Parallel Proceedings: Central and State Authorities Cannot Adjudicate Simultaneously

Issue

Whether Central Tax Authorities can issue a Show Cause Notice (SCN) and proceed with adjudication for a transaction where State Tax Authorities have already passed an order and an appeal is currently pending.

Facts

The Period: Assessment Year 2021-22.
State Action: The State Tax Authorities initiated and concluded adjudication on a specific transaction. The assessee subsequently filed an appeal against this order, which is currently pending before the State Appellate Authority.
Central Action: While the state appeal was pending, the Central Tax Authorities issued a fresh SCN under Sections 73 and 74 regarding the same transaction.
The Conflict: The assessee challenged the Central SCN, arguing that parallel proceedings by two different authorities on the same subject matter are barred under Section 6 of the CGST Act.

Decision

Section 6 Bar: The High Court (Telangana) reaffirmed the “one subject matter – one authority” principle. Under Section 6(2)(b), if a State officer has initiated proceedings, the Central officer is barred from initiating proceedings on the same subject matter.
Status of Proceedings: Since the State had already concluded its adjudication and the matter was in the appellate stage, the Central authorities could not “re-adjudicate” the same issue simultaneously.
Abeyance Order: The Court directed that the SCN issued by the Central Tax Authorities must be kept in abeyance (stayed).
Outcome: The Central Authorities can only proceed with their SCN after the State’s appellate proceedings have reached a final conclusion. This ensures there are no contradictory orders on the same transaction. In favour of assessee.

Key Takeaways for Taxpayers

The First-in-Time Rule: Generally, the authority that initiates the formal adjudicatory process (issuance of SCN) first is the only one entitled to complete it.
Single Interface: The core design of GST is to provide a “single interface.” If you are being harrassed by “dual control” (both State and Central teams asking for the same data for the same year), you can invoke the Section 6 bar.
Inquiry vs. Proceeding: Per recent Supreme Court guidance (Armour Security, 2025), mere “summons” or “investigations” do not always trigger the Section 6 bar. The bar is most effectively triggered once a formal Show Cause Notice is issued.
Notification Duty: If a second authority initiates an inquiry on a matter already being handled by another team, the taxpayer has a duty to inform the second authority about the existing proceedings to avoid duplication.

HIGH COURT OF TELANGANA

Aarush Enterprises

Assistant Commissioner of Central Tax, Hyderabad^*

Aparesh Kumar Singh, CJ.
and G.M. MOHIUDDIN, J.

WRIT PETITION No. 32866 of 2025

JANUARY 6, 2026

P.Venkata Prasad, learned counsel and P.V.Prasad for the Petitioner. . D.Raghavendar Rao, learned Senior Standing Counsel, B.Mukherjee, learned counsel and N.Bhujanga Rao, learned Deputy Solicitor General of India for the Respondent.

ORDER

1. Heard Mr. P.Venkata Prasad, learned counsel representing M/s. P.V.Prasad Associates appearing for the petitioner, Mr. D.Raghavendar Rao, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (CBIC), appearing for respondent Nos.1 and 2 and Mr. B.Mukherjee, learned counsel representing Mr. N.Bhujanga Rao, learned Deputy Solicitor General of India appearing for respondent No.4.

2. For easy reference to gather the substratum of the dispute, the order dated 31.10.2025 and the order dated 20.11.2025 are extracted hereunder:

31.10.2025:

“Learned counsel Sri P.Venkata Prasad, representing M/s.P.V.Prasad Associates, appears for the petitioner.

Sri D.Raghavendar Rao, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs, appears for respondents No.1 and 2 through video conferencing.

Learned counsel Sri Angothu Nehru appears for respondent No.4.

The show cause notice dated 19.09.2025 along with Form GST DRC-01 issued under Section 73 and also under Section 74 of the Central Goods and Services Tax Act, 2017/Telangana Goods and Services Tax Act, 2017, for the tax period 2021-2022 is under challenge in this writ petition on the ground that the State Tax authorities have already adjudicated the demand in respect of the same transaction by the order-in-original dated 21.04.2025, against which the appeal is pending.

Learned counsel for the petitioner submits that the impugned show cause notice is in violation of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017.

Learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs appearing for the respondents prays for two weeks time to obtain instructions.

List this case on 20.11.2025.

In the meantime, there shall be interim stay of the impugned show cause notice.”

20.11.2025:

“Sri P. Venkata Prasad, learned counsel, representing M/s. P.V. Prasad Associates, appears for the petitioner.

Sri D. Raghavendar Rao, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs, appears for respondent Nos.1 and 2.

The show cause notice dated 19.09.2025 against the petitioner for the financial year 2021-22 is on three counts, which read as under:

“3. Excess availment of Input Tax Credit (ITC) of Rs.2,28,450/-(IGST: Rs.30,890.-, CGST: Rs.98,780/- & SGST: Rs.98,780/-) in GSTR-3B in comparison with ITC available in GSTR-2A, (GSTR 3B v. 2A).”

“4. The taxpayer has claimed ITC of Rs.96,08,924/- (CGST: Rs.48,04,462/- & SGST: Rs.48,04,462/-) in respect of supplies received from taxpayer whose registration has been cancelled suo-moto retrospectively.”

“5. Irregular availment of Blocked/ineligible credit of Rs.19,573/-(IGST: Rs.2,285/-, CGST: 8,644/- & SGST: Rs.8,644/-) during the period 2021-22 for contravention of provisions of Section 17(5) of the CGST Act, 2017.”

The show cause notice issued by the State tax authorities is under Section 122 of the Telangana State Goods and Services Tax Act, 2017 (for short, “the TGST Act”) in respect of the financial year 2021-22 alleging that the petitioner has issued fake invoices without any underlying supply of the goods, which is liable for penalty under Section 121(1) to an amount equivalent to the Input Tax Credit (ITC) passed on to an amount under Central Goods and Services Tax Act, 2017 (for short, “the CGST Act”)/TGST Act. The proceedings by the State tax authorities has ended in imposition of penalty by order dated 21.04.2025. The proceedings by the Central Goods and Services Tax (CGST) have not been concluded. The petitioner has preferred an appeal against the order-in-original passed by the State tax authorities and approached this Court alleging that the impugned show cause notice issued by the Central tax authorities is violative of Section 16(2)(b) of the CGST Act.

Learned counsel for the petitioner has drawn the attention of this Court to show cause notice that the question of fake invoices without underlying supply are also the subject matter of the show cause notice. The proceedings by the State tax authority for issuance of fake invoices without underlying supply and unavailing ITC are also those which could be under scrutiny in the proceedings by the CGST authorities, which is not proper on the part of the CGST authorities in view of Section 16(2)(b) of the CGST Act.

Learned counsel for the respondent submits that the subject matter of both the proceedings do not overlap. Separate proceedings for penalty under Section 122 and irregular and illegal availment of ITC under Section 74(1) of the CGST Act can be initiated by the State and Central tax authorities.

On consideration of the rival submissions of the parties and in the aforesaid facts and circumstances, we are of the view that since the penalty proceedings have concluded and the petitioner has preferred an appeal and whereas the proceedings before the CGST authorities are yet to be concluded, the show cause notice dated 19.09.2025 issued by respondent No.1 be kept in abeyance till the appeal preferred by the petitioner is decided. The appellate authority of the State tax department shall conclude the appeal proceedings in accordance with law within a period of four weeks from the date of receipt of a copy of this order. Petitioner shall cooperate in the proceedings.

Let this order be communicated through respondent No.5 to the concerned appellate authority i.e., Appellate Joint Commissioner (ST), Secunderabad Division, Hyderabad.

Let the matter be listed on 30.12.2025.”

3. Today when the matter has been taken up, learned counsel for the petitioner informs that the Appellate Authority of the State Tax has not concluded the appeal proceedings against the penalty imposed under Section 121(1) of the Central Goods and Services Tax Act, 2017/Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the CGST/TGST Act’). The officer has changed and therefore, proceedings may not have been disposed by now.

4. On the part of the Central Tax Authorities, learned Senior Standing Counsel for CBIC submits that for the time being, the interest of the petitioner has already been protected by keeping the show cause notice issued by the Central Tax Authorities in abeyance. The Appellate Authority of the State Tax has also been directed to conclude the appeal proceedings initiated under Section 122 of the CGST/TGST Act. He submits that with the aforesaid protection, the matter may be disposed of at this stage with liberty to the Central Tax Authorities to pass an order on the show cause notice dated 19.09.2025 after consideration of petitioner’s reply, but only after the Appellate Authority of the State Tax concludes the appeal proceedings in respect of the show cause notice under Section 122 of the CGST/TGST Act.

5. Learned counsel for the petitioner has made strenuous efforts to convince us that since a question of overlap of proceedings, be it under Section 73 or 74 of the CGST/TGST and Section 122 of the CGST/TGST Act, is involved, the matter may be decided by this Court itself.

6. However, at this stage, we refrain from expressing any final opinion in the matter. Taking into account the submission of the parties, this Court had kept the show cause notice dated 19.09.2025 issued by Central Tax Authorities in abeyance while directing the Appellate Authority of the State Tax to conclude the appeal proceedings, in accordance with law, within a period of four weeks from the date of receipt of copy of the order, which, however, has not yet been concluded.

7. We are of the view that the Central Tax Authorities should proceed with the show cause notice dated 19.09.2025 but only after conclusion of the appeal proceedings pending before the Appellate Authority of the State Tax. Meanwhile, Petitioner may file reply after disposal of the appeal and take all available points in law and fact including the question of overlap and reference to CBIC circular dated 06.07.2022 in its reply before the Central Tax Authorities. Needless to say, the Central Tax Authorities would take into consideration the grounds urged on behalf of the petitioner and also the findings of the Appellate Authority of the State Tax in the appeal proceedings while taking a decision in the matter. Needless to say, if the petitioner is aggrieved by the order of the Central Tax Authorities or the Appellate Authority of the State Tax, it would be open for it to assail it in an appropriate proceeding on all grounds of law and fact available to it. The Appellate Authority of the State Tax is directed to conclude the proceedings, if not yet concluded within a further period of three weeks from today.

8. The instant Writ Petition is, accordingly, disposed of. However, there shall be no order as to costs.

9. Let the order be communicated to the Appellate Authority of the State Tax by the petitioner.

Miscellaneous applications pending, if any, shall stand closed.