Single GST adjudication allowed when authority acts first, bars parallel proceedings under Section 6(2)(b) CGST Act

HC held that, in light of the SC ruling in Armour Security, once either Central or State GST authority initiates adjudicatory proceedings first, parallel adjudication by the other authority on the same cause of action is barred under Section 6(2)(b) CGST Act. In this case, both Central and State authorities had issued summons and notices. HC directed the assessee to appear before the Central authority, respond to the show cause notice, and comply with State summons, informing State authorities of the Central proceedings. State and Central authorities must coordinate, verify the assessee's claims, and ensure no multiple adjudicatory processes occur on the same subject matter, proceeding thereafter in accordance with law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, in view of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, the issuance of a show cause notice under Section 74 by the Central tax authority, after prior action by the State tax authority on the same subject matter, amounts to impermissible parallel adjudicatory proceedings.

1.2 What directions should be issued to the taxpayer and the Central and State GST authorities to ensure compliance with Section 6(2)(b) of the CGST Act and the principles laid down in the decision of the Supreme Court in Armour Security (India) Ltd. regarding "initiation of proceedings", "same subject matter", and coordination between authorities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Bar on parallel adjudicatory proceedings under Section 6(2)(b) CGST Act where both Central and State authorities act on the same subject matter

Legal framework (as discussed)

2.1 The Court proceeded on the basis of Section 6(2)(b) of the CGST Act, which bars the "initiation of any proceedings" on the "same subject matter" once proceedings have been initiated by either the Central or State tax administration.

2.2 The Court relied on and reproduced in extenso the conclusions and guidelines in paragraphs 96 and 97 of the Supreme Court judgment in Armour Security (India) Ltd., which, inter alia, held that:

(i) "Initiation of any proceedings" in Section 6(2)(b) refers to formal commencement of adjudicatory proceedings by issuance of a show cause notice, and not to summons, search, seizure, or other investigative steps;

(ii) "Subject matter" refers to the tax liability, deficiency or obligation arising from a particular contravention which the Department seeks to assess or recover;

(iii) Parallel adjudicatory proceedings on the same subject matter by the other authority, when one authority has already initiated adjudicatory proceedings, are barred;

(iv) Intelligence-based enforcement action may be initiated by either authority, and legitimate investigation (including summons) can continue until it is ascertained that both authorities are examining the identical liability/contravention or issuing overlapping show cause notices; and

(v) Any show cause notice in respect of a liability already covered by an existing show cause notice must be quashed.

Interpretation and reasoning

2.3 The Court noted the factual matrix that: (a) the State authority had issued multiple summons/notices dated 13.05.2022, 10.01.2023, 14.03.2023 and 16.03.2023, and an intimation in DRC-01A dated 01.04.2024 under Rule 142(1A); and (b) the Central authority had issued a summons/notice dated 09.05.2023 and a show cause notice dated 11.07.2024 under Section 74.

2.4 The core question identified was whether the summons issued by the State authority could be said to "prevail upon" the show cause notice issued by the Central authority so as to render the latter a barred "parallel proceeding" under Section 6(2)(b).

2.5 The Court observed that, in light of Armour Security (India) Ltd., the matter stood substantially covered and no fresh adjudication on the substantive interpretation of Section 6(2)(b) was required. The Supreme Court had already delineated: (i) what constitutes "initiation of proceedings"; (ii) how "same subject matter" is to be tested; and (iii) how potential overlaps and duplication between Central and State authorities are to be handled.

2.6 The Court recorded the stand of the Central and State authorities that they would abide by Section 6(2)(b) and the principles in paragraphs 96 and 97 of Armour Security (India) Ltd., and that they would maintain appropriate coordination to avoid parallel adjudicatory proceedings.

2.7 Having regard to the binding precedent and the authorities' undertaking, the Court considered it unnecessary, in this writ jurisdiction, to determine itself whether the impugned show cause notice was, in fact, a barred parallel proceeding on the same subject matter. Instead, it treated the controversy as one to be resolved administratively between the authorities in accordance with Armour Security (India) Ltd.

Conclusions

2.8 The Court declined to quash the impugned show cause notice or summons at this stage and refrained from pronouncing upon their validity or on whether Section 6(2)(b) was actually attracted in the facts.

2.9 It concluded that the controversy should be resolved by the Central and State authorities themselves, strictly following the legal position and guidelines laid down by the Supreme Court in Armour Security (India) Ltd., including determination of any overlap in "subject matter" and ensuring that the assessee is not subjected to multiple adjudicatory processes on the same subject matter.

2.10 The petitioner was left to raise all contentions under Section 6(2)(b) and Armour Security (India) Ltd. before the adjudicating authority, which would decide in accordance with law.

Issue 2 - Directions to taxpayer and authorities for coordination and conduct of proceedings in light of Armour Security (India) Ltd.

Legal framework (as discussed)

2.11 The Court expressly relied on paragraphs 96 and 97 of Armour Security (India) Ltd., which prescribe:

(i) that an assessee must comply with summons and show cause notices in the first instance;

(ii) that, upon learning of overlapping inquiries, the assessee must inform the second authority;

(iii) that authorities must inter-communicate to verify overlap and either continue distinct inquiries or designate one authority to proceed, sharing material as necessary; and

(iv) that courts may intervene under Article 226 where the guidelines are not followed.

Interpretation and reasoning

2.12 The Court noted that various High Courts had, post-Armour Security (India) Ltd., directed assessees to place their contentions and documents before the competent GST authorities, who were then to decide issues of overlap and bar under Section 6(2)(b) in light of Armour Security (India) Ltd.

2.13 Adopting the same approach, the Court considered that the appropriate course was not to undertake a merits adjudication in writ proceedings, but to channel the controversy into the statutorily competent authorities, with structured obligations of cooperation and coordination imposed on both the assessee and the tax administrations.

2.14 The Court emphasized that:

(i) the petitioner must fully cooperate with both the Central and State authorities by responding to summons and notices, furnishing documents, and raising legal objections, including those based on Section 6(2)(b) and Armour Security (India) Ltd.;

(ii) the State and Central authorities must then communicate with each other to verify the petitioner's claim of overlap in subject matter; and

(iii) the authorities must ensure that no multiple adjudicatory processes on the same subject matter are pursued, and that only the appropriate authority proceeds to adjudication, consistent with Armour Security (India) Ltd.

Conclusions

2.15 The Court disposed of the petition by issuing specific directions:

(a) The petitioner shall appear before the Central authority, file a response to the show cause notice under Section 74, and raise all contentions with supporting documents, in terms of Armour Security (India) Ltd., within the time stipulated.

(b) The petitioner shall comply with summons and intimation in DRC-01A under Rule 142(1A) issued by the State authority, respond to all lawful requisitions, and specifically inform the State authority of the issuance of the Central show cause notice, in terms of paragraph 97(a) & (b) of Armour Security (India) Ltd.

(c) Upon such intimation, the State authority shall communicate with the Central authority to verify the assessee's claim of overlapping inquiries, in terms of paragraph 97(c) of Armour Security (India) Ltd.

(d) The Central and State authorities shall coordinate so that the assessee is not subjected to multiple adjudicatory processes on the same subject matter and shall follow the verdict in Armour Security (India) Ltd. in deciding which authority proceeds with adjudication.

(e) The adjudicating authority, as so determined, shall thereafter proceed in accordance with law, including affording the petitioner an opportunity of being heard.

2.16 The Court expressly clarified that it had not expressed any opinion on the merits of the allegations, or on the validity of the show cause notice or the summons/notices, and that all rights and contentions of the parties, including those under Armour Security (India) Ltd., were left open to be urged before the competent authority.

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