Issuance Of Summons Not Considered ‘Initiation of Proceedings’: Armour Security (India) Ltd. v. Commissioner, CGST
Brief Facts and Background:
The Petitioner, engaged in the business of providing security services, was issued a Show Cause Notice (“SCN”) by the State GST Department constituted under the State Goods and Services Tax Act (“SGSTA”) on 18 November 2024. The said show cause notice was served on the ground that –
(i) net tax under declared due to non-reconciliation of turnovers in other returns and e-way bill information; (ii) excess claim of ITC.
Subsequently, the Commissioner, CGST, Delhi East Commissionerate issued summons on 23 January 2025 under Section 70 of the Central Goods and Services Tax Act, 2017 (“CGST Act”), requiring the directors of the Petitioner to produce various documents.
Aggrieved by the initiation of parallel proceedings by both the State and Central GST authorities, the Petitioner filed a writ petition before the Hon’ble High Court of Delhi (“High Court”), contending that the issues raised by the Central Authorities had already been examined by the State GST Department. It was further submitted that, considering Section 6(2)(b) of the CGST Act, the Central GST authorities lacked jurisdiction to conduct a separate investigation into the same matter. The High Court dismissed the writ petition and declined to interfere with the summons issued to the Petitioner, holding that the expression “any proceeding” under Section 6(2)(b) of the CGST Act cannot be interpreted to include a search or investigation. It observed that a summons or investigation following a search serves merely as a precursor to formal proceedings and is distinct from assessment proceedings, being primarily intended to collect information. The Court clarified that the statutory bar against parallel proceedings applies only to assessment-related actions, such as those under Sections 73 and 74 of the CGST Act, and not to preliminary investigative steps undertaken to gather facts.
Aggrieved by the order of the Delhi High Court, the petitioner preferred a Special Leave Petition before the Supreme Court.
Issue for consideration:
The issue for consideration before the Apex Court was whether issuance of summons can be construed as ‘initiation of proceedings’ in respect of the ‘same subject matter’ within the meaning of Section 6(2)(b) of the CGST Act.
Judgement:
The Apex Court first observed that the framework of the GST regime is founded on two central and interrelated concepts: (i) the principle of a “single interface” and (ii) the concept of “cross-empowerment.”
Whether summons amount to ‘initiation of proceedings’ under Section 6(2)(b)?
The Supreme Court of India observed that various High Courts have adopted divergent views on the scope of the term “proceedings” in this context. Some courts have held that proceedings extend to audits, inquiries, or investigations for instance, in R.P. Buildcon1 and Vivek Narsiya2, whereas others, such as in G.K. Trading3, and Anurag Suri4, have confined “proceedings” to those commencing with a show cause notice, reasoning that summons under Section 70 are merely steps in aid of an inquiry and do not, by themselves, constitute proceedings.
Referring to the ninth GST Council meeting held on January 16, 2017, and Circulars dated October 5, 2018, and June 22, 2020, the GST framework strikes a balance between the principle of a single interface where one authority manages routine taxpayer compliance and cross-empowerment, which equips both Centre and States for intelligence-driven enforcement actions. Section 6 of the CGST Act formalizes this cross-empowerment by permitting officers from either department to function as ‘proper officers’ under the other’s law, while prohibiting duplicate proceedings on identical matters. For administrative efficiency, taxpayers are allocated between Centre and States, yet either authority may independently initiate intelligence-based enforcement.
A summons constitutes merely a preliminary step in an investigation or inquiry, aimed at gathering information rather than serving as a final action. While tax liability may emerge from audits, scrutiny, or investigations, Sections 73, 74, and 76 of the CGST Act mandate issuance of a show cause notice before any demand or recovery can be enforced. Although “proceedings” remain undefined in the CGST Act, it commences only with the show cause notice.
Meaning of ‘subject matter’ under Section 6(2)(b) of the CGST Act:
One of the claims of the Petitioner was that both the investigations centered on the same subject matter. However, the phrase “subject matter” under Section 6(2)(b), though undefined in GST law, has been judicially construed to denote the cause of action for which proceedings are launched, ensuring only one authority (Central or State) pursues a single cause to prevent duplication. This subject matter crystallizes upon issuance of the show cause notice, which delineates allegations, period, invoked provisions, and proposed demand, thereby inaugurating formal proceedings. The statutory bar under Section 6(2)(b) applies solely when proceedings involve identical liabilities or overlapping obligations; distinct violations remain pursuable by separate authorities, with the Apex Court stipulating two conditions for “sameness”: (i) the proceedings must concern the same liability or offence based on identical facts, and (ii) the sought demand, penalty, or relief must match.
Thus, the Supreme Court conclusively held that the issuance of summons or initiation of search/investigation does not amount to ‘initiation of proceedings’ for the purposes of Section 6(2)(b) of the CGST Act.
Our thoughts:
The Supreme Court’s judgment reinforces that the statutory bar under Section 6(2)(b) of the CGST Act applies exclusively to parallel assessment or adjudicatory actions concerning the identical subject matter such as tax demands, penalties, or recoveries under Sections 73, 74, or 76 and does not extend to simultaneous investigations or summons issued under Section 70 for information-gathering. To operationalize this principle and prevent harassment, the Court issued pragmatic guidelines for authorities: (i) they must proactively communicate with counterpart agencies upon detecting potential overlaps in the same subject matter; (ii) overlapping show cause notices must be quashed or withdrawn by the second authority; and (iii) taxpayers remain obligated to fully cooperate with summons, producing documents as required during preliminary inquiries.
This balanced approach fortifies the GST regime’s foundational tenets of a “single interface” for routine compliance and “cross-empowerment” for intelligence-driven enforcement, while advocating real-time data-sharing mechanisms between Central and State authorities to foster efficient, duplication-free tax administration and safeguard taxpayers from protracted multiplicity of proceedings.
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