Parallel GST proceedings by State and Central authorities for the same period are barred.

Parallel GST proceedings by State and Central authorities for the same period are barred.

Issue

Can State GST authorities initiate and conclude proceedings against a taxpayer for a specific period if the Central GST authorities have already initiated proceedings on the same subject matter for that same period?

Facts

• The Central GST authority initiated proceedings against the assessee for the period 2021-22 and 2022-23 by issuing a show-cause notice.
• Subsequently, the State GST authorities also began their own, separate investigation against the same assessee for the same period, which resulted in an order being passed.
• The assessee filed a writ petition challenging the validity of the State authority’s action, arguing that it constituted an illegal parallel proceeding, which is not permitted under the GST framework.

Decision

The High Court ruled decisively in favour of the assessee.

• It held that Section 6(2)(b) of the CGST Act explicitly bars such parallel proceedings. The provision clearly states that once a proper officer under one Act (e.g., the Central GST Act) has initiated proceedings, the proper officer under the other Act (e.g., the State GST Act) loses jurisdiction to initiate proceedings on the same subject matter.
• Since the Central authority had acted first, the proceedings initiated by the State authority were without jurisdiction. The order passed by the State authority was therefore quashed and set aside.
• To ensure a single, unified proceeding, the court further directed the State authorities to transfer all documents and data they had collected to the Central authority, allowing the latter to complete the valid proceeding it had already initiated.

Key Takeways

• “One Assessee, One Adjudication”: A foundational principle of the GST administrative framework is that for any given subject matter and tax period, a taxpayer should only have to face one set of proceedings, either from the Central or the State tax administration, but not both.
• Jurisdictional Bar is Absolute: Section 6(2)(b) creates a clear and absolute jurisdictional bar. The authority that validly initiates proceedings first (Central or State) secures exclusive jurisdiction over that subject matter.
• First-in-Time Principle: The key to determining which authority has jurisdiction is to see which one initiated the proceedings first. In this case, the Central authority’s show-cause notice was the first formal action.
• The Remedy is to Quash and Consolidate: The correct legal remedy for an illegal parallel proceeding is to quash the second proceeding. Courts will also typically order the consolidation of all records with the authority that has valid jurisdiction to ensure the assessment is complete and based on all available information.