Validity of tax proceedings where state appellate authority has not concluded parallel proceedings; central action deferred until completion.

Where parallel proceedings under state and central GST regimes overlap, the State Tax appellate authority is directed to conclude the pending appellate proceedings within a short stipulated period; consequence: Central Tax authorities may proceed on the show cause notice only after that conclusion. The affected taxpayer may file a reply after disposal of the state appellate process and may raise the overlap point and reliance on the CBIC circular dated 06.07.2022 in its reply; consequence: all legal and factual grounds remain available and any adverse order may be assailed in an appropriate forum.

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Issues: (i) Whether the show cause notice dated 19.09.2025 issued by the Central Tax Authorities should be kept in abeyance pending disposal of the appeal against penalty proceedings concluded by the State Tax Authority; (ii) Whether the Appellate Authority of the State Tax should be directed to conclude the appeal within a specified timeframe.

Issue (i): Whether the Central Tax Authorities' show cause notice dated 19.09.2025 should be kept in abeyance until the State Tax appellate proceedings are concluded.

Analysis: The Court examined that penalty proceedings under Section 121(1)/Section 122 of the TGST/CGST Act have concluded at the State level and an appeal is pending before the State appellate authority, while proceedings by the Central Tax Authorities on the show cause notice are yet to be decided. Having regard to potential overlap between the matters and to avoid conflicting determinations, the Court balanced the parties' submissions and afforded interim protection by maintaining abeyance of the Central show cause notice until the State appeal is decided. The Court further required the Central Authorities to take into account the findings of the State appellate authority when proceeding.

Conclusion: The show cause notice dated 19.09.2025 shall remain in abeyance and the Central Tax Authorities may proceed on the show cause notice only after the Appellate Authority of the State Tax concludes the pending appeal. This conclusion is in favour of the assessee.

Issue (ii): Whether the Appellate Authority of the State Tax should be directed to conclude the petitioner's appeal within a specified period.

Analysis: The Court noted delay in the State appellate proceedings and observed that final resolution of the State appeal is necessary before the Central Authorities proceed. To ensure timely disposal and to give effect to the protective abeyance, the Court directed the State Appellate Authority to conclude the appeal within a short specified period and permitted the petitioner to cooperate and file necessary replies.

Conclusion: The Appellate Authority of the State Tax is directed to conclude the appeal within three weeks from the date of the order (subject to receipt of the copy), and this direction is in favour of the assessee.

Final Conclusion: The writ petition is disposed of by directing that the Central Tax Authorities shall not proceed on the show cause notice until the State Tax appellate proceedings are concluded, and the State Appellate Authority is directed to conclude the pending appeal within the timeframe ordered; the petitioner retains the right to file replies and to challenge any subsequent orders by appropriate proceedings.

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