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of <h1>Writ allowed: Central Proper Officer lacked jurisdiction under s.74 after State's prior intelligence-based action; s.6(2) applied</h1> HC allowed the writ, holding the Central Proper Officer lacked jurisdiction to initiate proceedings under s.74 after the State Proper Officer had already ... Parallel proceedings or not - Jurisdiction of Central Proper Officer to initiate proceedings on the same subject matter when State Proper Officer already initiated the “proceeding” u/s 74 of CGST Act - input tax credit being wrongfully availed and utilised by the petitioner - HELD THAT:- By virtue of cross-empowerment under Section 6(1) of the GST Act the State Proper Officer and the Central Proper Officer are appointed for all the purpose of the CGST Act and the OGST Act. Taking into consideration the events enumerated above, it is apparent that the exercise of power under Section 74 by the State Proper Officer based on the intelligence received is before the initiation of proceeding by the Central Proper Officer under said provisions on the very same subject-matter. Letter bearing D.O.F. No. CBEC/20/43/01/2017-GST(Pt.), dated 05.10.2018, referred to supra, clarifying the position as to the purport of Section 6(2) of the GST Act, unequivocally indicates that if an Officer of the State Tax Authority initiates intelligence based enforcement action against a taxpayer administratively assigned to Central Tax Authority, the Officers of State Tax Authority would not transfer the said case to its Central Tax counterpart and would themselves take the case to its logical conclusions. The Central Proper Officer made ineffective and inchoate approach by concluding the proceeding at latter point of time which is hit by provisions of Section 6(2). Even though the reply of the petitioner to the Show Cause Notice dated 13.08.2021 contained such objection, the learned Junior Standing Counsel could not throw light with respect to such aspect being considered by the Central Proper Officer in the Order-in-Original dated 30.01.2025. Hence, the Order dated 30.01.2025 passed by the Assistant Commissioner, Rourkela-I Division having jurisdiction over Rourkela-II Circle, Sundargarh is vitiated and treated as non-est in the eye of law. In the instant case, the petitioner flagged issue whether summons issued vide F. No. 10/DGGI/RRU/INV/Gr-A/GST/2018/859, dated 24.05.2019, as found mentioned in the Show Cause Notice dated 13.08.2021, for recording of statement under Section 70 of the CGST Act would suffice to construe that the initiation of proceeding was at earlier point of time by the Central Proper Officer than the Show Cause Notices dated 02.07.2021 and 30.07.2021 issued by the State Proper Officer for the purpose of determination of liability under Section 74 of the said Act, notwithstanding the fact that the Central Proper Officer has issued Show Cause Notice dated 13.08.2021 under Section 74 at a later date. Regard may be had to a decision of the Hon’ble Supreme Court of India rendered in the case of Armour Security (India) Ltd. Vrs. Commissioner, CGST, Delhi East Commissionerate and Another, [2025 (8) TMI 991 - SUPREME COURT], wherein the purport of use and meaning attached to “proceedings” and “subject-matter” as employed in Section 6 have been discussed and it was held that 'Where the proceedings concern distinct infractions, the same would not constitute a “same subject matter” even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted.' Taking aid of clause (h) of Paragraph 97 of the judgment in Armour Security (India) Ltd. the learned Senior Counsel would submit that this writ petition is liable to be entertained. He, referring to clause (v) of Paragraph 97 of said judgment, urged that all actions undertaken by the Central Officers by issue of summons under Section 70 to gather information cannot be construed to be “proceedings” initiated. Neither the learned Standing Counsel for the CT and GST Organisation nor the learned Junior Standing Counsel (CGST) placed any other material to indicate that prior to issue of Show Cause Notice dated 13.08.2021 by the Central Proper Officer initiating proceeding under Section 74, any other notice contemplating “proceedings” on the same “subject-matter” had been initiated. In view of purport and application of provisions of Section 6(2) of the GST Act as expounded by the Hon’ble Supreme Court of India in the case of Armour Security (India) Ltd, the Deputy Director, DGGI, Rourkela Regional Unit (Annexure-13) purporting to determine the liability of the petitioner under Section 74 lacks jurisdiction to issue the Show Cause Notice dated 13.08.2021 - Since the Show Cause Notice dated 13.08.2021 is held to be not in consonance with the statutory requirement and contrary to what has been explicitly mandated in Section 6 read with interpretation put forth by the Hon’ble Supreme Court of India in Armour Security (India) Ltd., the Order-in-Original dated 30.01.2025 passed as a resultant effect of such Show Cause Notice cannot be countenanced on the principle “Sublato fundamento cedit opus”. This Court entertaining the writ petition questioning the propriety of Central Proper Officer to proceed with the matter under Section 74, this Court is inclined to intervene. Conclusion - As is apparent that the initiation of proceedings on the same subject-matter under Section 74 of the GST Act by the Deputy Director, DGGI, Rourkela Regional Unit (Annexure-13) in pursuance of which the Assistant Commissioner, GST and Central Excise, Rourkela-I Division, Rourkela proceeded to pass Order-in-Original, the initiation of proceeding by the Central Proper Officer cannot be sustained in view of provisions contained in Section 6(2)(b) of the GST Act and is liable to be quashed. Since Show Cause Notice dated 13.08.2021 is quashed, the Order-in-Original dated 30.01.2025 passed by the Assistant Commissioner, GST and Central Excise, Rourkela-I Division (Annexure-1) cannot be protected and the same is also hereby set aside - Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a Proper Officer of Central tax (DGGI/Central Proper Officer) could initiate and conclude adjudicatory proceedings under Section 74 of the GST Act on the same subject-matter after a Proper Officer of State tax had already initiated proceedings under Section 74 in respect of identical allegations. 2. Whether issuance of summons under Section 70 or other investigative steps by one authority constitute 'initiation of proceedings' within the meaning of Section 6(2)(b) so as to bar subsequent initiation of adjudicatory proceedings by the other authority on the same subject-matter. 3. Whether, on the facts, the Show Cause Notice dated 13.08.2021 issued by the Central authority and the consequential Order-in-Original dated 30.01.2025 are sustainable in law given Section 6(2)(b) and the authoritative exposition in Armour Security (India) Ltd. ISSUE-WISE DETAILED ANALYSIS - 1. Competence of Central Proper Officer to initiate proceedings after State Proper Officer has initiated proceedings under Section 74 Legal framework: Section 6(1) and (2) of the GST enactments provide for cross-empowerment of Central and State officers as Proper Officers; Section 6(2)(b) expressly bars initiation of proceedings by one Proper Officer where a Proper Officer under the other Act 'has initiated any proceedings on a subject matter.' Administrative instructions (D.O. dated 05.10.2018 and F. No. CBEC-20/10/07/2019-GST dated 22.06.2020) clarify ambit of cross-empowerment and permit intelligence-based action by either authority but also indicate the authority initiating intelligence action may proceed to logical conclusion. Precedent treatment: The Supreme Court's decision in Armour Security (India) Ltd. is treated as authoritative on interpretation of 'proceedings' and 'subject-matter' under Section 6(2)(b), providing tests and guidelines to avoid duplication and to determine which authority may continue where overlap exists. Interpretation and reasoning: The Court analysed timelines and documents and found that Show Cause Notices under Section 74 were issued by the State Proper Officer (dated 02.07.2021 and 30.07.2021) on the basis of intelligence/alerts communicated to the State authority. The Central authority's Show Cause Notice dated 13.08.2021, though preceded by investigative acts (visits, summons) by Central officers, was issued later than the State SCNs. Under Section 6(2)(b), once adjudicatory proceedings on the same subject-matter are initiated by one Proper Officer, the other cannot initiate proceedings on that same subject-matter. The administrative D.O. (05.10.2018) and CBIC clarification (22.06.2020) support the position that the authority which initiates intelligence-based enforcement can complete it and need not transfer the matter; conversely, the other authority should not commence duplicative proceedings. Ratio vs. Obiter: Ratio - Section 6(2)(b) prohibits initiation of proceedings by the other Proper Officer where proceedings on the same subject matter have already been initiated; once the State Proper Officer had issued SCNs pertaining to the identical fake-invoice allegations, the Central Proper Officer's SCN and consequent adjudication on the same subject-matter were barred. Obiter - administrative clarifications and general policy remarks on coordination and IT integration supplement but do not displace statutory interpretation. Conclusion: The Central Proper Officer lacked jurisdiction to initiate and conclude adjudicatory proceedings under Section 74 after the State Proper Officer had initiated proceedings on the identical subject-matter; the subsequent SCN and Order are invalid and liable to be quashed under Section 6(2)(b). ISSUE-WISE DETAILED ANALYSIS - 2. Whether issuance of summons under Section 70 or investigatory steps constitute 'initiation of proceedings' under Section 6(2)(b) Legal framework: Section 6(2)(b) uses the expression 'has initiated any proceedings on a subject matter'; interpretation requires parsing what constitutes 'initiation' and the scope of 'subject matter.' Precedent treatment: Armour Security (India) Ltd. is decisive, holding that the 'initiation of any proceedings' means formal commencement of adjudicatory proceedings by issuance of a show cause notice and does not encompass issuance of summons, searches, seizures, visits, or other investigatory acts. The decision furnishes a two-fold test to determine 'sameness' of subject-matter (identical liability/contravention and identical demand/relief sought) and guidelines for inter-authority communication and coordination. Interpretation and reasoning: The Court applied Armour Security: investigatory acts such as visits and summons (Section 70 statements) are not by themselves the 'initiation of proceedings' under Section 6(2)(b). However, where a formal SCN/adjudicatory proceeding is issued by one authority prior to the other issuing its SCN on the same facts and liability, the bar under Section 6(2)(b) is attracted. Here, although the Central officers conducted visits and issued a summons in 2019, the State issued formal SCNs under Section 74 in July 2021 and thereby initiated adjudicatory proceedings on the subject-matter; the Central SCN dated 13.08.2021 came later and therefore was barred despite earlier investigatory steps. Ratio vs. Obiter: Ratio - Summons or other fact-gathering measures do not amount to 'initiation of proceedings' under Section 6(2)(b); the decisive act is issuance of a show cause notice or formal adjudicatory initiation. Obiter - guidelines on cooperation and procedure from Armour Security (communication between authorities, which authority continues, forwarding of materials) further inform equitable and administrative practice. Conclusion: Issuance of summons under Section 70 and other investigatory steps do not per se commence proceedings under Section 6(2)(b); but where a rival authority issues a formal SCN earlier on identical liability, a later SCN is barred notwithstanding earlier investigatory steps by the later authority. ISSUE-WISE DETAILED ANALYSIS - 3. Application of legal principles to the present facts and remedial consequence Legal framework: Application of Section 6(2)(b) read with Armour Security (India) Ltd.; ancillary application of administrative D.O.s and CBIC clarifications on cross-empowerment and intelligence-based action. Precedent treatment: Armour Security supplies the controlling interpretative matrix and mandatory guidelines (including the two-fold test and the procedural steps to be followed when overlap occurs). Interpretation and reasoning: Factual matrix established that State SCNs (02.07.2021 and 30.07.2021) related to alleged wrongful availment of input tax credit on the same fake invoices and named suppliers that formed the basis of the Central SCN dated 13.08.2021. The petitioner had explicitly informed the Central authority (by reply in Form DRC-06) that State proceedings were pending on the same allegations. Armour Security requires communication and verification between authorities upon such notice; rather than deferring or coordinating, the Central Proper Officer proceeded to issue a SCN and pass an O-O on 30.01.2025. Given that the State had already formally initiated adjudicatory proceedings on the same subject-matter, Section 6(2)(b)'s bar applied and the later Central SCN and Order are void. Reliance on earlier summons or investigative steps by Central officers does not cure the jurisdictional defect because summons are not initiation of proceedings under Armour Security. Ratio vs. Obiter: Ratio - On these facts the Central SCN and the resultant Order are invalid; the appropriate remedial consequence is quashing of the SCN and setting aside of the Order and demands. Obiter - administrative best practices (inter-authority consultation, transfer of materials, avoidance of duplication) are reiterated but do not change the statutory bar. Conclusion: The Show Cause Notice dated 13.08.2021 is quashed as being barred by Section 6(2)(b); consequentially the Order-in-Original dated 30.01.2025 and the Summary of Orders/Form DRC-07 reflecting demands are set aside. The writ is allowed and no order as to costs was made. CROSS-REFERENCES AND PRACTICAL GUIDANCE (as applied) 1. Where an assessee notifies a subsequently acting authority that the matter is already the subject of proceedings by another authority, the authorities must communicate and verify overlap (see Armour Security guidance reproduced and applied). 2. Investigative actions (visits, summons under Section 70) by themselves do not trigger the statutory bar under Section 6(2)(b); the bar is triggered by formal initiation of adjudicatory proceedings (SCN) and identity/overlap of the tax liability or relief sought. 3. Where a later SCN is quashed for breach of Section 6(2)(b), any consequential adjudicatory order and demands founded on that SCN fall with it (Sublato fundamento cedit opus).
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