The Goods and Service Tax Act (GST) was implemented in India with the vision to broad base taxation, introduce seamless credit and the best practices across the world being adopted. The ruling party has focused on many initiatives among which we have “ease of doing business” and “one nation one tax”. The framers of this comprehensive indirect tax law wished to make it as simple as possible and to have clear bifurcation of powers between the Centre and the State to allow co-operative federalism to work. Accordingly, GST was introduced in the nature of dual tax wherein both the Union i.e., Centre as well as the State can levy and collect tax. Along with the power to levy and collect tax, the Centre and the State officers were also given the Power to initiate and conduct verification/investigation proceedings against the defaulting taxpayers. The entire tax base was bifurcated between the Centre and the State department, and the taxpayers were allocated with their jurisdiction offices, which could be either of the two departments.
Though the taxpayers are bifurcated clearly, there are instances of parallel proceedings being initiated by the different departments and the ultimately the courts are left to decide the jurisdiction and validity of such proceedings. This short article aims to throw some light on these issues and the judicial pronouncements in this regard.
Authorities under the Act
In context of the bifurcation of powers between the Centre and the State, it is imperative to first understand as to which authorities are constituted under the GST Act. Section 3 and Section 4 of the GST Act deals with the Officers under the Act and plain reading of Section 3 shows that the Central Government has the power to appoint classes of officers through issuance of Notification. In this regard Notification No. 02/2017-Central Tax dated 19.06.2017 was issued which further provided for the appointment of Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, Commissioner, etc. as the proper officers.
Section 5 of the GST Act provides for powers of officers to discharge functions under this Act. Accordingly, the Ld. Commissioner may delegate his powers to any other officer who is subordinate to him.
Further, Section 6(1) of the GST Act provides for the authorisation of State Tax and Union Territory Tax Officer, & states that the officers appointed under the State Goods and Services Tax Act (hereinafter “SGST”) or the Union Territory Goods and Services Tax Act (hereinafter “UTGST”) to be the proper officers under the CGST Act also.
Hence, the officers of both the State & the Centre who are the de facto framers of this Act made sure to have separate and distinct authorities under the GST Act for both to empower them and keep their importance intact and equal.
Cross Empowerment between the Centre and the State Authorities
In terms of Section 6 (1) ibid. it is implicitly clear that, the State officers are empowered to adjudicate the matters pertaining to Centre & vice-versa. In this regard, it is worth noting that there are no guidelines prescribed under the Act or the Rules in relation to the cross-empowerment of the Central and the State Authorities. However, the Board had issued a letter having D.O.F. No. CBEC/20/43/01/2017-GST (FT.) dated 05.10.2018 with the subject “Clarifications on ambiguity regarding initiation of enforcement action by Central Tax Officers in case of taxpayers assigned to State Tax Authority and vice versa” which clarified that 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.
Further, clarity in relation to the issue of cross-empowerment of officers is also made in another letter issued by the board bearing no. CBEC-20/10/07/2019-GST dated 22.06.2020, where the clouds were cleared from the dilemma that whether a separate notification would be required for the cross empowerment of officers or issuance of any notification would be required, only if any condition has to be imposed and not otherwise?, it was stated that:
“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.”
Thus, even though no separate notifications are issued, the officers are cross empowered to adjudicate the matters. It was similarly held in the matter of RCI Industries and Technologies Ltd. v. Commissioner DGST, Delhi Ors. wherein, the Hon’ble Delhi High Court vide order dated 07.01.2021 observed that “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.”
Hence, in terms of above, it can be said that the law has not put any bar on the initiation of the proceeding by the Central and the State Tax Authorities. However, in terms of sub-section (2) to Section 6 ibid., where a proper officer under the SGST or the UTGST 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.
Can parallel proceedings be conducted by different wings of same department?
Now, since we are clear with cross-empowerment, we shall proceed on examining whether the different wings of the same department can also initiate parallel proceedings against the same defaulting taxpayer for the same subject matter?
Recently, the Hon’ble High Court of Calcutta in the matter of M/s R.P. Buildcon Private Limited & Anr. v. The Superintendent, CGST & CX, Circle-II, Group-10 & Ors. (Judgement delivered in case no. M.A.T. No. 1595/2022 dated 30.09.2022) held that parallel proceedings cannot be initiated/conducted simultaneously by the different wings of the same department for the same period on the same subject matter against the same Assessee.
In the aforementioned case, three wings of the same department were proceeding against the appellants for the very same period for which Audit has been concluded. The first department which had taken action was Audit Commissionerate which had issued notice under Section 65 of the CGST Act, 2017. The Assessee in the said case submitted all the requisite details as called for conducting Audit. In the meantime, the other two wings of the Department i.e., Anti-Evasion wing as well as the Range Office have also proceeded against the Appellants by issuing notices for the very same period for which audit proceedings under Section 65 of the Act has already commenced.
The Hon’ble High Court restrained the Anti Evasion wing and Range office wing of the said Department to proceed against the assessee, observing that audit proceedings under Section 65 by Audit Commissionerate have already commenced for same period.
The Hon’ble Division Bench has held in the clear terms that “it is but appropriate that the proceedings” initiated by Audit Commissionerate “should be taken to the logical end” and the proceedings initiated by Anti Evasion and Range Office for the very same period should not be proceeded with any further.
Therefore, the issue is no more a res-integra that different wings of the same department are restricted to initiate parallel proceedings if one wing of the same department is already proceeding against the same assessee on the same subject matter.
As the saying goes “with great power comes great responsibility”. The Central Tax and State Tax Authorities are vested with the powers to initiate the proceedings against the defaulting taxpayers. The power comes with the cap of responsibility that it has to be exercised in a manner which may not lead the defaulting taxpayer suffer irreparable harm and injury. Also, it is worth noting that though the provisions empower the officers for cross initiation of proceedings on any taxpayer, there is a clear bar on the authorities to initiate a parallel proceeding on the same subject matter.
Therefore, due care is expected by the GST authorities to initiate any proceedings not only on the basis of intelligence received, but also after conducting a proper verification of any parallel proceedings going on against an assessee, and wherever such proceedings are already initiated, the subsequent ones need to be stopped.
Special thanks to CA. Madhukar N. Hiregange sir for his valuable inputs in the article.
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Reviewed by CA. Madhukar N. Hiregange
penned by CA. Bhavesh Mittal & Adv. Alankar Singh Thakur