Supreme Court on Parallel GST Proceedings: Section 6(2)(b) Bar Applies from Show Cause Notice, Not Summons or Search; Guidelines Issued [2025 INSC 982]

The Supreme Court held that the bar in Section 6(2)(b) of the CGST Act on "initiation of any proceedings" on the "same subject matter" by both Central and State tax authorities applies only from the formal commencement of adjudication by issue of a show cause notice – not to summons, search, seizure or other inquiry and evidence gathering. "Same subject matter" means an identical or partly overlapping tax liability arising from the same contravention. The Court declined to interfere with summons issued by Central GST despite a State show cause notice, and laid down guidelines to avoid duplicate investigations (paras 96–97, 100).

Headnote

Goods and Services Tax — Cross-empowerment — Parallel proceedings by Central and State tax authorities — "Initiation of any proceedings" — "Same subject matter" — Summons and search — CGST Act, 2017, Ss. 6(2)(a), 6(2)(b), 67, 70, 73, 74; equivalent State GST provisions; Constitution of India, Art. 226.

Whether summons under S. 70 issued by Central GST, after a State show cause notice on allegedly the same issue, are barred by S. 6(2)(b) — Held, S. 6(2)(b) bars "initiation of any proceedings" on the "same subject matter"; investigative steps for gathering evidence – summons, search, seizure – are not "proceedings"; the expression refers to formal commencement of adjudicatory proceedings by issue of a show cause notice. "Subject matter" is the tax liability, deficiency or obligation arising from a particular contravention; identical or partially overlapping liability attracts the bar, distinct infractions do not. Audit or scrutiny-based action must be taken by the administration to which the taxpayer is assigned; intelligence-based enforcement can be taken by either, but parallel action should not be initiated by the other. Guidelines issued; petition disposed of.

(Paras 96–100)

Judgment Intelligence

Key Holdings

• Section 6(2)(b) bars "initiation of any proceedings" on the "same subject matter" (para 96(i)).
• Action arising from audit or detailed scrutiny of returns must be initiated by the tax administration to which the taxpayer is assigned (para 96(ii)).
• Intelligence-based enforcement action can be initiated by either the Central or the State administration, but the other should not initiate parallel proceedings (para 96(iii)–(iv)).
• Summons, search, seizure and other inquiry or evidence-gathering steps are not "proceedings"; proceedings begin with a show cause notice (para 96(v)–(vi)).
• "Same subject matter" is an identical or partly overlapping tax liability, deficiency or obligation from a particular contravention; distinct infractions are not the same subject matter even if the amount is similar (para 96(vii)–(x)).

Brief Facts

The petitioner, a security services company registered with the Delhi GST authorities, received a show cause notice dated 18.11.2024 under Section 73 from the State authority for April 2020–March 2021, raising a demand of Rs. 1,24,92,162 on grounds of turnover mismatch and excess ITC (paras 3–4). On 16.01.2025 Central GST officers searched its premises under Section 67(2), seized documents and devices, and issued summons under Section 70 to its directors; further summons followed on 23.01.2025. The petitioner contended that the State was already investigating the same issue, including ITC from cancelled suppliers (paras 5–6). The Delhi High Court dismissed its writ petition on 07.02.2025, holding that summons and investigation are only a precursor to proceedings (paras 7–10). The Supreme Court decided at the admission stage to dismiss the SLP, but assigned reasons in view of the importance of the issue (para 1).

Issues

1. Whether issuance of summons can be regarded as "initiation of proceedings" under Section 6(2)(b) of the CGST Act?
2. Whether "subject matter" under Section 6(2)(b) includes all matters dealt with in summons?
3. What is the purport of an "order" under Section 6(2)(a)?

Court's Findings

Survey of conflicting High Court views: The Court examined the divergent views of High Courts on whether "proceedings" includes inquiry or investigation, and the framework of single interface and cross-empowerment under Section 6, including the CBEC communication dated 05.10.2018 on intelligence-based enforcement.

Meaning of "initiation of any proceedings": Steps taken to probe an inquiry or gather evidence or information are not "proceedings". The bar is triggered by the formal commencement of adjudicatory proceedings by issue of a show cause notice (para 96(v)–(vi)).

Meaning of "same subject matter": Relying on Gorkha Security Services on the function of a show cause notice, the Court held that the subject matter is the liability arising from a particular contravention that the Department seeks to assess or recover. A twofold test applies: whether an authority has already proceeded on an identical liability or offence on the same facts, and whether the demand or relief sought is identical (para 96(vii)–(x)).

Final Outcome / Directions (paras 97–100)

• Guidelines (para 97): (a) the assessee must, in the first instance, comply with summons or a show cause notice; (b) if aware of an overlapping inquiry by another authority, it must inform the later authority in writing; (c) the authorities must verify the claim with each other; (d) if the claim is untenable, reasons and the distinct subject matters must be conveyed in writing; (e) authorities may inquire until overlap is ascertained, and a show cause notice on a liability already covered by an existing notice shall be quashed; (f) if overlap is found, the authorities decide inter se who continues and transfer all material; (g) failing agreement, the authority that first initiated the inquiry continues; (h) non-compliance can be challenged under Article 226; (i) taxpayers must cooperate fully.
• Suggestion to DGGI to develop a mechanism for real-time data and intelligence sharing between Central and State authorities (paras 98–99).
• Petition disposed of in the above terms (para 100).

Legal Principle

The Section 6(2)(b) bar against duplicate proceedings bites only at the show cause notice stage and only for the same (wholly or partly identical) liability from the same contravention; investigations may continue until overlap is established, subject to the coordination guidelines laid down by the Court.

Precedents Relied Upon

• Gorkha Security Services v. Govt. (NCT of Delhi), (2014) 9 SCC 105 – Relied upon: a show cause notice informs the noticee of the case to be met; used to identify the "subject matter" of proceedings.
• State of Punjab v. Ajaib Singh, AIR 1953 SC 10 and Collector of Customs, Baroda v. Digvijaysinhji Spinning & Weaving Mills Ltd., AIR 1961 SC 1549 – Referred to: harmonious construction avoiding practical inconvenience.
• Vivek Narsaria v. State of Jharkhand, 2024 SCC OnLine Jhar 50 – Considered: parallel inquiries by State and Central authorities.
• Decisions of the Allahabad, Madras, Kerala, Rajasthan, Punjab & Haryana, Himachal Pradesh and Delhi High Courts (including G.K. Trading, Kuppan Gounder P.G. Natarajan and K.T. Saidalavi) – Surveyed to resolve the conflict on the meaning of "proceedings".

Important Paragraphs of the Judgment

Para 96(v)–(vi): "All actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute "proceedings" within the meaning of Section 6(2)(b) of the CGST Act. … The expression "initiation of any proceedings" occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc."

Para 96(viii)–(ix): "Where any two proceedings initiated by the Department seek to assess or recover an identical or a partial overlap in the tax liability, deficiency or obligation arising from any particular contravention, the bar of Section 6(2)(b) would be immediately attracted. … Where the proceedings concern distinct infractions, the same would not constitute a "same subject matter" even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted."

Para 97(e): "The taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice. Any show cause notice issued in respect of a liability already covered by an existing show cause notice shall be quashed."

Para 97(g): "However, where the authorities are unable to reach a decision as to which of them shall continue with the inquiry or investigation, then in such circumstances, the authority that first initiated the inquiry or investigation shall be empowered to carry it to its logical conclusion…"

What the Ruling Means: Practical Impact

• Do not ignore summons: Taxpayers must appear and respond even if another authority is already investigating; the objection to duplication must be raised in writing.
• Duplicate show cause notices are vulnerable: A second notice covering a liability already covered by an existing notice is liable to be quashed.
• Document the overlap: The twofold test – same liability on same facts, and same demand – will decide whether the bar applies; distinct contraventions can be pursued separately.
• Writ remedy available: If authorities fail to follow the guidelines, the taxpayer can approach the High Court under Article 226.

Frequently Asked Questions

Can Central and State GST both investigate the same taxpayer?

Either may take intelligence-based enforcement action, but once one has initiated action, the other should not initiate parallel proceedings on the same subject matter (para 96(iii)–(iv)).

Is a summons under Section 70 a "proceeding" under Section 6(2)(b)?

No. Summons, search and seizure are evidence-gathering steps; proceedings begin with a show cause notice (para 96(v)–(vi)).

What is "same subject matter" under Section 6(2)(b)?

An identical or partly overlapping tax liability, deficiency or obligation from a particular contravention. Distinct infractions are not the same subject matter even if the amounts are similar (para 96(vii)–(ix)).

What should a taxpayer do if two authorities investigate the same issue?

Comply with the summons, inform the later authority in writing about the earlier inquiry, and if the authorities do not follow the guidelines, approach the High Court (para 97).

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