No Bar on Central Authority Issuing Summons Despite State Authority Proceedings: Supreme Court

No Bar on Central Authority Issuing Summons Despite State Authority Proceedings: Supreme Court

Introduction

The Supreme Court of India has delivered a landmark judgment clarifying the interplay between Central and State GST authorities under the Goods and Services Tax (GST) regime. The Court held that a summons issued by the Central GST authorities under Section 70 of the CGST Act does not amount to "initiation of proceedings" under Section 6(2)(b) of the Act. Accordingly, the Central Authority can issue summons even where the State Authority has already initiated proceedings.

Factual Background

The Petitioner, M/s Armour Security (India) Ltd., a GST-registered security services provider, challenged the summons issued by the Central GST authorities (CGST) under Section 70 of the CGST Act. The Petitioner argued that these summons were barred under Section 6(2)(b), since the State GST authorities had already issued a show-cause notice regarding alleged wrongful ITC claims from cancelled dealers.

Procedural Background

The matter came before the Supreme Court through a writ petition filed by the Petitioner. It was contended that the summons issued by the CGST were invalid as they violated Section 6(2)(b) of the CGST Act, which prohibits duplicate proceedings on the same subject matter by both Central and State GST authorities.

Issues

1. Whether a summons issued by the Central GST authorities constitutes "initiation of proceedings" under Section 6(2)(b) of the CGST Act?

2. Whether the Central Authority can issue summons despite the State Authority already initiating proceedings?

Contentions of the Parties

Petitioner’s Contentions: The Petitioner argued that the summons issued by the CGST authorities were barred under Section 6(2)(b), since proceedings had already been initiated by the State GST authorities through a show-cause notice. It was claimed that the subject matter of both actions related to the availability of input tax credit in respect of cancelled dealers.

Respondent’s Contentions: The Respondent contended that the summons were merely investigative in nature and did not amount to initiation of proceedings under Section 6(2)(b). It was further argued that the statutory bar would only apply if both authorities had initiated proceedings on the same subject matter.

Reasoning and Analysis

The Bench comprising Justices JB Pardiwala and R Mahadevan held that issuance of a summons is only an investigative measure and does not constitute "initiation of proceedings" under Section 6(2)(b).

The Court clarified that:

• At the stage of issuing summons, the Department is yet to determine whether proceedings should be initiated against the assessee.
• Mere issuance of summons cannot be equated with initiation of proceedings, since it does not establish liability.
• The statutory bar under Section 6(2)(b) is triggered only when both authorities conduct proceedings on the very same subject matter or overlapping deficiencies.

The Court also expressed concern over the lack of real-time data sharing between CGST and SGST authorities, which often results in duplicate or overlapping proceedings, contrary to the GST framework. It recommended that the Directorate General of GST Intelligence (DGGI) establish a robust mechanism for seamless data sharing to ensure harmony and cooperative federalism.

Outcome

The Supreme Court dismissed the writ petition and upheld the summons issued by the CGST authorities. It held that CGST authorities are empowered to issue summons even if State authorities have already initiated proceedings, provided both do not proceed simultaneously on the same subject matter.

The Court also issued detailed guidelines to prevent duplication of proceedings and to ensure better coordination between Central and State authorities.

Representation

The Petitioner was represented by Mr. Sridhar Potaraju, Sr. Adv. along with Mr. Srinivas Kotni, Mr. Rishabh Dev Dixit, Mr. Rohit Dutta, Mr. Gaichangpou Gangmei, AOR Mr. Akshay Kumar, Mr. Aayush, Mr. Lalit Mohan, Ms. Niharika Singh, Mr. Sai Swaroop, and Mr. Gurdeep Singh, Advocates.