Today, we are talking about cross empowerment of the Central and State Authorities under GST. It has been seen there is ambiguity regarding initiation of enforcement action by the Central Tax Officers in case of taxpayer assigned to the State Tax Authority and vice versa. There are and have been several instances where both, the Centre and State Authorities have initiated action against a taxpayer, for the same subject matter, subjecting him to multiple jurisdictions.
First, it would be better to see the requite provisions provided under GST law in this regard in respect of power of officer and authorisation of officers.
Section 5 of the Central Goods and Service Tax Act, 2017 (‘CGST Act, 2017’) provides for powers of officers to discharge functions under this Act. The Commissioner may delegate his powers to any other officer who is subordinate to him. An Appellate Authority shall not exercise the powers and discharge the duties conferred on any other officer of Central Tax. Vide Notification No. 2/2017-Central Tax, dt 19-06-2017, w.e.f. 22.06.2017, the Central Board of Excise and Customs appoints certain officers to exercise powers and discharge the duties under this Act.
The provisions of Section 5 of the CGST Act, 2017 may be read as under:
“Section 5: Powers of Officers –
(1) Subject to such conditions and limitations as the Board may impose, an officer of Central tax may exercise the powers and discharge the duties conferred or imposed on him under this Act.
(2) An officer of Central tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of Central tax who is subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other officer who is subordinate to him.
(4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of Central tax.
The provisions of Section 5 of the Delhi Goods and Services Tax Act, 2017 (“DGST Act, 2017”) may be read as under:
“Section 5: Powers of Officers –
(1) Subject to such conditions and limitations as the Commissioner may impose, an officer of State tax may exercise the powers and discharge the duties conferred or imposed on him under this Act.
(2) An officer of State tax may exercise the powers and discharge the duties conferred or imposed under this Act on any other officer of State tax who is subordinate to him.
(3) The Commissioner may, subject to such conditions and limitations as may be specified in this behalf by him, delegate his powers to any other officer who is subordinate to him.
(4) Notwithstanding anything contained in this section, an Appellate Authority shall not exercise the powers and discharge the duties conferred or imposed on any other officer of State tax.
Further, Section 6 of the CGST Act, 2017 provides for authorisation of State Tax and Union Territory Tax Officer, subject to conditions as shall be notified by the Central Government on recommendations of the Council to be the proper officers for the purpose of this Act. Vide Notification No. 39/2017-Central Tax dt. 13-10-2017, the Central Government hereby specifies that the officers appointed under the respective State Goods and Services Tax Act, 2017 or the Union Territory Goods and Services Tax Act, 2017 (hereafter in this notification referred to as “the said Acts”) who are authorised to be the proper officers for the purposes of Section 54 or Section 55 of the said Acts (hereinafter in this notification referred to as “the said officer”) by the Commissioner of the said Acts, shall act as proper officers for the purpose of sanction of refund under section 54 or section 55 of the CGST Act read with rules made thereunder except sub-rules (1) to (8) and sub-rule (10) of rule 96 of the Central Goods and Services Tax Rules, 2017, in respect of a registered person located in the territorial jurisdiction of the said officers who applies for the sanction of refund to the said officers.
The provisions of Section 6 of the CGST Act, 2017 may be read as under:
Section 6: Authorisation of officers of State tax or Union territory as proper officer in certain circumstances–
(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.”
The provisions of Section 6 of the DGST Act, 2017 may be read as under:
Section 6: Authorisation of officers of central tax as proper officer in certain circumstances–
(1) Without prejudice to the provisions of this Act, the officers appointed under the Central Goods and Service Tax Act, 2017 (Central Act 12 of 2017) 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 Central Goods and Services Tax Act, 2017 (Central Act 12 of 2017) as authorised by the said Act under intimation to the jurisdictional officer of central tax;
(b) where a proper officer under the Central Goods and Service Tax Act, 2017 (Central Act 12 of 2017) 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 Central Goods and Service Tax Act, 2017 (Central Act 12 of 2017)”
To achieve the goal of a harmonised tax structure, Section 6 of the CGST Act, 2017 provides for cross empowerment of the Central and State Tax officers, with pari materia provisions in the SGST Act. However, since both, the Central and the State Tax authorities can exercise jurisdiction over an assessee, Section 6(2)(b) of the CGST Act, 2017 expressly stipulates that where a Proper Officer under the SGST Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the corresponding Proper Officer under the CGST Act on the same subject matter. Similar provision is reciprocated in the State/Union Territories GST Laws. The underlying purpose of Section 6 of the CGST Act, 2017 is to safeguard a taxpayer from being subjected to multiple authorities for the same subject matter, whilst simultaneously empowering the Officers under the Central or State GST Acts to take appropriate action under law.
It is submitted that there are no guidelines prescribed under the Act or the Rules regarding cross empowerment of the Central and the State Authorities, however, in this context, the letter issued by the Central Board of Indirect Taxes and Customs dated 5th October, 2018 may be read as under:
“LETTER D.O.F. NO. CBEC/20/43/01/2017-GST(FT.)
CLARIFICATIONS ON AMBIGUITY REGARDING INITIATION OF ENFORCEMENT ACTION BY CENTRAL TAX OFFICERS IN CASE OF TAXPAYERS ASSIGNED TO STATE TAX AUTHORITY AND VICE VERSA
LETTER D.O.F. NO. CBEC/20/43/01/2017-GST(PT), DATED 5-10-2018
It has been brought to the notice of the Board that there is ambiguity regarding initiation of enforcement action by the Central tax officers in case of taxpayer assigned to the State tax authority and vice versa.
2. In this regard, GST Council in its 9th meeting held on 16-1-2017had discussed and made recommendations regarding administrative division of taxpayers and concomitant issues. The recommendation in relation to cross-empowerment of both tax authorities for enforcement of intelligence based action is recorded at para 28 of Agenda note no. 3 in the minutes of the meeting which reads as follows:-
“viii. Both the Central and State tax administrations shall have the power to take intelligence based enforcement action in respect of the entire value chain”.
3. It is accordingly clarified 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.
4. 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 Sate tax counterpart and would themselves take the case to its logical conclusions.
5. Similar position would remain in case of intelligence based enforcement action initiated by officers of State tax authorities against a taxpayer administrative assigned to the Central tax authority.
6. It is also informed that GSTN is already making changes in the IT system in this regard.”
The intent/purpose of Section 6 was further clarified vide above Circular dated 05.10.2018 issued by the CBEC, explaining that both, the Central Tax Officers as well as the State Tax Officers 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”, and that the authority which initiates such action is empowered to complete the entire process of investigation, issuance of Show Cause Notice, adjudication, recovery, appeal etc.
It further clarifies that if such action is initiated by an officer against a taxpayer administratively assigned to the other tax authority, i.e. Centre or State, the jurisdictional officer must hold his hands. This implies that the initiating authority would not transfer the said case to its jurisdictional tax counterpart having administrative assignment over the taxpayer, but would itself take the case to its logical conclusion. Thus, Section 6 of the CGST Act, 2017 read with the aforementioned Circular, clearly ensures that there is no overlap of jurisdiction by the Central and the State Tax Officers; rather it brings harmony between the Centre and the State Authorities for the same event of taxation.
Further, a clarity on the issue of cross-empowerment of State GST and Central GST officers is also visible in a recent letter issued by the Central Board of Indirect Taxes and Customs being No. CBEC-20/10/07/2019-GST dated 22th June, 2020 which reads as follows-
“F. No. CBEC-20/10/07/2019-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes Customs
GST Policy Wing
***
Dated: 22nd June, 2020
The Principal Director General,
Directorate General of GST Intelligence,
2nd Floor. Wing- VI, West Block- VIII
R.K. Puram,
New Delhi- 110066
Sir,
Subject: Reference form DGGI on Cross empowerment under GST. reg.
I am directed to refer to DGGI letter F.No.574/CE/66/2020/Inv./15308 dated 26.05.2020 on the issues related to cross empowerment of officers in terms of provisions of section 6 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”).
2. Issue raised in the reference is whether intelligence based enforcement actions initiated by the Central Tax officers against those taxpayers which are assigned to the State Tax administration gets covered under section 6(1) of the CGST Act and the corresponding provisions of the SGST/UTGST Acts or whether a specific notification is required to be issued for cross empowerment on the same lines as notification No. 39/2017-CT dated 13.10.2017 authorizing the State Officers for the purpose or refunds under section 54 and 55 of the COST Act.
3.1 The issue has been examined in the light of relevant legal provisions under the CGST Act, 2017. It is observed that Section 6 of the CGST Act provides for cross empowerment of State Tax officers and Central Tax officers and reads as:-
“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.”
3.2 Thus in terms of sub-section (1) of section 6 of the CGST Act and subsection (1) of section 6 of the respective State GST Acts respective State Tax officers and the Central Tax officers respectively are authorised to be the proper officers for the purposes of respective Acts and no separate notification is required for exercising the said powers in this case by the Central Tax Officers under the provisions of the State GST Act. It is noteworthy in this context that the registered person in GST are registered under both the CGST Act and the respective SGST/UTGST Act
3.3 The confusion seems to be arising from the fact that, the said subsection provides for notification by the Government if such cross empowerment is to be subjected to conditions. It means that notification would be required only if any conditions are to be imposed. For example, notification No. 39/2017-CT dated 13.10.2017 restricts powers of the State Tax officers for the purposes of refund and they have been specified as the proper officers only under section 54 and 55 of the CGST Act and not under rule 96 of the CGST Rules, 2017 (IGST Refund on exports). If no notification is issued to impose any condition, it means that the officers of State and Centre have been appointed as proper officer for all the purpose of the CGST Act and SGST Acts.”
4. Further, it may kindly be noted that a notification under section 6(1) of the 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 the section. In the absence or any such conditions, the power of Cross- empowerment under section 6(1) of the CGST Act is absolute and not conditional.”
Various citations regarding judicial intervention in light of the mandate under Section 6(2)(b) of the CGST Act, 2017.
There are and have been several instances where both, the Centre and State Authorities have initiated action against a taxpayer, for the same subject matter, subjecting him to multiple jurisdictions, necessitating judicial intervention in light of the mandate under Section 6(2)(b) of the CGST Act, 2017. The judgments rendered in the case of Vipul Chandra Pursottam Das Mahant Vs. Assistant Commissioner of State Taxes passed by the Gujarat High Court in R/Special Civil Application No. 9488 of 2023 dated 22.06.2023, relevant portion of which reads as follows:
5. In view of the aforesaid facts and circumstances of the present case, when the respondent no. 4 has initiated the inquiry and inspected the documents and carried out the inspection at the place of the petitioner and inquiry is going on in connection with five different Firms at present including M/s. J.M. Enterprise, for which, the summon was issued by the Respondent No. 1, whereas M/s Galaxy Enterprise, summon was issued by Respondent No. 2. Hence, we are of the view that the present petition deserves consideration.
5.1. The respondents no. 1 & 2 are directed to transfer the papers/documents to respondent no. 4 for necessary the papers/documents to respondent no. 4 for necessary inquiry/investigation in connection with both the Firms viz., M/s. J.M. Enterprise and M/s. Galaxy Enterprise.
5.2. The petitioner is directed to co-operate with the respondent no. 4 and produce necessary/required documents demanded by respondent no. 4 for the purpose of investigation/inquiry and thereafter, it is open for the respondent no. 4 to pass an appropriate order/take appropriate action in accordance with the law.
Further relied upon the judgment and order dated 07.01.2021 passed by the Delhi High Court reported in 2021 SCC OnLine Del 3450 (RCI Industries & Technologies Ltd. Vs. Commissioner Dgst Delhi & Others.), which reads as follows:
“15. Since contentions have been raised with respect to the cross-empowerment of the Central and the State authorities, and it is asserted that there are no guidelines prescribed under the Act or the Rules, it would be profitable to throw some light on the issue. In this context, the letter issued by the Central Board of Indirect Taxes and Customs dated 5 October, 2018 which also finds mentions in the order of the Gujarat High Court in R/Special Civil Application No. 23279 of 2019 dated 27 December, 2019 titled Sureshbhai Gadhecha v. State of Gujarat, relied upon by the Petitioner, reads as under:
“XXX…..
Further clarity on the issue of cross-empowerment of State GST and Central GST officers is also visible in a recent letter issued by the Central Board of Indirect Taxes and Customs being No. CBEC 20/10/07/2019-GST dated 22 June, 2020 which reads as follows-
“XXX….
16. It is thus apparent that if an officer of the Central GST initiates intelligence- based enforcement action against a taxpayer administratively assigned to State GST, the officers of the former would not transfer the said case to their counterparts in the latter department and they would themselves take the case to its logical conclusion. At this stage, we are only concerned with the search action initiated and the ultimate logical conclusion would have to be gone into at the appropriate stage, when the Revenue proceeds for determination of tax. The Respondents would be bound by the aforenoted circulars and we reiterate that in case the action of the State and Central Authorities is overlapping, the Petitioner would be at liberty to take action to impugn the same in accordance with law.”
Further relied upon the judgment of Calcutta High Court reported in 2022 SCC OnLine Cal 862 (Ideal Unique Realtors Pvt. Ltd. & Anr. Vs. Union of India & Others), which thus read as follows:
“4. We find that such a procedure had not been adopted in the instant case and the appellants appears to have been dealt with in a most unfair manner in the sense that from the year 2018 for the very same TRAN – 1 issue the appellants have repeatedly been summoned, issued notices etc. The spot memos, which have been communicated to the appellants along with the communications dated 22 March, 2021 is also for the very same purpose.
5. Thus, it is not clear as to why different wings of the very same department have been issuing notices and summons to the appellants without taking any of the earlier proceedings to the logical end.
6. Therefore, on that ground, we are of the view that the spot memos, which have been furnished along with the communications dated 22 March, 2021 cannot be enforced. However, we make it clear that the issue whether CERA audit can be conducted against a private entity as contended by the appellants is not gone into as this Court is of the view that it is too premature for the Court to give a ruling on the said issue. This is more so because the authorities have not taken forward the proceedings, which they have initiated earlier from May, 2018.
7. Therefore, it is appropriate for the concerned authority to take the proceedings to the logical end after affording an opportunity of personal hearing to the appellants.
8. From the records placed before us, we find that there is no allegation against the appellants that they have not cooperated with the department in not responding to the summons issued earlier. Conveniently, the communications dated 22 March, 2021 issued by the Superintendent, Range – III, Park Street Division, CGST & CX does not refer to any of the earlier proceedings, which have been initiated against the appellants.”
Further relied upon the judgment of High Court of Jharkhand in Writ Petition No. 4491 of 2023 (Vivek Narsaria Vs. State of Jharkhand & Ors. dated 15th January, 2024), which thus read as follows:
“14. Having heard the arguments advanced by respective parties and having perused the documents brought on record and the statements & averments made in the respective Counter Affidavits and materials available on record, we find that bare perusal of section 6 of the Act, especially Section 6(2)(b), when read with the Clarification dated 05.10.2018, further read with Clarification dated 22.06.2020, when read together, it clearly denotes and implies that it is a chain of a particular event happening under the Act and every & any enquiry/investigation carried out at the behest of any of the Department are interrelated. Even if, we accept the submission of the Respondent No. 5 that the proceedings initiated by the Respondent No. 5 is on the basis of an information received from Noida; in that event also, we are at loss to say that the DGGI is raising a question about credibility and competence of the State GST Authorities, in carrying out the investigation concerning wrong/inadmissible availment of Input Tax Credit, inasmuch as, the officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities.
15. We are little hesitant to accept such argument, inasmuch as, the State Authorities has also initiated the same very proceeding for wrong/illegal availment of Input Tax Credit. Undeniably, the proceedings at the instance of State Authorities or the Preventive Wing or the DGGI is at initial stage and the proceedings on the basis of ‘Search & Seizure’ by the State Authorities, is prior in point of time. Hence, Section 6(2)(b) read with clarification dated 05.10.2018, adds to the issues raised by the petitioner herein and manifestly crystalizes that since all the proceedings are interrelated, the State Authorities should continue with the proceedings.
The issue since has also been raised with attachment of bank account, which we failed to understand as to what had become so emergent that prior to any determination or finding of any irregular/inadmissible/wrong availment of Input Tax Credit, the bank account had to be attached, which appears to be an ‘arm twisting method’ to make the petitioner succumb to the particular authority, which cannot be the dictum of the Act and we deprecate the same.
16. We are therefore of the opinion that the Preventive Wing of the CGST and DGGI Wing of the CGST, shall forward all their investigation carried out as against the petitioner and inter-related transaction to the State Authorities, who shall continue with the proceedings from the same stage.
17. Consequently, we therefore direct the Respondent No. 4 & 5 to make over the entire investigations carried till date to Respondent No. 3, who shall carry out further proceedings as against the petitioner in accordance with law.
A divergent view was taken by the Delhi High Court in the case of Indo International Tobacco Ltd. v. Vivek Prasad, Additional Director General, DGGI, 2022 (67) G.S.T.L. 403 (Del.).The Petitioners therein contended that the issuance of such multiple proceedings by multiple agencies was violative of the mandate of Section 6(2)(b) of the CGST Act, as also the Circular dated 05.10.2018 issued by the CBEC. The Delhi High Court finally observed as –
“SUMMARY OF FINDINGS:
76. In the facts of the present case, we find that the investigations were initiated by various jurisdictional authorities against different entities. As contended by the respondents, as common thread were allegedly found in these investigations, the same have been transferred to DGGI, AZU to be brought under one umbrella. We also find that in the CGST Act there is no prohibition to such transfer. Section 6(2)(b) of the CGST Act has limited application and therefore, is not applicable to the facts of the present petitions. Similarly, the Circular dated 05.10.2018 also has no application to the facts of the present petitions.”
The Court Finds that
“59. Section 6 of the CGST Act is clearly guided by the object of providing a common national market of goods and services and to eliminate the subjection of the taxpayers to multiple jurisdictions. It aims to provide protection to the taxpayers against being subjected to multiple agencies for the same set of transactions, at the same time empowering the Officers under the CGST Act or the SGST Act or the UTGST Act to pass a comprehensive order and take action, keeping in view and extending to the other Acts. There should, therefore, be only one order insofar as the tax entity is concerned.
60. To give effect to the above intent, Section 6(2)(b) of the CGST Act states that where the proper officer under the SGST Act or the UTGST Act has initiated any proceedings on a subject matter, the Central Tax Officer shall not initiate proceedings on the same subject matter. Clearly the intent being that as the State Tax Officer is empowered to pass an order even under the CGST Act, there is no occasion for the Central Tax Officer to initiate parallel proceedings on the same subject matter.
61. As stated hereinabove, Section 6 of the CGST Act is intended to give the effect of harmonious convergence of the States and the Union for the same event for taxation.
62. The above intent is further sought to be effectuated by the Circular dated 05.10.2018 issued by the CBEC. The same reads as under:
..XXX..
63. The above Circular is intended to give effect to the mandate of Section 6 of the CGST Act and the pari materia provisions in the State Act(s). It states that the mandate of Section 6 shall apply even to the “intelligence based enforcement action”. It clarifies that the Central Tax Officers as also the State Tax Officers are authorized to initiate intelligence based enforcement action on the entire taxpayers base “irrespective of the administrative assignment of the taxpayer to any authority” and that the authority which initiates such action is empowered to complete the entire process of investigation, issuance of Show Cause Notice, adjudication, recover, etcetera. It further clarifies that even though the taxpayer may be administratively assigned to the other authority- State or Centre as the case maybe, the officer initiating „intelligence based enforcement action need not transfer the said case to the authority otherwise having administrative assignment over the taxpayer.
64. The above Circular is one example where Section 6 shall have its full play. In terms of Section 6(1), the State or the Central Tax Officer as the case maybe, is also authorised to act as the proper officer for the purposes of the other Act- CGST or the SGST Act as the case maybe. Therefore, when such officer initiates „intelligence based enforcement action, he acts and is empowered to so act not only under the CGST Act but also under the SGST or the UGST Act. In terms of Section 6(2)(a), he has to pass a comprehensive order, both under the CGST and the SGST/UGST Act. In terms of Section 6(2)(b), as he has initiated, intelligence based enforcement action, the other jurisdiction officer must hold his hands and the officer initiating such „intelligence based enforcement action need not transfer the case to the jurisdiction officer to whom otherwise the taxpayer is administratively assigned.
65. As noted hereinabove, it is on the basis of the above Circular that the learned senior counsel for the petitioner has vehemently submitted that as the, intelligence-based enforcement action has been initiated by the Officer of the State Tax Authorities, they are to complete the entire process of investigation and take it to its logical conclusion without transferring the same to the Central Tax Officer.
66. A bare reading of Section 6 of the CGST and the abovementioned Circular, on first blush, supports the interpretation put forth by the learned senior counsel for the petitioners. However, in our opinion, neither Section 6 of the CGST Act nor the Circular dated 05.10.2018 is intended to nor can be given an overarching effect to cover all the situations that may arise in the implementation of the CGST and the SGST Acts. The Circular cannot be extended to cover all and myriad situations that may arise in the administration and the functioning of the GST structure, now being governed by the CGST Act; the SGST Act; the UTGST Act; and the IGST Act. Section 6 of the CGST Act and the above said Circular clearly has a limited application, which is of ensuring that there is no overlapping exercise of jurisdiction by the Central and the State Tax Officers. It is to bring harmony between the Centre and the State in the implementation of the GST regime, with the two not jostling for jurisdiction over a taxpayer. It is, however, not intended to answer a situation where due to complexity or vastness of the inquiry or proceedings or involvement of number of taxpayers or otherwise, one authority willingly cedes jurisdiction to the other which also has jurisdiction over such inquiry/proceedings/taxpayers.
67. Neither Section 6 of the CGST Act nor the SGST Act nor the Circular dated 05.10.2018, therefore, apply to the fact situation presented by the two petitions before us as they do not operate and are not intended to operate in a situation where the intelligence based enforcement action has repercussion or involvement of taxpayers beyond the territorial jurisdictional limit of the officer initiating such an action. It also does not address a situating where two or more Officers, may be Central or State or only Central or State, initiate separate „intelligence based enforcement action but having a common thread or involvement of multiple taxpayers, like a case of conspiracy. In the first case, the officer initiating the intelligence based enforcement action cannot travel beyond his territorial jurisdiction. To strictly enforce Section 6 and the abovementioned Circular would therefore, lead to compelling such officer to restrict his investigation and findings and resultant action only to the taxpayer within his territorial jurisdiction, thereby leading to an incomplete and inconclusive investigation/action. In the abovementioned second scenario, as all officers who have initiated intelligence based enforcement action are otherwise having jurisdiction over the taxpayer, strictly enforcing the mandate of Section 6 and the abovementioned Circular, will on the one hand subject the taxpayer to multiple action(s) (which is completely contrary to the intent of the Act as noted hereinabove), while on the other hand lead to multiple authorities expending their time, energy and resources investigating the same intelligence input, maybe even reaching to conflicting findings. It is settled principle of interpretation of statute that the court must adopt construction which will ensure smooth and harmonious working of the statute and eschew the other which will lead to absurdity or give rise to practical inconvenience or friction or confusion in the working of the system. {Refer: State of Punjab v. Ajaib Singh & Anr., AI 1953 SC 10; Collector of Customs, Baroda v. Digvijaysinhji Spinning & Weaving Mills Ltd., AIR 1961 SC 1549}
68. As is evident from the narration given in the additional-affidavit and the counter-affidavit in the two writ petitions, various jurisdictional tax Authorities have conducted an intelligence-based investigation into the entities within their respective territorial jurisdiction. The petitioners, however, during the course of such investigation, appeared as a common link. If the strict interpretation as contended by the learned senior counsel for the petitioners is to be accepted, each of these different jurisdictional State or Central Authorities would carry out their independent investigation to their logical conclusion. This may not only make a taxpayer liable to face multiple investigations and proceedings, which is, in fact, the complaint with which the petitioners first approached this Court, but may also lead to such jurisdictional authorities reaching a contradictory conclusion on their respective investigations. It would defeat the very object of Section 6 and the harmonious structure that the GST regime seeks to bring about.
69. In the present set of writ petitions, the respondents have explained that to bring investigation under one umbrella, the DGGI AZU sought transfer of investigations being carried out by different Commissionerate(s) to itself. This was acceded to by each Commissionerate in both the writ petitions. We have not been shown any prohibition in the CGST Act or the SGST Act to such transfer of investigation. Neither it has been contended that the DGGI, AZU, would otherwise lack jurisdiction to carry out an investigation against the petitioners. It is not denied by the petitioners that the DGGI, AZU has a pan-India jurisdiction. DGGI, AZU would, as Central Tax Officer and in compliance with the mandate of Section 6 of the CGST Act and the SGST Act, have to pass comprehensive order, both under the CGST Act as also the SGST Act.
70. We, therefore, find that the Circular dated 05.10.2018 has no application to the peculiar facts in the present set of writ petitions.”
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