Taxpayers have been facing parallel and/ or multiple proceedings in case of scrutiny, audit, investigation and other proceedings. The article tries to bring out the legal position as per relevant GST Act and judicial pronouncements.
Taxpayers have been facing parallel and/ or multiple proceedings from CGST Enforcement Department, DGGI and SGST Enforcement Department on same and/ or similar issues when scrutiny and/ or audit is already undergoing and vice versa. This causes great difficulty to the taxpayer as he has to present himself before multiple authorities even when the issues are same/ similar. This happens particularly in cases where Departments claim to have “intelligence” and DGGI, Anti-Evasion or Bureau of Investigation starts intelligence-based enforcement action.
The Government had issued a Circular No. D.O.F. No. CBEC/20/43/01/2017-GST (Pt.) dated 5-10-2018 wherein it has clarified that both the Central and State tax administrations shall have the power to take intelligence-based enforcement action in respect of the entire value chain. It has thus been 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. Thus, 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.
Section 6 of the CGST Act, 2017, which authorises officers and cross-empowers them reads as follows:
“Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances.
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.”
It is clear from section 6(1) of the Act that it contains a non-obstante clause and also empowers officers appointed under the State Goods and Services Tax Act, 2017 to be appointed as proper officers for the purposes of the Act and vice versa, since similar provisions exists in the respective State GST Acts. Clause (a) of sub-section (2) of section 6 of the Act expressly provides that if a proper officer issues an order under the CGST Act, he shall also issue an order under the SGST Act as authorized by the said enactments under intimation of the Jurisdictional Officer. In conformity with the scheme of statutes, officers under any of the said statutes can be authorized as proper officers for the purposes of proceeding under the other GST statutes as well. Section 6(1) of the Act empowers the officers appointed under the SGST Act to act as proper officers for the purposes of the Act. Section 6 of the SGST Act mirrors Section 6 of the CGST Act. Consequently, the officers under the said enactments are also authorized as proper officers under the CGST Act.
In conformity with the scheme of cross empowering officers under the said enactments, clause (a) of Section 6(2) of the CGST Act also empowers a proper officer to issue orders under the SGST Act and the said Act. Similarly, officers under the SGST Act are also empowered to issue orders under the CGST Act. The only condition is that the issuance of such orders is required to be intimated to the Jurisdictional Officer of the central tax or the state tax, as the case may be.
Further, to ensure that there are no multiple proceedings in regard of the central and the state officers being authorized as proper officers, clause (b) of Section 6(2) of the CGST Act provides that where a proper officer under the SGST Act has initiated proceedings on a subject matter, the proper officer under the CGST Act would not initiate proceedings “on the same subject matter”. This provision of CGST is also mirrored by clause (b) of Section 6(2) of the SGST Act as well. Thus, where a proper officer under the CGST Act had initiated proceedings on a subject matter, no proceedings would be initiated by proper officer authorized under the SGST Act on the same subject matter. It is clear that the object of Section 6(2)(b) of the CGST Act is to ensure that cross empowerment of officers of central tax and state tax do not result in the taxpayers being subjected to parallel proceedings. The object of Section 6(2)(b) of the CGST Act is to avoid multiple proceedings by State Tax Officers and Central Tax Officers on the same subject matter and the rule of purposive interpretation requires Section 6(2)(b) of the CGST Act to be read in the light of the aforesaid object.
The Government has issued an Instruction no. 01/2023-24-GST (Inv.) dt. 30th March, 2024 wherein it has clarified that the fact of initiation of inquiry, if any, already on same subject matter with respect to the same taxpayer/ GSTIN by another investigating office or tax administration must be ascertained for purposes of obtaining approval to initiate investigation. The position must be placed before the authority who is to approve initiation of investigation.
Thus, it is clear that even when the officers are cross-empowered to undertake proceedings and issue notices and orders, based on their investigation, no proceedings can be initiated by an officer on the ‘same’ subject matter – Amit Gupta Versus Union of India (2023) 12 Centax 85 (Del.).
In a matter, where based on an audit, the Audit Department of SGST issued a Show Cause Notice on points which the Anti-Evasion Department of CGST had already issued Show Cause Notice, the Hon’ble Court directed the Audit Department of SGST to keep in abeyance all proceedings in respect of the same points and abide by the adjudication order to be passed by the CGST Authority – Mahabir Prasad Kedia v. Assistant Commissioner of State Tax [2024] 159 taxmann.com 752 (Calcutta).
In the matter Subhash Agarwalla Versus State of Assam (2024) 15 Centax 482 (Gau.) it was also held that, as per section 6(2) of the CGST Act, 2017, once a proceeding is initiated under either of the two Acts, another proceeding for the same period under the other Act is not to be initiated.
In the matter Kaysons Infrastructure Private Limited & Anr. Vs CBIC & Ors. (WPA/2846/2023) (Cal. HC Order dt. 08.01.2024), where audit under Central GST issued a Show Cause Notice in parallel proceedings when scrutiny was already going on by State authorities, the Hon’ble Court stayed the audit proceedings as they were parallel in nature and on the same issue.
In the matter when Audit had was conducted and the matter was already settled, the Court directed interim stay of the proceedings by DGGI, till final disposal of the writ petition. – Gopeshwar Iron & Steel Works (P.) Ltd. v. Superintendent, CGST & CX, Range 1 [2023] 153 taxmann.com 589 (Calcutta).
Thus, we see that the Courts have also come to the rescue of the taxpayers and in cases where parallel proceedings have been initiated by the Department, the one which is initiated later needs to be put to rest.
Consolidation of proceedings in one agency
In case scrutiny and/ or audit proceedings are on-going alongwith investigation by another agency, it is possible to consolidate the proceedings into one and let it be completed by one agency. In practical terms, it will certainly avoid parallel proceedings and save the taxpayer from presenting himself before multiple agencies and for the Department too, it will lead to avoidance of duplicate proceedings.
The Government has issued an Instruction no. 01/2023-24-GST (Inv.) dt. 30th March, 2024 wherein it has clarified that there may be a situation where it comes to the Central Commissionerate’s notice that either the DGGI or the State GST department and vice versa are also simultaneously undertaking record-based investigation of the same taxpayer on different subject matters. The (Pr.) Commissioner must engage in dialogue with the other investigating office(s) to consider the feasibility of only one of the offices pursuing all these subject matters with respect to the taxpayer, and the other offices consolidating their material with that office. If this outcome is not feasible, the reasons therefor should be confirmed on file by such (Pr.) Commissioner.
It has been further clarified that there may be a situation where the Jurisdictional officer has initiated an investigation with respect to a GSTIN in its jurisdiction, and the issue is relevant to some or all of that taxpayers’ GSTINs registered (under the same PAN) in multiple jurisdictions. If the matter also falls in the charter of DGGI and is not such that DGGI avoids taking up (as it is more appropriately in the purview of return scrutiny or audit etc), then the (Pr.) Commissioner of the Jurisdiction shall expeditiously make a self-contained reference to its zonal (Pr.) Chief Commissioner who shall request the Pr. DG, DGGI to take up the matter in accordance with DGGI guidelines.
It has been held in the matter of Amit Gupta Versus Union of India (2023) 12 Centax 85 (Del.) that it is possible that the investigations in respect of a subject matter may require to be expanded as the investigation progresses. The investigating agencies are not constrained in any straight jacket formula, which would prevent them from completing their investigation. However, the same does not imply that if the course of investigations commenced separately by two authorities coincide at some stage; the authorities cannot consolidate the same. Thus, in terms of section 6(2)(b) of the Act, where a proper officer has initiated the proceedings in respect of the subject matter, no proceedings in respect of the same subject matter are required to be initiated by a proper officer under the said Act and the SGST Act and vice versa. Confining the proceedings to silos of a subject matter may in certain cases lead to parallel proceedings. Therefore, the device of transferring investigations or proceedings inter se proper officers to ensure that a taxpayer is not subjected to parallel proceedings, in effect, helps to promote the object of section 6(2)(b) of the CGST/SGST/UGST Act.
This issue has also been decided by the Apex Court in the matter of Indo International Tobacco Ltd. v. Vivek Prasad, Addl. Director General (DGGI) and Ors. [2022] 134 taxmann.com 157 wherein it has been held that to strictly enforce Section 6 and the Circular dated 5-10-2018 would lead to compelling an 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. 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 Circular, will on the one hand subject the taxpayer to multiple action(s) (which is completely contrary to the intent of the Act), 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, (1952) 2 SCC 421 : AIR 1953 SC 10; Collector of Customs, Baroda v. Digvijaysinhji Spinning & Weaving Mills Ltd., AIR 1961 SC 1549).”
Thus, the objective of Section 6(2)(b) of CGST Act, 2017 is to ensure that cross empowerment of officers of central tax and state tax do not result in taxpayers being subjected to parallel proceedings. In case the matters are ‘same’ the proceedings can be consolidated and that provisions of the Act allow consolidation of investigation or proceedings in a single authority.
However, in case multiple proceedings are ongoing on different subjects, which are not same, the Department can carry out multiple proceedings and any contention that the provisions of the Act prescribe consolidation of investigation or proceedings in a single authority is not correct.
Thus, on an overall basis, we see that the Departments should certainly avoid parallel proceedings on ‘same’ issue and in such a case, the Agency which has initiated the proceedings first, should be allowed to complete the proceedings and the agency which came in later, much back track. However, in case the issues are not ‘same’ and different, the agencies have the requisite powers to continue their investigations and bring it to a logical conclusion. In these cases too, the Department may ‘consolidate’ the proceedings and see that, if possible, one of the agencies takes over the entire investigation. This will certainly help the Taxpayer as he will not have to present himself before multiple agencies. The Department can also take a holistic view of the matter.
Views expressed are personal.
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