Section 6(2)(b) CGST Act prevents parallel GST proceedings when one authority starts first on same issue

HC held that Section 6(2)(b) of the CGST Act, as interpreted by SC in Armour Security, bars parallel adjudicatory proceedings by Central and State GST authorities on the same cause of action once one authority has first initiated proceedings. As State summons preceded Central summons, HC found no need for further adjudication on merits and disposed of the petition with directions. The petitioner must appear before both authorities, respond to summons, and raise all contentions per Armour Security. State and Central authorities must coordinate, verify claims, and ensure no multiple adjudications on the same subject matter, with further proceedings conducted in accordance with law and after hearing the petitioner.

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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, initiation of proceedings by the State tax authority bars the Central tax authority from initiating parallel adjudicatory proceedings on the same subject-matter.

1.2 Whether the summons/notice earlier issued by the State authority prevails over the subsequent notice issued by the Central authority, and to what extent both authorities may continue inquiry or investigation without violating the prohibition against parallel proceedings.

1.3 What directions are required to ensure compliance by the authorities and the assessee with the legal position and guidelines laid down in the binding precedent governing Section 6(2)(b) CGST Act.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Bar on parallel proceedings under Section 6(2)(b) CGST Act where one authority has already initiated proceedings on the same subject-matter

Legal framework

2.1.1 The Court noted that Section 6(2)(b) of the CGST Act prohibits initiation of any proceedings by one authority on the same subject-matter where such proceedings have already been initiated by another jurisdictional authority. The Court relied on the binding interpretation and guidelines laid down by the Supreme Court regarding (a) the meaning of "initiation of any proceedings"; (b) the meaning of "subject matter"; and (c) the interrelationship between Central and State GST authorities.

Interpretation and reasoning

2.1.2 The Court recorded that the Supreme Court has conclusively held: (i) Section 6(2)(b) bars initiation of proceedings on the same subject-matter; (ii) "initiation of any proceedings" refers to formal commencement of adjudicatory proceedings by issuance of a show cause notice and does not include steps such as summons, search or seizure; (iii) "subject matter" refers to tax liability, deficiency or obligation arising from a particular contravention; and (iv) where two proceedings seek to assess or recover identical or overlapping liability arising from the same contravention, the bar is attracted.

2.1.3 It was emphasized that while intelligence-based enforcement and investigative steps, including issuance of summons under Section 70, may be undertaken by either Central or State administration, parallel adjudicatory proceedings on the same subject-matter by both authorities are impermissible once one authority has first initiated such proceedings.

2.1.4 The Court further noted that the Supreme Court prescribed a twofold test to determine "same subject matter": (i) whether an authority has proceeded on an identical liability or alleged offence on the same facts; and (ii) whether the demand or relief sought is identical. When both conditions are satisfied, Section 6(2)(b) is immediately attracted.

2.1.5 Applying the above principles, the Court observed that in the present case summons/notice dated 29.06.2022 was issued by the State authority, and a subsequent summons/notice dated 29.07.2022 was issued by the Central authority under Section 74 of the CGST Act. The petitioner's contention was that these constituted parallel proceedings on the same subject-matter.

Conclusions

2.1.6 The Court held that, in view of the authoritative pronouncement of the Supreme Court, once one authority (Central or State) has initiated proceedings first in point of time, the other authority is barred from commencing parallel adjudicatory proceedings on the same subject-matter under Section 6(2)(b). However, legitimate investigative steps, such as issuance of summons under Section 70, may continue so long as they do not result in parallel adjudication.

2.1.7 The Court concluded that, in the circumstances of the case, there was no need for an independent or further adjudication on the legal issue beyond ensuring adherence to the law and guidelines laid down by the Supreme Court. The relief sought by way of outright quashing of the impugned notice was therefore not granted; instead, the matter was directed to be dealt with by the authorities strictly in accordance with the binding precedent.

2.2 Priority between State and Central GST actions and permissible scope of inquiry/investigation

Interpretation and reasoning

2.2.1 The core factual issue identified was whether the earlier summons/notice dated 29.06.2022 issued by the State authority should prevail over the subsequent notice dated 29.07.2022 issued by the Central authority under Section 74, and whether the latter is hit by the bar on parallel proceedings.

2.2.2 The Court noted that, under the law as clarified by the Supreme Court, when one authority has first initiated adjudicatory proceedings in respect of a particular subject-matter, any subsequent show cause notice or adjudicatory proceeding by the other authority in respect of the same liability and contravention must give way and cannot be sustained.

2.2.3 At the same time, the Court emphasized that both Central and State authorities are entitled to undertake and continue inquiry or investigation - including issuance of summons - until it is ascertained whether both are examining the identical liability and contravention, and whether a show cause notice has already been issued covering that liability.

2.2.4 The Court recorded the statement of counsel for State and Central authorities that they would abide by Section 6(2)(b) and by the principles and guidelines set out by the Supreme Court, and would maintain appropriate coordination to avoid parallel adjudicatory proceedings.

Conclusions

2.2.5 The Court did not make a factual determination as to which specific notice would ultimately prevail or whether the subject-matter was in fact identical; instead, it left those determinations to be made by the authorities themselves through mutual coordination, applying the tests and guidelines prescribed by the Supreme Court.

2.2.6 The Court directed both authorities to coordinate so that the assessee is not subjected to multiple adjudicatory processes on the same subject-matter, with any subsequent proceeding inconsistent with Section 6(2)(b) yielding to the proceeding first initiated.

2.3 Directions to parties and authorities to operationalize the Supreme Court guidelines

Interpretation and reasoning

2.3.1 The Court, instead of entering into an adjudication on facts or merits, chose to structure the relief in line with directions issued by other High Courts in similar matters, where assessees were directed to present their case before the authorities and the authorities were directed to proceed in accordance with the Supreme Court's conclusions and guidelines.

2.3.2 The Court considered it sufficient and appropriate to dispose of the petition by ensuring (i) full compliance by the assessee with summons/notices issued by both authorities, and (ii) inter-authority communication and coordination to verify overlap of inquiries and to avoid duplication, in terms of the Supreme Court's para 96 and 97 guidelines.

Conclusions

2.3.3 The Court directed the petitioner to appear before both Central and State authorities, file responses to the summons/notices, raise all contentions (including those based on Section 6(2)(b) and the Supreme Court judgment), and furnish all relevant documents by a specified date. The petitioner was mandated to comply with all lawful requisitions and to assist in inquiry/investigation.

2.3.4 The Court directed that, after receiving the petitioner's responses, the State authority shall communicate with the Central authority to verify the assessee's claim of overlapping inquiries, in accordance with the Supreme Court's guidelines, and that both authorities shall coordinate to ensure that the petitioner is not subjected to multiple adjudicatory processes on the same subject-matter.

2.3.5 It was further directed that, after such coordination, the competent adjudicatory authority shall proceed in accordance with law, including providing the petitioner an opportunity of being heard, and that any show cause notice issued in respect of a liability already covered by an existing show cause notice would be liable to be quashed in terms of the Supreme Court's ruling.

2.3.6 The Court expressly clarified that it was not expressing any opinion on the merits of the allegations or on the validity of the summons/notices, and that all rights and contentions of the parties remained open, to be considered by the authority dealing with the show cause notice in light of the binding Supreme Court decision.

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