GST Update on whether dual investigation proceedings can be initiated by different authorities against the assessee?

This update intends to discuss about the issues in cross empowerment of both the Central and the State tax authorities for enforcement of intelligence based action against the taxpayer. It has been clarified vide Letter D.O.F. No. CBEC/20/43/01/2017-GST (P.T.) dated 5th October 2018 that officers of both Central and State tax are authorised to initiate intelligence based proceedings against the assessee and are required to complete the said proceedings irrespective of the jurisdiction under which assessee is operating. To illustrate- if M/s ABC is registered under GST Law with the Central Tax Authorities then investigation proceedings can be initiated either by Central tax authorities or State tax authorities. It is also clarified that there is no need to transfer the proceedings initiated by the State tax authorities to the Central tax authorities if M/s ABC is registered under Central Tax authorities. However, the question that arises is whether the investigation proceedings can be simultaneously initiated against the assessee by two different authorities?  One such issue was dealt in the case of M/s Bhawani Textile [C/SCA/5273/2020 dated 04.03.2020] where the search was carried out at the office premises of by DGGI, Ahmedabad Unit under Section 67 of the CGST Act, 2017 but simultaneously summons were being issued by the State tax authorities also. The DGGI had seized original books of account and document of the petitioner for carrying out the investigation. Thereafter, the summons was issued by Deputy Commissioner, State Tax and DGGI, Surat for conducting inquiry at office premises of the petitioner. In the instant case, there was nothing on record to indicate that the Central Tax Authority has transferred the case to any other authority of state. The Taxpayer filed a writ application before the Gujarat High Court wherein he sought relief that once the proceedings are initiated by the DGGI Ahmedabad Zonal Unit, no other authorities should interfere until the proceedings are completed by the authority who first initiated.

The Hon’ble Gujarat High Court took a reference to the clarification given by the Board on 5th October 2018 regarding the Cross Empowerment of both tax authorities and stated that if an intelligence based enforcement action is taken by the Central Tax Officer against the taxpayer which has its administration under the State tax, the officers of the Central tax authority would not transfer the case to its State tax. In the case on hand while no transfer of case was done by the Central Tax Authority to the State, the summons were issued on independent basis by the State Tax and DGGI Surat. It was held that no undue harassment shall be caused by different authorities on the same matter until the DGGI, Ahmedabad reaches a logical conclusion.

These Dual adjudication and control under GST has bought fear in the industry where the Intelligence based audits can be conducted by state governments for taxpayers under the central government jurisdiction vice-a-versa. The industry would prefer a single administration and control. The meaning of cross empowerment cannot be taken as a tool to harass the assessee so as to knock the doors of High Court for interim reliefs from the dual investigation proceedings.

This is solely for educational purpose.

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