTGST Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the CGST Act on the same subject matter. In other words, if proceedings have already been initiated by a State GST officer, no action can be taken by the CGST officers on the same subject matter.
There are similar parallel provisions laid down in the SGST Act and the UTGST Act.
PARALLEL PROCEEDINGS BY STATE AND CENTRAL AUTHORITIES –
In one such case before the Hon’ble Madras HC, in the case of TVL. AL-MADHINA STEEL TRADERS [WP NO. 3110 of 2023-Order dt.3.2.23], summons was issued by the CGST officer on 3rd Jan 2023. State GST authorities had simultaneously initiated proceedings under the GST Act. Reply was filed by the petitioner on 18.1.2023 against the summons dated 3rd Jan 2023 and before a decision was taken by the CGST officer, the subject WP was filed. It was held that the WP has been filed prematurely and that the petitioner will have to necessarily await the outcome of the decision taken by the CGST officer. It is mandatory on the part of the CGST office to consider the reply expeditiously and take a call as to whether the subject matter is one and the same. In case it is concluded that the subject matter is one and the same, they will have to drop the initiation of proceedings against the petitioner as per the provisions of Section 6(2)(b) of the GST Act, 2017.
In another peculiar parallel proceeding case before the Hon’ble Patna HC, in the case of ‘FONDEMENT BITUMENOUS INDS P LTD.’ [CIVIL WRIT JURISDICTION CASE NOS. 3651 AND 3279 OF 2023-Order dt. 11.4.2023], summons was issued by the CGST officer. Pursuant to which, necessary documents were filed before the authority. The SGST officer had by notices issued, initiated proceedings on the very same transaction. The notice issued by the State officer notices that during the course of investigation conducted by the Central Tax Authority, Kolkata, it was revealed that M/s D.S. Bitumix, Kolkata-700001, a bogus firm was engaged in availment of fake input tax credit and subsequently passing of irregular/inadmissible input tax credit to many entities. The petitioner was one such dealer, who had allegedly purchased material from the said bogus firm. The proceeding initiated against the petitioner is with respect to the input tax credit claimed by the petitioner on the purchases made from the bogus dealer. It was held as under-
“there is no prohibition in the State Tax Authority initiating an action where the Central Tax Authority is seized of the matter but, however, on the very same transaction, obviously, only one assessment can be made and it is proper that the authority, who initiated the action first, continues with it and the other authority restrains itself from so proceeding….
The investigation, as initiated against the supplier of the petitioner, cannot have any bearing on the action taken by the State Tax Authority against the petitioner for the relevant periods, being distinct from each other and against two separate assessees.”
Accordingly, the WP filed by the petitioner was dismissed.
From, the above provisions and case laws it could be seen that parallel simultaneous proceedings cannot be initiated against the same taxpayer, by both the Central and State authorities on the same subject matter.
A natural question could be posed as to what happens if parallel proceedings are initiated by different agencies of the Central/ State authority.
PARALLEL PROCEEDINGS BY DIFFERENT AGENCIES –
In one such case before the Gujarat High Court [Vipulchandra Pursottamdas Mahant- R/Spl CA no. 9488 of 2023 dated 22.6.2023], DGGI, Vadodara had carried out Inspection of the premises under Section 67(1) of the CGST Act and the said investigation was still pending. Thereafter, other GST officers also issued summons under Section 70 seeking necessary documents. They were informed that DGGI, Vadodara is in possession of the documents and that they have no authority to proceed further with the inquiry with the same subject matter. Inspite of this communication, they were still required to attend the inquiry and submit the documents, which resulted in the subject WP. In the said case, the GST officers were directed to transfer the papers/ documents to DGGI, Vadodara for necessary inquiry / investigation, who will pass an appropriate order / take appropriate action in accordance with the law. The WP was allowed to the said extent.
The principle that, only one assessment can be made in respect of the same transaction and that the authority that initiated action first should continue with the investigation, has been followed in the above case too.
PARALLEL PROCEEDINGS ON DIFFERENT ENTITY HAVING SAME PRINCIPAL PLACE OF BUSINESS –
In a case before the Hon’ble Delhi HC [HANUMAN ENTERPRISES (OPC) PVT LTD. vs. ADG, DGGI- WP(C) NO.2900 OF 2023 AND C.M.APPL NO. 11322 OF 2023, decided on 14.8.23], DGGI, Jaipur conducted investigation against the petitioner, who contended that in terms of Sec 6(2)(b) of the CGST Act, DGGI Jaipur cannot conduct investigation as they are already being investigated for the same period by another agency – Delhi State GST authority. The petitioner’s bank account and ITC was blocked and its GST registration was cancelled (subsequently restored) by the Delhi State Authority on account of an investigation relating to the petitioner’s dealing with one M/s Girdhari Exports. The petitioner’s ITC was blocked on account of a communication received from DGGI, Jaipur and the petitioner’s bank account was blocked at the instance of DGGI, Chennai. DGGI, Chennai had not investigated the petitioner but was concerned with an entity named M/s Balaji Enterprises. The Delhi State Authority administratively concerned with the petitioner, has clarified that it has not carried out any investigation but had issued orders regarding blocking of the account at the instance of DGGI, Chennai. DGGI, Chennai, had also stated that it has not carried out any investigation in respect of the petitioner company. The disclosed principal place of business of the petitioner is the same as that of some other connected entities, which have been investigated by DGGI, Chennai. In the said case it was held that no advantage can be drawn by the petitioner on that account. The petitioner has a separate tax registration. If any of the authorities has found it necessary to investigate the petitioner based on certain information, the said investigation cannot be stopped or interdicted on account of investigation conducted with respect of any other entity. Thus, no reason was found to interdict DGGI, Jaipur from conducting the investigation in respect of the petitioner company.
From the above proceedings its clear that only if parallel proceedings on the same subject matter and in respect of the same entity has been initiated by different agencies, that the same will fit in the restriction clause of Sec 6(2)(b)ibid. It will not be hit by the said provision, if the parallel action initiated is against another entity having same principal place of business.
(D) CROSS EMPOWERMENT OF TAX AUTHORITIES FOR ENFORCEMENT OF INTELLIGENCE BASED ACTION –
It has been clarified by Board, vide Letter D.O.F. No. CBEC/20/43/01/2017-GST(PT.) dated 5.10.2018, 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. 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 State tax counterpart and would themselves take the case to its logical conclusions. Similar position would remain in case of intelligence-based enforcement action initiated by officers of State tax authorities against a taxpayer administratively assigned to the Central tax authority.
JURISDICTIONAL AUTHORITY FOR CONSEQUENTIAL ACTION – An Office Memorandum dated 19th Oct 2022 has been issued clarifying that in case, where an enforcement action against a taxpayer assigned to State Tax Authority has been initiated by the Central Tax Authorities (and vice versa)-
1. all consequential action relating to the case including, but not limited to appeal, review, adjudication, rectification, revision will lie with the authority which had initiated the enforcement action;
2. refund in such cases may, however, be granted only by the jurisdictional tax authority administering the taxpayer; and
3. recurring SCN’s to be issued by the actual jurisdictional authorities, which is responsible for assessment of returns of taxpayer.
As could be seen from the above clarification, the Enforcement agencies can initiate proceedings on the entire taxpayer’s base without worrying about the jurisdiction aspect. The same is in tune with the provision of Section 6(2)(b) of the CGST Act and similar parallel provisions under the State GST Acts and the UTGST Act. Though initial SCN is to be issued by the authority which had initiated the enforcement action, the recurring SCN on the matter is to be issued by the jurisdictional tax authority.
CONCLUSION – Form the above deliberations on initiation of proceedings / investigation by different authorities/ agencies, it can be deduced that, on the same subject matter, simultaneous proceedings cannot be carried on parallelly and the authority/ agency that first initiated the proceedings is to continue with the investigation and that the second authority/ agency is barred from continuing the proceedings in terms of the provisions laid down under the GST Act. Moreover, the Enforcement agencies of both Central and State Tax officers are also empowered to initiate proceedings against any taxpayer irrespective of its jurisdiction and consequential action to be taken as per guidelines in the said office memorandum.
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