TaxTMI 
TaxTMI 
Who can initiate intelligence based actions for enforcement in GST - State or Central officers for taxpayers assigned to Centre or State? There is now clarity on the same.
GST Council in its 9th meeting held on 16.01.2017 had 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'
Accordingly, CBIC had clarified through member, CBEC vide Letter No. CBEC/20/43/01/2017-GST (PT) dated 05.10.2018 that in view of the fact that both Central and State Tax authorities have been authorized to initiate intelligence based enforcement action on the tax payer, irrespective of administrative assignment of tax payer, it has been clarified that the tax authority which initiates the action is only empowered to complete the investigation process i.e., issuance of SCN, adjudication and recovery etc.
It may be noted that proceedings are generally considered as adjudication proceedings under sections 73, 74 or 74A which are initiated by way of issuance of a show cause notice. As per section 6(2)(b) of CGST Act, 2017, it is stipulated that adjudication proceedings can be initiated by way of issuance of show cause notice. Further, it prohibits separate initiation of proceedings in the same subject matter by proper officer of CGST and SGST. It may therefore, be opined that activities of summons, search or seizure do not require issuance of SCN and may therefore, not be considered as proceedings in M/s ARMOUR SECURITY (INDIA) LTD. Versus COMMISSIONER, CGST, DELHI EAST COMMISSIONERATE & ANR. - 2025 (8) TMI 991 - Supreme Court, the court clarified on proceedings and observed that clause (b) of sub-section (2) of Section 6 of the CGST Act and the equivalent State enactments bars the 'initiation of any proceedings' on the 'same subject matter'. Intelligence based enforcement action can be initiated by any one of the Central or the State Tax administrations despite the taxpayer having been assigned to the other administration. Parallel proceedings should not be initiated by other tax administration when one of the tax administrations has already initiated intelligence-based enforcement action. Further, the expression 'initiation of any proceedings' occurring in section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search or seizure etc. It was held that where a summons or a show cause notice is issued by either the Central or the State Tax Authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response, as the case may be. Mere issuance of a summons does not enable either the issuing authority or the recipient to ascertain that proceedings have been initiated. The taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice. Any show cause notice issued in respect of a liability already covered by an existing show cause notice shall be quashed. Thus, issuances of summons, initiation of searches or seizures are not considered as initiation of proceedings by the proper officer or DGGI investigating officers.
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.