Facts of the Case

The petitioner, M/s. Baibhaw Construction Private Limited, through its Director Ranjan Kumar, a resident of Gopalganj, Bihar, is an assessee registered under the Bihar Goods and Services Tax Act, 2017. The petitioner was issued a notice dated 04.02.2022 (Annexure-1) by the Assistant Commissioner of State Tax, Gopalganj Circle, for conducting an audit for financial year 2017-18. Separately, the petitioner had earlier appeared in response to a summons dated 07.07.2021 under Section 70 of the CGST Act issued by the Senior Intelligence Officer, Directorate General of GST Intelligence (DGGI), Patna Zonal Unit. It was thereafter issued a further notice dated 07.09.2022 (Annexure-2) under Section 70 covering financial years 2017-18 to 2021-22, followed by a notice dated 30.09.2022 (Annexure-3) under Section 73/Section 74 of the CGST Act from the same DGGI officer. Aggrieved by these simultaneous proceedings by the State and Central GST authorities for the same financial year, the petitioner approached the Patna High Court under Article 226, invoking Section 6 of the BGST Act. The matter was heard by a Division Bench on 10.10.2023.

Issues Involved

  1. Whether simultaneous proceedings by the State Tax Authority (audit notice) and the Central Tax Authority (DGGI summons and show-cause notice) against the same assessee for overlapping financial years were legally permissible.
  2. Whether Section 6(2)(b) of the CGST/BGST Act, which bars a second 'Proper Officer' from initiating proceedings on the same subject matter once one authority has commenced action, required the State Tax Authority to stay its hands.
  3. Which of the two proceedings — the State audit notice dated 04.02.2022 or the DGGI's Section 70 summons dated 07.07.2021 — was first in point of time and therefore entitled to continue.

Petitioner's Arguments

  • The petitioner argued that it was being subjected to simultaneous proceedings by two different tax authorities for the identical assessment year, which was impermissible.
  • Relying on Section 6 of the BGST Act, the petitioner contended that since the inquiry was being conducted by a 'Proper Officer' authorized to act under both the State and Central GST enactments, only the authority that first initiated the inquiry should be permitted to proceed.
  • The petitioner sought a direction that the first inquiry be allowed to proceed to conclusion while the summons and proceedings issued by the other authority be stayed until then.

Respondent's Arguments

  • The Government Advocate representing the State and the Additional Solicitor General representing the Union of India both sought continuation of the proceedings initiated by their respective authorities, resisting any stay.
  • Reliance was placed on a prior co-ordinate Bench decision of the same Court where simultaneous proceedings by State and Central authorities were permitted to continue, since those proceedings concerned different assessees/different subject matter.

Court Order/Findings

  • The Court examined Section 2(91), Sections 3 and 4 of the CGST/BGST enactments defining 'Proper Officer', and Section 6, which harmonizes cross-empowerment between Central and State Tax Officers, along with the CBEC's clarificatory D.O. letter dated 05.10.2018 on intelligence-based enforcement action.
  • It distinguished the Delhi High Court's ruling in Indo International Tobacco Ltd. v. Vivek Prasad, where the authorities themselves had transferred the investigation to a single umbrella, noting that no such transfer had occurred here.
  • On facts, the Court found that the Central Tax Authority's Section 70 summons dated 07.07.2021 preceded the State Tax Authority's audit notice dated 04.02.2022, and that both concerned the same assessee and overlapping financial year 2017-18.
  • Applying Section 6(2)(b), the Court held that since the Central Tax Authority had first initiated intelligence-based enforcement action, the State Tax Authority's proceedings (Annexure-1) must be kept in abeyance, and directed that any documents already furnished to the State Tax Authority be transmitted to the Central Tax Authority, before whom the petitioner shall appear.
  • The writ petition was allowed with these directions, and no order was made on costs.

Important Clarification

  • Both Central and State GST authorities have concurrent power to initiate intelligence-based enforcement action against any taxpayer irrespective of administrative assignment, as clarified by the CBEC's D.O. letter dated 05.10.2018; the authority that initiates such action is entitled to carry it through to conclusion without being obliged to transfer it.
  • Under Section 6(2)(b) of the CGST/SGST Acts, once one 'Proper Officer' has initiated proceedings on a subject matter against an assessee, the officer under the other enactment cannot initiate a fresh proceeding on the same subject matter for the same period — the temporal sequence of initiation, not the administrative assignment of the taxpayer, determines which authority proceeds.
  • Where the overlapping proceedings concern different assessees or distinguishable subject matter, however, courts have permitted both to continue simultaneously, as illustrated by the co-ordinate Bench decision the Department relied upon.

Sections Involved

  • Section 6 of the Central Goods and Services Tax Act, 2017 (and the parallel provision of the BGST Act) — cross-empowers Central and State Tax Officers as 'Proper Officer' under each other's enactments and bars parallel proceedings on the same subject matter.
  • Section 2(91) of the CGST/BGST Act — defines 'Proper Officer'.
  • Sections 3 and 4 of the CGST/BGST Act — provide for classes of officers and their appointment.
  • Section 70 of the CGST Act, 2017 — power to summon persons for producing documents/giving evidence, invoked by the DGGI.
  • Sections 73 and 74 of the CGST Act, 2017 — provisions for determination of tax not paid/short paid, without and with allegation of fraud respectively.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee, in the sense that duplicative State Tax proceedings were directed to be kept in abeyance, though the Central Tax (DGGI) proceedings were permitted to continue against the petitioner — so the outcome is better described as procedural relief for the assessee rather than a substantive win on any tax liability.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Judicature at Patna
  • Case No.: Civil Writ Jurisdiction Case No.2668 of 2023
  • CNR: Not available on record
  • Coram: Chief Justice K. Vinod Chandran and Justice Rajiv Roy
  • Decision Date: 10.10.2023
  • Disposal Nature: Writ petition allowed with directions

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