Writ allowed: Central Proper Officer lacked jurisdiction under s.74 after State's prior intelligence-based action; s.6(2) applied

HC allowed the writ, holding the Central Proper Officer lacked jurisdiction to initiate proceedings under s.74 after the State Proper Officer had already initiated intelligence-based action. The SC's interpretation of s.6(2) was applied to find that earlier State action barred subsequent Central proceedings; summons under s.70 did not amount to prior "proceedings" by the Central authority. The show-cause notice dated 13.08.2021 and the resulting order dated 30.01.2025 were quashed and set aside. Petition therefore 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).

---