Cross-Empowerment under Section 6 of the CGST Act is Automatic and Intelligence-Based Enforcement is valid regardless of Taxpayer Assignment

The Hon’ble High Court of Jammu and Kashmir and Ladakh in the case of in R.K. Ispat Ltd. through Ram Avtar Aggarwal Silklon Processors Pvt. Ltd. through Vikrant Sharma Chenab Industries Pvt. Ltd. through Kush Aggarwal Jyotsana Industries Pvt. Ltd through Sajan Marriya J&K Textorium Pvt. Ltd. through Rajesh Kumar J&K Synthetic Pvt. Ltd. through Rajesh Kumar M/s Natural Industries through Ram Avtar Aggarwal Toplon Industries Pvt. Ltd. through Kush Aggarwal Orbit Spinning Pvt. Ltd. through Sajan Marriya Green Textorium Pvt. Ltd. through Rajesh Kumar Versus Union of India and others - 2025 (10) TMI 170 - JAMMU AND KASHMIR AND LADAKH HIGH COURT held that cross-empowerment under Section 6 of the CGST Act is automatic and does not require a separate government notification unless conditions are imposed; intelligence-based enforcement actions can be initiated by either Central or State authorities regardless of taxpayer assignment; the Joint Commissioner is competent to issue show cause notices even when amounts involved are below Rs. 1 crore; and bunching of show cause notices across multiple assessment years under Section 74 is not expressly prohibited.

Facts:

R.K. Ispat Ltd. ('the Petitioner') and eleven other firms engaged in manufacturing and trading contested show cause notices issued by the Joint Commissioner, CGST Jammu, based on intelligence inputs accusing them of fraudulent availment of bogus Input Tax Credit through paper transactions without actual supply.

Union of India and others ('the Respondents') issued the notices after search operations under Section 67(2) of the CGST Act substantiated the intelligence inputs, finding irregularities including pseudo transactions and unauthorized manufacturing.

The Petitioner contended that CGST officers had no jurisdiction since they were assigned to State tax authorities, that the Joint Commissioner lacked jurisdiction because the monetary limit was under Rs. 1 crore as per a Central government circular dated February 9, 2018, and that bunching of five years’ assessments in one show cause notice was impermissible under Section 74.

The Respondent contended that Section 6 of the CGST Act enables cross-empowerment of officers between Central and State tax authorities, allowing jurisdiction irrespective of taxpayer allocation, and that the Joint Commissioner, being a higher-ranking officer, can issue notices regardless of monetary limits fixed for administrative convenience.

The Petitioner approached the High Court through writ petitions under Article 226 of the Constitution challenging jurisdiction, competence, and procedural aspects of the show cause notices.

Issues:

• Whether issuance of a specific notification is mandatory for cross-empowerment under Section 6 of the CGST Act?
• Whether bunching of show cause notices for multiple assessment years under Section 74 of the CGST Act is permissible?
• Whether a Joint Commissioner is competent to issue show cause notices where the amount involved is less than Rs. 1 crore?

Held:

The Hon’ble Jammu and Kashmir and Ladakh High Court in R.K. Ispat Ltd. through Ram Avtar Aggarwal Silklon Processors Pvt. Ltd. through Vikrant Sharma Chenab Industries Pvt. Ltd. through Kush Aggarwal Jyotsana Industries Pvt. Ltd through Sajan Marriya J&K Textorium Pvt. Ltd. through Rajesh Kumar J&K Synthetic Pvt. Ltd. through Rajesh Kumar M/s Natural Industries through Ram Avtar Aggarwal Toplon Industries Pvt. Ltd. through Kush Aggarwal Orbit Spinning Pvt. Ltd. through Sajan Marriya Green Textorium Pvt. Ltd. through Rajesh Kumar Versus Union of India and others - 2025 (10) TMI 170 - JAMMU AND KASHMIR AND LADAKH HIGH COURTheld as under:

• Observed that, Section 6 of the CGST Act confers automatic cross-empowerment of officers of Central and State GST authorities without need of any separate notification, except to impose conditions by notification.
• Noted that, the GST Council and Central Government circulars divide taxpayers to avoid dual control but retain concurrent powers for intelligence-based enforcement by both State and Central tax authorities over the entire value chain.
• Noted that, bunching of show cause notices under Section 74 covering multiple financial years is not expressly prohibited and can be challenged during adjudication.
• Held that, a Joint Commissioner, being a senior officer authorized under Section 5(2) of CGST, is competent to issue show cause notices even when the amount involved is below Rs. 1 crore and that monetary limits in administrative circulars are for merely for work allocation and cannot act as a bar on jurisdiction.

Our Comments:

The judgment reiterates the holding in M/s ARMOUR SECURITY (INDIA) LTD. Versus COMMISSIONER, CGST, DELHI EAST COMMISSIONERATE & ANR. - 2025 (8) TMI 991 - Supreme Court, which says that that intelligence-based enforcement actions can be initiated by either Centre or State irrespective of taxpayer allocation, whereas audit/scrutiny actions must follow jurisdictional assignment; . Further the judgment also aligns with recent Kerala High Court in the case of Pinnacle Vehicles And Services Private Limited Versus Joint Commissioner, (Intelligence & Enforcement), Kozhikode, Joint Commissioner, (General), Thiruvananthapuram, Commissioner, Taxes, Thiruvananthapuram, The Secretary, GST Council, New Delhi. - 2025 (1) TMI 838 - KERALA HIGH COURT and Karnataka High Court in the case of SLM Stationery Versus Union Of India, The Goods And Services Tax Council, Joint Commissioner Of Commercial Taxes (Enforcement), Belagavi, Commercial Tax Officer (Enforcement) -2 Vijayapur - 2025 (4) TMI 232 - KARNATAKA HIGH COURT rulings cross-empowerment under Sub-section (1) of Section 6 the CGST Act is inbuilt and does not require a separate notification by the Government of India.. However, the Madras High Court in Tvl. Vardhan Infraastructre, Represented by its Partner, S. Manikandan, Chennai Versus The Special Secretary, The Chairman, Central Board of Indirect Taxes, The Additional Chief Secretary & Commissioner of State Taxes, The Director General of GST Intelligence, South, The Senior Intelligence Officer, The Assistant Commissioner (ST) - 2024 (3) TMI 1216 - MADRAS HIGH COURTheld that for effectuating cross-empowerment, the issuance of a notification by the Government on the recommendations of the GST Council is a sine qua non.

Further the court leaves an open stance on bunching of show cause notices under Section 74, which leaves room for procedural scrutiny at adjudication, showing judicial restraint from premature interference.

Relevant Provisions:

Section 6 of the CGST Act:

'6. Authorisation of officers of State tax or Union territory tax 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.'

Section 74 of the CGST Act:

74. Determination of tax pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any willful- misstatement or suppression of facts.-

“(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.

….”

Circular No. 01/2017 dated September 20, 2017:

i. Of the total number of taxpayers below Rs. 1.5 crore turnover, all administrative control over 90% of the taxpayers shall vest with the State tax administration and 10% with the Central tax administration;

ii. In respect of the total number of taxpayers above Rs. 1.5 crore turnover, all administrative control shall be divided equally in the ratio of 50% each for the Central and the State tax administration;

iii. The division of taxpayers in each State shall be done by computer at the State level based on stratified random sampling and could also take into account the geographical location and type of the taxpayers, as may be mutually agreed;

CBIC Circular No. CBEC-20/10/07/2019-GST dated June 22, 2020:

“3.3 The confusion seems to be arising from the fact that, the said sub-section 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.”

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