M/s Armour Security (India) Ltd. vs Commissioner, CGST, Delhi East Commissionerate & Anr.

Held: Where the proceedings concern distinct infractions, the same would not constitute a “same subject matter” even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted. [Para 96(ix)] Central Goods and Service Tax Act, 2017 – ss.6(2)(b), 70 – Scope and Ambit of “initiated any proceedings” u/s.6(2)(b) – The Petitioner is a public limited company engaged in the business of providing security services – On 18.11.2024, petitioner received a show cause notice u/s.73 of the Act from the respondent no.2, raising demand of Rs. 1,24,92,162/u/ss.50 and 74 of CGST Act, 2017 – Thereafter, two summons dated 16.01.2025 and 23.01.2025 respectively were issued by respondent no.1 to the petitioner directing one of the directors of the petitioner to produce relevant documents – Being aggrieved by the said summons the petitioner preferred a writ petition before the High Court, on the ground that as the respondent no. 2 had already made the investigation in respect of the same issue and the respondent no. 1 does not have the jurisdiction in view of s.6(2)(b) of the CGST Act – Writ petition dismissed – High Court held that the expression “any proceeding” in s.6(2)(b) cannot be construed to include a search or investigation – The High Court further held that a summons or investigation pursuant to a search constitutes only a precursor to the formal proceedings – Correctness: Held: s.6(2)(b) of the CGST Act precludes a proper officer under the CGST Act to initiate any proceedings on a subject matter if a proper officer under the SGST or the UGST Act has initiated any proceedings on the same subject matter – Further, s.70 of the CGST Act empowers a proper officer to summon any person whose presence is considered necessary for giving evidence or producing documents or any other relevant material in an inquiry – The issuance of summons is one of the instruments employed by the Department to obtain information, documents, or statements in cases involving suspected tax evasion – Such summons may be issued to the person under investigation or to a person considered a witness in investigation against another person – The legislature has used the term “inquiry” in s.70, as at the stage of issuing a summons, the Department is primarily engaged in gathering information regarding a possible contravention of law, which may subsequently form the basis for proceedings against an assessee– At the stage of issuing a summons, the Department is yet to determine whether proceedings should be initiated against the assessee – Such evidence-gathering and inquiry do not constitute “proceedings” within the meaning of s.6(2)

(b) of the CGST Act – The mere issuance of a summons cannot be equated with proceedings barred under the Act, as the subject matter cannot be ascertained solely through summons – In the present case, the petitioner was served with a show cause notice dated 18.11.2024 by the respondent no. 2 u/s.73 of the CGST Act, thereby initiating proceedings – The petitioner has impugned the summons dated 16.01.2025 and 23.01.2025 respectively issued by the respondent no. 1 for production of documents – At the summons stage, it cannot be predicted with certainty that the subject matter of the proceedings will be identical; the mere presence of an overlapping aspect under investigation does not ipso facto render the subject matter “same” – The High Court correctly held that the term “any proceedings” does not encompass summons issued pursuant to a search or investigation, as at the stage of issuance of summons the Department is merely engaged in gathering information – A case of search is clearly distinct and separate from proceedings initiated only after issuance of a show cause notice. [Paras 55, 56, 57, 58, 61, 62]

Central Goods and Service Tax Act, 2017 – Show cause notice under GST regime:

Held: A show cause notice is a document served on a noticee, requiring them to explain why a particular action should not be initiated against them – Under the GST regime, issuance of a show cause notice is a mandatory precondition for raising a demand – It forms the bedrock for proceedings related to the recovery of tax, interest, and penalty – The notice ensures adherence to the principles of natural justice by granting the assessee an opportunity to present their case before any adverse action is taken – In essence, it serves as both a procedural safeguard and a legal necessity, marking the commencement of quasi-judicial adjudication under the Act. [Para 65]

Notice – Show cause notice – Whether a show cause notice can be vagaue:

Held: A show cause notice sets the law in motion concerning the liability under the statute, containing charges that a specific person is called upon to answer – In other words, it sets out the alleged violations of legal provisions and requires the assessee to explain why the duty should not be recovered from them – Thus, a show cause notice cannot be vague, nor can any allegations be made without evidence being commensurate with the gravity of the charges levelled against the noticee. [Para 66] Central Goods and Service Tax Act, 2017 – s.67 and s.74 – Whether the mere issuance of summons imply that the Department has decided to proceed against the taxpayer for recovery of liability:

Held: In the facts of the present case, the mere issuance of summons does not imply that the Department has decided to proceed against the taxpayer for recovery of liability – Therefore, issuance of summons, by no stretch, can be considered as the initiation of proceedings, since at that stage, the Department still retains the discretion not to initiate any proceedings – A mere contemplation or possibility of initiating action cannot be equated with “proceedings”, as doing so would undermine the framework of cross-empowerment under the Act – Even when a discovery is made during the search proceedings u/s.67 of the CGST Act, the Department is required to bring such proceedings to a definitive conclusion, either by issuing a show cause notice u/s.74 or by dropping the matter altogether. [Para 74]

Central Goods and Service Tax Act, 2017 – Whether “subject matter” within the meaning of s.6(2)(b) of the CGST Act includes all matters dealt with in summons under the Act: Held: It is abundantly clear from the purport of s.6(2)(b) of the Act that “subject matter” needs to be understood in perspective of initiation of proceedings – The proceedings stand initiated when a show cause notice is issued with regard to a subject matter – It is settled that the service of a show cause notice is made in order to inform the noticee about the case that has been set up against him, which he has to meet – Primacy is given to the cogency of a show cause notice – The subject matter of the proceedings lies in the contents of the notice – Hence, it ought to be exhaustive, so much so that it is capable of presenting the case of the Revenue in a nutshell – A show cause notice delineates the scope of the proceedings in the expression of subject matter with which the authority would be dealing – It would be impermissible for an authority to invoke such rules, claims or grounds at a later stage which do not figure in the show cause notice i.e, any ground, reasoning or claim which does not figure out in the show cause notice cannot be permitted to adversely affect the noticee – The expression “subject matter” contemplates proceedings directed towards determining the taxpayer’s liability or contravention, encompassing the alleged offence or non-compliance together with the relief or demand sought by the Revenue, as articulated in the show cause notice through its charges, grounds, and quantification of demand – Accordingly, the bar on the “same subject matter” is attracted only where both proceedings seek to assess or recover an identical liability, or even where there is the slightest overlap in the tax liability or obligation – In other words, u/s.6(2)(b), the “subject matter” is intrinsically tied to the determination of the specific violation under scrutiny or the liability alleged to be unpaid – The statutory bar is triggered only when the two proceedings against the same taxpayer are, in substance, directed towards the very same or overlapping deficiency in tax discharge or the identical contravention alleged – Where the proceedings concern distinct infractions, each Department is entitled to proceed within its respective statutory remit without infringing the prohibition. [Paras 82, 83, 84, 85, 86, 87]

Central Goods and Service Tax Act, 2017 – ss.6(2)(b) – A twofold test to determine whether a subject matter is “same”: Held: First, the subject matter will be considered the same if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts; and secondly, if the demand or relief sought is identical. [Para 88] Central Goods and Service Tax Act, 2017 – s.6(2)(a) – Purpose of:

Held: The provision serves a two fold purpose: first, to insulate taxpayers from the prospect of being proceeded against by more than one authority for the same subject matter; and secondly, to vest in the officers functioning under the CGST Act, the SGST Act, or the UTGST Act, to render a comprehensive order, thereby avoiding multiplicity of proceedings – Such a construction is also in consonance with the well-recognized principle of comity between jurisdictions, which mandates that coordinate authorities must act with mutual respect and due regard for each other’s domain, so as to preclude the possibility of conflicting determinations on the same issue. [Para 93]

Central Goods and Service Tax Act, 2017 – s.6(2)(b) – What is the purport of an “Order” u/s.6(2)(a) of the CGST Act: Held: The expression ‘order’, qualified by the terms “under this Act”, occurring in the said provision admits of a broad construction, so as to include every form of order which a proper officer is competent to issue by virtue of the authority vested in them under the statute – Such an interpretation is necessary to ensure that the statutory mandate achieves its intended purpose of avoiding multiplicity of proceedings and securing uniformity of adjudication across the parallel enactments – Inasmuch as the CGST Act vests the proper officer with authority to issue “orders” under various provisions, it becomes imperative that such officer duly apprises the jurisdictional counterpart of any action initiated by the Department in relation to a taxable person who may otherwise fall within the administrative domain of that officer – Given that the statutory framework envisages a regime of cross-empowerment amongst officers, the obligation so cast operates as a safeguard against the prejudice which may arise from the initiation of parallel or overlapping proceedings against the same taxpayer by different wings of the Department. [Paras 94, 95]

Central Goods and Service Tax Act, 2017 – Guidelines – The following guidelines to be followed in cases where, after the commencement of an inquiry or investigation by one authority, another inquiry or investigation on the same subject matter is initiated by a different authority:

Held: a) Where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response, as the case may be – Because, mere issuance of a summons does not enable either the issuing authority or the recipient to ascertain that proceedings have been initiated; b) Where an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation; c) Upon receipt of such intimation from the assessee, the respective tax authorities shall communicate with each other to verify the veracity of the assessee’s claim – so as this course of action would obviate needless duplication of proceedings; d) If the claim of the taxable person regarding the overlap of inquiries is found untenable, and the investigations of the two authorities pertain to different “subject matters”, an intimation to this effect, along with the reasons and a specification of the distinct subject matters, shall be immediately conveyed in writing to the taxable person; e) The taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice; f) However, if the Central or the State tax authority, as the case may be finds that the matter being inquired into or investigated by it is already the subject of inquiry or investigation by another authority, both authorities shall decide inter-se which of them shall continue with the inquiry or investigation; g) However, where the authorities are unable to reach a decision as to which of them shall continue with the inquiry or investigation, then in such circumstances, the authority that first initiated the inquiry or investigation shall be empowered to carry it to its logical conclusion, and the courts in such a case would be competent to pass an order for transferring the inquiry or investigation to that authority; h) If it is found that the authorities are not complying with these aforementioned guidelines, it shall be open to the taxable person to file a writ petition before the concerned High Court u/Art.226 of the Constitution of India; i) At the same time, taxable persons shall ensure complete cooperation with the authorities – It is incumbent upon them to appear in response to a summons and/or reply to a notice. [Para 97]

Central Goods and Service Tax Act, 2017 – s.6 – Framework of single interface and cross-empowerment:

Held: The unique scheme and framework of the Goods and Services Tax regime envisages two distinct concepts at its heart, the concept of a “single interface” as-well as the concept of “cross-empowerment” – The former relates to doing away of dual administrative control over the collection as-well as assessment of tax returns by tax payers, that had existed previously, in the erstwhile scheme of indirect taxes in the form of value added tax or VAT – Whereas, the latter, pertains empowering both the Central and State tax administrations to simultaneously undertake enforcement actions against a tax-payer – The underlying objective of this arrangement was to simplify the taxpayer’s engagement with the tax system by ensuring that all notices, audits, assessments, and other proceedings are handled by a single authority, thereby eliminating the complexity and duplication that would arise from dual control – It was envisioned that a taxpayer should not be compelled to respond to two different authorities for the same issue or transaction – S. 6 of the CGST Act and the identical pari-materia provision in the respective State and Union Territories statutes, is a nuanced provision that enshrines both the concept as-well as the contours of “single interface” system and “cross-empowerment” – It delineates when and how the various officers appointed under different corresponding legislations shall act as “proper officer” for the purposes of the said legislation. [Paras 34, 37, 42]