Chhattisgarh HC Allows CGST Proceedings After SGST Closed Case Without Adjudication

Issue

Whether the statutory bar under Section 6(2)(b) of the CGST Act, which prohibits parallel proceedings by Central and State authorities on the same subject matter, applies when the State GST (SGST) authorities issued a summary notice (DRC-01) but subsequently closed the proceedings without passing any adjudication order, thereby allowing the Central GST (CGST) authorities to initiate fresh proceedings on the same issue.

Facts

• The Assessee: South Eastern Coalfields Limited (SECL), a PSU holding GST registration with the State authorities.

• The Dispute: Liability to pay GST under Reverse Charge Mechanism (RCM) on Development Cess and Environment Cess (approx. ₹120 Crores).

• SGST Action: The State GST authorities issued a Show Cause Notice (SCN) in Form GST DRC-01 covering the period July 2017 to July 2021.

• Outcome of SGST Action: The SGST authorities did not proceed to adjudication (i.e., they passed no order confirming demand or penalty under Section 73/74). Instead, they dropped/closed the proceedings, reportedly because the Central authorities had already initiated an inquiry.

• CGST Action: The Central GST authorities (who had conducted a prior inspection and issued a payment memo) then issued a fresh SCN under Section 73 for the same subject matter.

• Challenge: SECL challenged the Central SCN, arguing that since the SGST authority (the jurisdictional officer) had already “initiated” proceedings by issuing DRC-01, the Central authority was barred by Section 6(2)(b) from acting on the same matter.

Decision

• The Chhattisgarh High Court dismissed the assessee’s appeal and upheld the Central GST proceedings.

• Interpretation of Section 6(2)(b): The Court held that the bar on parallel proceedings is intended to prevent double jeopardy or concurrent adjudication. It applies when an authority has effectively “initiated” adjudication proceedings.

• No Adjudication = No Bar: Since the SGST authorities closed the case without adjudication (i.e., no final assessment order was passed determining liability), the subject matter was not “decided” or actively “pending” in a manner that would trigger the bar.

• Vacuum in Law: If the SGST authority drops a notice without a decision on merits, it cannot result in a situation where the taxpayer escapes liability entirely. The Central authority, having conducted the primary inspection, was entitled to proceed.

• Procedural Validity: The Court also noted procedural lapses in the SGST notice (issuance of DRC-01 without the mandatory pre-intimation DRC-01A), suggesting the State’s initiation was defective/incomplete, further justifying the Central action.

Key Takeaways

• “Closed without Adjudication” Exception: This judgment carves out an important exception to Section 6(2)(b). If the first authority (State) exits the scene without passing a formal order on merits (assessment/demand), the second authority (Centre) is not barred from stepping in to protect the Revenue’s interest.

• Initiation vs. Conclusion: Mere issuance of a summary notice (DRC-01) that is later dropped does not amount to “proceedings” that permanently oust the jurisdiction of the counterpart authority.

• Supreme Court Challenge: The Supreme Court has issued notice in the SLP filed against this judgment (SLP(C) No. 33124/2025), indicating that the final word on whether this interpretation violates the “Single Interface” principle is yet to come.

• RCM on Cesses: The substantive issue (GST on Development/Environment Cess) involves high stakes for mining PSUs and remains a matter of litigation on merits.