Multiplicity of Proceedings Under GST - When Two Authorities Cannot Pursue the Same Dispute PART I - From Cross-Empowerment to the Problem of Parallel Proceedings

One Taxpayer, Two Authorities - Where the Problem Begins

GST is administered by both the Centre and the States. This dual structure is necessary because GST itself is based on shared legislative and administrative powers. At the same time, it creates an unusual practical problem. A taxpayer may be assigned to the State GST authorities, but Central GST officers or the DGGI may receive separate intelligence concerning the same taxpayer. One authority may issue a summons, another may conduct a search, and a third may ultimately result in a show cause notice.

The mere involvement of two authorities does not make their actions illegal. Different authorities may possess different information and may even be examining different violations committed during the same tax period. The real problem arises when their actions overlap to such an extent that the taxpayer is effectively required to answer the same tax dispute before two authorities.

This is the problem commonly described as multiplicity or parallel proceedings. The law has to maintain a careful balance. It must allow genuine investigation of tax evasion, but it must also protect the taxpayer against repeated inquiries and duplicate adjudication of the same liability. Section 6 of the CGST Act, 2017 provides the statutory foundation for maintaining this balance.

Cross-Empowerment Comes With a Statutory Restriction

Section 6(1) recognises cross-empowerment. Broadly stated, officers appointed under the State GST Act or the Union Territory GST Act may, subject to the prescribed conditions, act as proper officers under the CGST Act. Corresponding provisions exist in the State GST laws. Thus, the GST framework does not create completely watertight compartments between Central and State officers.

But the power given by Section 6(1) is immediately accompanied by an important safeguard. Section 6(2)(b) provides:

"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."

The basic idea is easy to understand. Cross-empowerment permits more than one authority to possess power; it does not mean that two authorities should adjudicate the same dispute.Section 6(2)(b) therefore protects the taxpayer without taking away legitimate enforcement powers. The real difficulty has never been the language of the prohibition. It has been deciding what amounts to "proceedings" and what constitutes the "same subject matter".

When Does an Inquiry Become a Proceeding?

A GST dispute rarely begins with a show cause notice. Information may first emerge from return scrutiny, audit, inspection, search or intelligence. The officer may issue a summons under Section 70 to call for books, invoices or statements. Only after examining the material may the Department decide whether a tax demand is required.

This distinction is important. A summons normally seeks information; it does not itself tell the taxpayer that a particular amount of tax is finally proposed to be demanded on a particular legal ground. An investigation may even end without any demand. It would therefore be difficult to say that the first authority issuing a summons automatically acquires exclusive jurisdiction over every issue that may subsequently arise concerning that taxpayer.

The position changes when a show cause notice is issued. The notice identifies the allegations, the alleged violation and the proposed demand. In simple terms, investigation searches for the case; the show cause notice tells the taxpayer what the case is; adjudication decides the case. This distinction, which had divided the High Courts for several years, has now received authoritative recognition from the Supreme Court in M/s ARMOUR SECURITY (INDIA) LTD. Versus COMMISSIONER, CGST, DELHI EAST COMMISSIONERATE & ANR. - 2025 (8) TMI 991 - Supreme Court.

Same Taxpayer or Same Year Does Not Mean the Same Subject Matter

The second important expression in Section 6(2)(b) is "same subject matter". This expression cannot mean merely the same taxpayer. A taxpayer may commit several independent violations, and different proceedings concerning those violations can legitimately coexist.

Even the same tax period is not decisive. Suppose a State officer issues a notice for FY 2025-26 alleging wrongful ITC on invoices issued by non-existent suppliers. A Central officer may separately discover suppression of taxable outward supplies during the same year. The taxpayer and financial year are identical, but the alleged violations and tax liabilities are different. Section 6(2)(b) cannot automatically prohibit the second proceeding.

The reverse situation is equally important. Suppose the first notice proposes recovery of Rs. 50 lakh of ITC relating to certain fictitious suppliers, and a second authority seeks recovery of Rs. 30 lakh arising from the very same transactions. The second authority cannot escape the statutory restriction merely because its figure is different. The real enquiry is therefore whether both authorities are pursuing the same or overlapping liability arising from substantially the same facts and alleged contravention.

A Summons Is Not Yet a Proceeding - The First Judicial Approach

Before the Supreme Court settled the controversy, a line of High Court decisions drew a clear distinction between an inquiry or investigation and a formal proceeding for purposes of Section 6(2)(b). According to this approach, a summons issued under Section 70 is primarily a tool for collecting evidence. It may require a person to appear, give a statement, or produce documents, but it does not necessarily mean that the Department has already formed a definite case regarding tax liability. Therefore, merely because one GST authority has started an inquiry does not automatically prevent another competent authority from making its own inquiry, particularly where the exact subject matter has not yet crystallised.

The Allahabad High Court adopted this approach in M/s G.K. Trading Company Versus Union of India And 4 Others - 2021 (1) TMI 130 - ALLAHABAD HIGH COURT. The taxpayer contended that action by the Central GST authorities could not continue because the State GST authorities had already initiated action. The High Court examined Sections 6(2)(b) and 70 together and explained that the two provisions operate at different stages. Section 70 empowers the proper officer to summon a person during an inquiry to give evidence or produce documents, whereas the "proceedings" contemplated by Section 6(2)(b) are proceedings concerning the same cause of action and the same dispute, which may ultimately involve assessment, audit, demand, recovery, penalty, or similar adjudicatory action. The Court therefore held that an inquiry under Section 70 cannot simply be conflated with proceedings contemplated under Section 6(2)(b).

The Madras High Court considered a similar question in Kuppan Gounder P.G. Natarajan Versus Directorate General of GST Intelligence, New Delhi - 2021 (8) TMI 136 - MADRAS HIGH COURT. In that case, the State authorities had already noticed discrepancies while scrutinising the taxpayer's returns, and those proceedings were pending. Meanwhile, the Central authorities had issued summons under Section 70 and were continuing an investigation. The taxpayer argued that once the State authorities had acted, the Central summons should be quashed under Section 6(2)(b). The High Court did not accept this broad proposition. It noted that the State action related to discrepancies noticed on scrutiny of returns, whereas the Central summons formed part of an investigation in which documents and evidence were being sought. The Court emphasised that the authorities should not be unnecessarily restrained at such an early stage, particularly when the investigation had not yet resulted in a definite adjudicatory demand.

The matter thereafter reached the Division Bench in Kuppan Gounder P.G. Natarajan, Managing Director, M/s. KPN Travels India Ltd., Versus Directorate General of GST Intelligence, New Delhi - 2021 (9) TMI 713 - MADRAS HIGH COURT . The taxpayer again argued that search and seizure had already been undertaken by the State authorities and, therefore, DGGI could not separately issue summons under Section 70. The Division Bench rejected the challenge and maintained the distinction between an "inquiry" under Section 70 and the "proceedings" referred to in Section 6(2)(b). It therefore declined to quash the summons.

These decisions were based on an important practical consideration. If every summons were treated as initiating proceedings, the first authority issuing a summons could effectively block another authority from investigating even a different violation subsequently discovered against the same taxpayer. For example, a State authority examining a mismatch in returns could unintentionally prevent DGGI from investigating separate intelligence regarding fake invoices merely because both matters concerned the same taxpayer or tax period. Section 6(2)(b), enacted to prevent duplicate proceedings, could then become an unintended barrier to legitimate investigation.

The principle emerging from this first judicial approach was therefore comparatively simple: an inquiry seeks to discover whether there is a case; an adjudicatory proceeding seeks to determine the case already identified. The mere issuance of a summons under Section 70 does not, by itself, establish that proceedings on the "same subject matter" have already been initiated. This distinction later became one of the important foundations of the Supreme Court's reasoning in Armour Security.

Repeated Investigation of the Same Dispute - The Taxpayer-Protective Approach

A different line of High Court decisions looked at the controversy from the taxpayer's point of view. Their concern was that an excessively narrow meaning of the word "proceedings" could create its own hardship. If every summons, search or investigation were treated as something entirely separate from a formal proceeding, different GST authorities could repeatedly examine the same transactions while each maintained that no adjudicatory proceeding had yet begun. The taxpayer could then be required to produce the same documents, explain the same transactions and respond to similar allegations before several authorities.

The Orissa High Court addressed such an overlap in Anurag Suri Versus The Director General of Goods and Services Tax Intelligence and others - 2021 (4) TMI 73 - ORISSA HIGH COURT. The Central GST authorities had already searched the taxpayer's premises, seized documents, and issued summons. The taxpayer participated in that investigation. Thereafter, the State GST authority issued a show cause notice alleging non-payment or short-payment of tax, erroneous refund, or wrongful availment or utilisation of ITC, and subsequently proceeded further. An important feature was that the Central inquiry covered the period from July 2017 to June 2018, while the State proceeding included March 2018. Thus, there was a clear overlap in the period and the underlying tax controversy. The High Court interfered with the later State action and did not permit substantially overlapping proceedings to continue independently. The factual setting and reasoning of this decision were later specifically noticed by the Supreme Court in Armour Security Case.

A similar concern arose before the Calcutta High Court in M/s. R.P. Buildcon Private Limited & Anr. Versus The Superintendent, CGST & CX, Circle – II, Group - 10 & ors. - 2022 (10) TMI 501 - CALCUTTA HIGH COURT. In that case, audit proceedings under Section 65 had already been undertaken for FY 2017-18, 2018-19 and 2019-20. While that exercise was in progress, the Anti-Evasion Wing and the Range Office of the same Department initiated separate action concerning the very same financial years. The taxpayer contended that once the audit had already commenced, different wings of the Department should not start fresh proceedings for the same period. The High Court accepted this concern and held that the audit proceedings should be taken to their logical conclusion. It restrained the Anti-Evasion and Range formations from proceeding further for those financial years. Importantly, the Court treated the audit under Section 65 as falling within the expression "proceedings" for this purpose.

The controversy became still more striking in Vivek Narsaria Versus The State of Jharkhand, The Commissioner of State Taxes, Joint Commissioner of State Taxes, Ranchi, The Principal Commissioner, Central Goods & Service Tax and Central Excise, The Senior Intelligence Officer, Directorate General of GST Intelligence, Jamshedpur - 2024 (1) TMI 809 - JHARKHAND HIGH COURT . The State GST Intelligence Bureau had first inspected the taxpayer's business premises on 16.03.2023 and called for books of account. Thereafter, the Central Preventive Wing issued a notice alleging wrongful ITC on purchases from non-existent entities. While both authorities were examining the matter, DGGI conducted another search, seized documents and issued several summons. The taxpayer ultimately complained that he was receiving summons from three different GST formations in relation to interconnected allegations of fraudulent ITC.

The Jharkhand High Court took the view that such overlapping action could not be allowed to continue independently. It emphasised that DGGI does not enjoy a superior statutory status merely because it is a specialised intelligence wing of the Central Government. Since the State authorities had initiated the exercise earlier, the Court directed the Central Preventive Wing and DGGI to hand over the material collected during their investigation to the State authorities, which were to continue the matter. The subsequent contempt proceedings also record that the Central formations were specifically required to transfer their investigation records to the Joint Commissioner of State Taxes.

These decisions highlight a key practical issue. While a taxpayer may be legally obliged to cooperate with an investigation, it does not justify multiple authorities repeatedly requesting the same records, examining the same transactions, or pursuing similar allegations without proper coordination. Cross-empowerment was designed to enhance GST administration, not to lead to overlapping investigations on the same taxpayer and dispute.

At the same time, this taxpayer-protective line of decisions must now be read in the light of the later ruling in Armour Security. The Supreme Court has clarified that a summons, search or seizure does not, merely by itself, amount to initiation of "proceedings" under Section 6(2)(b). Therefore, the broader reasoning in decisions such as Vivek Narsaria cannot now be understood to mean that the authority which conducts the first inspection or issues the first summons automatically excludes every other authority. Their continuing importance lies in a narrower but valuable principle: even where more than one authority possesses investigative power, repeated examination of substantially the same matter should be avoided through communication, sharing of evidence and coordinated action.

Fresh Intelligence Can Be Shared - It Need Not Start Another Proceeding

An important practical approach emerged from the Himachal Pradesh High Court in M/s Kundlas Loh Udyog Versus State of H.P. & Anr. - 2024 (9) TMI 1236 - HIMACHAL PRADESH HIGH COURT. The case dealt with a situation frequently encountered under GST: one tax authority had already started examining the taxpayer's transactions, but another authority subsequently obtained information suggesting fraudulent availment of ITC. The question was whether such fresh information necessarily justified a separate proceeding by the second authority or whether it could simply be passed on to the authority already dealing with the matter.

The taxpayer was engaged in the manufacture and distribution of iron and steel. The State Tax authorities had already issued summons and sought details relating to purchases and suppliers. Thereafter, the Central authority also issued summons and examined the availment of ITC in relation to certain suppliers. It further blocked the taxpayer's credit ledger on the allegation of fraudulent availment of ITC. The taxpayer challenged the Central action on the ground that the State authorities had already initiated proceedings concerning the same subject matter and, therefore, a parallel exercise by the Central authority was barred by Section 6(2)(b).

The High Court examined the scheme of Section 6 in some detail. It explained that the GST law gives Central and State officers cross-empowered jurisdiction, but this power is accompanied by an important restriction. Once one competent authority has initiated proceedings on a particular subject matter, the other should not initiate another proceeding on the same subject matter. According to the Court, the very purpose of Section 6(2)(b) is to ensure that cross-empowerment does not result in the taxpayer facing parallel proceedings before Central and State authorities.

The Court then dealt with an important argument from the Revenue. What happens if the Central authority has obtained additional information showing that fraudulent ITC may have been availed or passed on? Would preventing the Central authority from starting another proceeding mean that such valuable intelligence must simply be ignored? The High Court answered this difficulty in a practical manner. It held that fresh information available with the second authority could always be communicated to the authority which was already conducting the investigation, inquiry or proceeding. In other words, the evidence could be shared without creating another proceeding around the same evidence.

The Court also made an important distinction. If the Central authority discovered that another firm, not already covered by the existing proceeding, had fraudulently availed ITC, there was nothing to prevent independent action against that firm. Section 6(2)(b) does not stop genuine enforcement against a different taxpayer or a different subject matter. What it seeks to prevent is the repetition of proceedings on the same subject matter merely because another authority has obtained additional information.

On the facts before it, the High Court concluded that the State authority had already initiated proceedings on the relevant subject matter. It therefore quashed the subsequent summons issued by the Central authority as well as the blocking of the credit ledger. The decision thus went beyond merely identifying the problem of multiplicity; it suggested a workable administrative solution.

The principle emerging from Kundlas Loh Udyog can therefore be stated very simply: fresh intelligence does not always require a fresh proceeding. Information may be gathered by one authority and used by another authority already dealing with the dispute. This approach protects both interests. The Revenue does not lose valuable evidence, while the taxpayer is saved from having to answer substantially the same controversy before different authorities.

This principle later assumed greater importance in Armour Security. Although the Supreme Court subsequently clarified that summons or investigation by itself does not necessarily amount to initiation of "proceedings" under Section 6(2)(b), it also emphasised communication and coordination between the concerned authorities where their actions appear to overlap. Thus, the broader practical message of Kundlas Loh Udyog continues to remain relevant: share the intelligence where necessary, but avoid multiplying the proceedings.

Part I - Concluding Thoughts

The judicial conflict before Armour Security therefore arose from two legitimate concerns. One was that Section 6(2)(b) should not stop genuine investigation merely because another authority had earlier issued summons. The other was that cross-empowerment should not expose the taxpayer to repeated governmental action concerning substantially the same dispute.

The real questions gradually became clearer. When does investigation become a proceeding? How should the "same subject matter" be identified? Does the first authority always get priority? Can two investigations continue together? And what happens when the second authority possesses valuable additional evidence?

These questions finally reached the Supreme Court in M/s ARMOUR SECURITY (INDIA) LTD. Versus COMMISSIONER, CGST, DELHI EAST COMMISSIONERATE & ANR. - 2025 (8) TMI 991 - Supreme Court. Part II of this Article examines how the Supreme Court brought the competing judicial approaches together and laid down a practical framework for the future.

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