State Assessments Quashed as Parallel Proceedings on Same Period Are Impermissible.

Issue

Can a State GST authority initiate and pass an assessment order for a specific tax period when a Central GST authority (DGGI) has already conducted an investigation, passed an order, and the matter for the same period is currently sub judice (pending) before a High Court?

Facts

• The petitioner, ID Fresh Food (India) (P.) Ltd., was investigated by the DGGI (a Central authority) for the period July 2017 to December 2021 over the alleged misclassification of “parottas.”
• This central investigation resulted in an Order-in-Original, which was appealed, and the matter is now pending before the Madras High Court.
• While the central authority’s case was still ongoing, the State GST authorities initiated separate and parallel assessment proceedings for the financial years 2019-2020 and 2020-2021.
• These periods (2019-20 and 2020-21) were a subset of the larger period already under adjudication by the central authority.
• The State did not dispute this overlap of periods. The petitioner challenged the State’s orders as a violation of the GST law against parallel proceedings.

Decision

• The Andhra Pradesh High Court quashed the assessment orders issued by the State GST authority.
• It held that parallel assessments by both Central and State authorities for the same transactions and the same tax periods are impermissible under the GST regime.
• The court found that such simultaneous proceedings violate the statutory scheme of cross-empowerment and create a clear risk of double taxation.

Key Takeaways

• No Parallel Proceedings: The “first-in-time” rule is reinforced. Once an authority (either Central or State) has initiated proceedings on a specific subject matter for a specific period, the other authority is barred from initiating a parallel proceeding on the same matter and period.
• Jurisdiction is Locked: The DGGI’s initial investigation and the subsequent legal proceedings locked in the jurisdiction for that period. The State authority cannot encroach on this.
• “Sub Judice” Prevents New Action: The fact that the matter was pending before the Madras High Court (sub judice) further solidifies that the proceeding is “live,” making any new, parallel assessment by the State authority legally invalid.
• Preventing Double Taxation: The court’s decision upholds a fundamental principle of GST: to prevent a taxpayer from being subjected to two different assessments and potentially two demands for the same alleged tax short-payment.