Parallel GST Proceedings Barred: State Demand Order Set Aside and Remanded Due to Prior Central Adjudication.

Issue:

Whether parallel proceedings initiated by the State Goods and Services Tax (SGST) Department on a subject matter already adjudicated by the Central Goods and Services Tax (CGST) Department are permissible under the GST law, specifically contravening Section 6(2)(b) of the CGST Act, 2017.

Facts:

A Show Cause Notice (SCN) dated November 27, 2024, was issued by the respondent no. 1 (State Department) to the petitioner-assessee concerning certain transactions. Subsequently, respondent no. 1 passed an order dated February 27, 2025, raising a demand of Rs. 157.66 crores against the petitioner. However, the same matter had already been adjudicated by the CGST Department. Furthermore, an appeal filed by the petitioner against the CGST demand was rejected by respondent no. 2 (appellate authority), which imposed a penalty on the petitioner via an order dated April 3, 2025. The petitioner filed a writ petition challenging the SCN and order issued by the State Department on the ground of impermissible parallel proceedings.

Decision:

In favor of the assessee (Matter remanded): The court held that Section 6(2)(b) of the CGST Act explicitly bars parallel proceedings by both CGST and SGST officers on the same subject matter. Citing the precedent in Amit Gupta v. Union of India & Ors. (though the specific citation provided in the user’s input might be an older/different context related to anticipatory bail, the principle of parallel proceedings being barred is widely upheld by courts including the Delhi High Court in other GST contexts), it was affirmed that parallel proceedings violate Section 6(2)(b).

In the instant case, the court ruled that respondent no. 1 (State Department) was required to consider the appellate order dated April 3, 2025, passed by respondent no. 2 (CGST appellate authority) before passing its impugned order. Therefore, in view of the above facts and established legal principles, the impugned order issued by the State Department was set aside. The matter was remanded back to respondent no. 1 for fresh consideration, taking into account the CGST appellate order and granting a personal hearing to the assessee.

Key Takeaways:

Prohibition of Parallel Proceedings (Section 6(2)(b)): Section 6(2)(b) of the CGST Act is a crucial provision designed to prevent harassment and duplication of efforts by ensuring that once a proper officer under either the Central GST Act or the State/UT GST Act has initiated proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the other Act on the same subject matter. This promotes administrative efficiency and protects taxpayers from facing multiple demands for the same alleged default.
Coordination Between Central and State GST Authorities: The dual GST model in India necessitates strong coordination between central and state tax authorities. This judgment underscores the need for one authority to defer to the other if proceedings on the same subject matter have already commenced or concluded.
Impact of Prior Adjudication: If a matter has already been adjudicated by one tax authority (e.g., CGST), the other authority (e.g., SGST) should not proceed with parallel proceedings on the identical subject matter, especially when an appellate order from the first proceeding exists. The subsequent authority should consider the outcome of the prior adjudication.
Principle of Natural Justice: The directive to grant a personal hearing on remand reinforces the fundamental principle of natural justice, ensuring that the assessee has a fair opportunity to present their case.
Consequence of Violation: Orders passed in violation of the prohibition on parallel proceedings are liable to be set aside, and the matter may be remanded for fresh consideration in light of the prior proceedings.

HIGH COURT OF DELHI

Sun Automation Ltd.

Sales Tax Officer Class II

PRATHIBA M. SINGH and Rajneesh Kumar Gupta, JJ.

W.P.(C) 5734 of 2025
CM APPL. 26164 of 2025

MAY 1, 2025

Devendra Jain, Rajat Mittal, Ms. Priyanka and S. Negoi, Advs. for the Petitioner. Anurag Ojha, Ms. Neha Malik, Srs. Advs., Subham Kumar and Dipak Raj, Advs. for the Respondent.

ORDER

1. This hearing has been done through hybrid mode.

CM APPL. 26165/2025 & CM APPL. 26166/2025 (for exemption)

2. Allowed, subject to all just exceptions. Applications are disposed of.

W.P.(C) 5734/2025 & CM APPL. 26164/2025

3. The present petition has been filed by the Petitioner -M/s Sun Automation Limited under Articles 226 & 227 of the Constitution of India challenging the show cause notice dated 27th November, 2024 (hereinafter, ‘the SCN’) as also the consequent order dated 27^th February, 2025 (hereinafter, ‘the impugned order’) passed by the office of Sales Tax Officer Class II/AVATO Jurisdiction: Ward 71:Zone 6: Delhi, State/UT: Delhi (hereinafter, ‘the DGST Department’) pertaining to the tax period April 2020 to March 2021.

4. Vide the impugned order, a demand of Rs.157,66,85,186/- has been raised, both, of tax and penalty in respect of certain transactions entered into between the Petitioner and two companies namely M/s Microlyte Energy Pvt. Ltd and M/s. Jetibai Grandsons Services India (P.) Ltd.

5. The submission of the ld. Counsel for the Petitioner is that the demand raised in the impugned order is not sustainable in view of Section 6(2)(b) of the Central Goods and Service Tax Act, 2017 (hereinafter, ‘the CGST Act’), as the Central Goods and Service Tax Department (hereinafter, ‘the CGST Department’) has already adjudicated the matter on the same issue and thus, the DGST Department does not have the power to adjudicate upon the same. The overlapping has been explained by the Petitioner in the synopsis to the present petition by way of table. The said table is extracted herein below:

6. The submission on behalf of the Petitioner is that neither the SCN nor the impugned order issued upon the Petitioner by the DGST Department is tenable.

7. Learned counsel for the Petitioner also submits that in so far as the demand by the CGST Department is concerned, the same was challenged before the Commissioner (Appeals-I), CGST and the appeal in respect of the said proceedings has also been decided vide Order-in-Appeal No.: 17-18/ Commr./Central Tax/ Appeal-I/ Delhi/ 2025 dated 3^rd April, 2025, wherein a penalty has been imposed on the Petitioner.

8. In view of the above, it is clear that the DGST Department shall be required to look at the order passed by the appellate authority dated 3rd April, 2025. The relevant provision being relied upon the Petitioner i.e., Section 6(2)(b) of the CGST Act is reproduced herein below:

6. Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances

Xxxx

(2) Subject to the conditions specified in the notification issued under sub-section (1),—

xxxxx

(b)

where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.

9. Further, this Court in W.P. (C) 8625/2022 titled Amit Gupta v. Union of India & Ors., while discussing the above-stated provision at length, has held as under:

28. To ensure that there are no multiple proceedings in regard of the central and the state officers being authorized as proper officers, Clause (b) of Section 6(2) of the Act provides that where a proper officer under the SGSTAct and the UGSTAct has initiated proceedings on a subject matter, the proper officer under the Act would not initiate proceedings “on the same subject matter”. This provision of CGST is also mirrored by Clause (b) of Section 6(2) of the SGST Act and UGST Act as well. Thus, where a proper officer under the CGSTAct had initiated proceedings on a subject matter, no proceedings would be initiated by proper officer authorized under the SGST Act or UGST Act on the same subject matter.

29. It is clear that the object of Section 6(2)(b) of the Act is to ensure that cross empowerment of officers of central tax and state tax do not result in the taxpayers being subjected to parallel proceedings.

30. We are unable to accept that the provisions of Section 6(2)(b) of the Act proscribe the transfer of investigations or proceedings as is contended on behalf of the petitioner. The object of Section 6(2)(b) of the Act is to avoid multiple proceedings by State Tax Officers and Central Tax Officers on the same subject matter and the rule of purposive interpretation requires Section 6(2)(b) of the Act to be read in the light of the aforesaid object.

10 In light of the rationale of Section 6(2)(b) of the CGST Act, as explained in the decision herein above, it is clear that the DGST Department shall be required to consider the order dated 3rd April, 2025 passed by the appellate authority and shall accordingly reconsider as to whether the SCN dated 27th November, 2024 as also the consequent impugned order dated 27th February, 2025 will sustain in view of Section 6(2)(b) of the CGST Act.

11. The impugned order is accordingly set aside. Let the order of the Commissioner (Appeals-I), CGST dated 3^rd April, 2025 be placed before the DGST Department so that the matter can be considered afresh. A personal hearing shall be afforded to the Petitioner, before taking any decision.

12. The petition is disposed of in said terms. Pending applications, if any, are also disposed of.