State GST authorities lack jurisdiction to investigate Central GST assigned assessees without Section 6 cross-empowerment notification

Madras HC held that State GST authorities lacked jurisdiction to investigate assessees assigned to Central GST authorities without proper cross-empowerment notification under Section 6 of respective GST Acts. The court found that while GST Council's Circular assigned administrative jurisdiction, no statutory notification was issued for cross-empowerment except for refunds. Consequently, proceedings initiated by State authorities against Central-assigned assessees were quashed as without jurisdiction. However, the court directed appropriate Central/State authorities to initiate fresh proceedings against respective assigned assessees within limitation period, excluding time during pendency of writ petitions.

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Issues Involved:
1. Jurisdiction of Central and State Tax Authorities under respective GST Acts.
2. Validity of cross-empowerment without proper notification under Section 6 of respective GST Acts.
3. Legality of proceedings initiated by Central Authorities against assessees assigned to State Authorities and vice versa.

Detailed Analysis:

1. Jurisdiction of Central and State Tax Authorities under respective GST Acts:

The primary issue in these writ petitions is whether the petitioners, assigned to either the Central Tax Authorities or the State Tax Authorities under the CGST Act, 2017 and/or the TNGST Act, 2017, can be subjected to investigation and further proceedings by the counterparts under the respective GST Enactments. The petitioners challenged the proceedings initiated by the Central Authorities on the grounds of lack of jurisdiction, asserting that they were assigned to the State Authorities for administrative purposes.

2. Validity of Cross-Empowerment Without Proper Notification Under Section 6 of Respective GST Acts:

The petitioners argued that in the absence of a proper notification under Section 6 of the respective GST Enactments for cross-empowerment, the impugned proceedings by the respective counterparts were without jurisdiction. Section 6 of the CGST Act, 2017, and the TNGST Act, 2017, allow for cross-empowerment of officers from Central and State Tax Authorities, subject to conditions specified by the government on the recommendations of the GST Council. However, no notifications have been issued for cross-empowerment except for the purpose of refunds.

3. Legality of Proceedings Initiated by Central Authorities Against Assessees Assigned to State Authorities and Vice Versa:

The judgment highlighted that the GST Council had decided on a division of taxpayers between Central and State Tax Authorities to ensure a single interface, as reflected in Circular No.01/2017-GST (Council) dated 20.09.2017. The circular allocated 90% of taxpayers with turnover below Rs. 1.5 crores to State Authorities and the remaining 10% to Central Authorities, while taxpayers with turnover above Rs. 1.5 crores were divided equally.

The court noted that the returns filed by assessees under the respective GST Enactments are the same and are to be filed on a common portal. The returns capture all details under the respective GST Enactments applicable to an assessee, and the payment of tax under the CGST Act, 2017, and TNGST Act, 2017, is at the same rate.

The court emphasized that the powers of assessment are vested with the proper officers to whom the assessees have been assigned. Therefore, in the absence of a notification for cross-empowerment under Section 6 of the respective GST Enactments, the actions taken by the respondents (Central or State Authorities) against the petitioners assigned to the other authority are without jurisdiction.

Conclusion:

The court concluded that the proceedings initiated by the respondents against the petitioners by authorities other than those to whom they have been assigned are without jurisdiction and warrant interference. The court quashed the impugned proceedings and directed the respective authorities (Central or State) to whom the petitioners have been assigned to initiate appropriate proceedings afresh against them in accordance with the provisions of the respective GST Enactments and Rules. The time between the initiation of the impugned proceedings and the pendency of the writ petitions is to be excluded for the purpose of computation of limitation.

The writ petitions were disposed of with the above observations, and no costs were awarded. Consequently, connected miscellaneous petitions were closed.

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