The Supreme Court of India, in a landmark judgment delivered on August 14, 2025, in the case of M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate & Anr. [Special Leave Petition (C) No. 6092 of 2025 dated August 14, 2025], has provided crucial clarity on the interpretation of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”). This ruling addresses the persistent ambiguity surrounding the “initiation of proceedings” and “same subject matter” in the context of parallel investigations and/ or proceedings by the Central and State tax authorities. The Court dismissed the Special Leave Petition, upholding the High Court’s decision not to interfere with the summons issued under Section 70 of the CGST Act.
Case Background (Factual Matrix):
The Petitioner, M/S ARMOUR SECURITY (INDIA) LTD., a public limited company providing security services and registered with Delhi GST authorities, became involved in a dispute concerning tax demands and investigations.
- Initial Show Cause Notice (SCN): On November 18, 2024, Respondent No. 2 ( State GST authority) issued a show cause notice under Section 73 of the CGST Act for the tax period April 2020-March 2021. This SCN demanded 1,24,92,162/- (CGST, SGST, IGST) along with interest and penalty. The grounds included under-declared net tax due to non-reconciliation of turnovers and e-way bill information, as well as an excess claim of Input Tax Credit (ITC).
- Search and Summons by Central Authority: Subsequently, on January 16, 2025, officers of Respondent No. 1 (Commissioner, CGST, Delhi East Commissionerate) conducted a search at the petitioner’s premises under Section 67(2) of the CGST Act. Electronic gadgets and documents were seized, and summons under Section 70 of the CGST Act were issued to four company directors, requiring them to produce documents. Another summons was issued on January 23, 2025, to a director for document production.
- Petitioner’s Challenge: On January 24, 2025, the petitioner informed Respondent No. 1 that Respondent No. 2 was already investigating the company on similar grounds, including ITC claimed from cancelled suppliers, and requested the release of seized items.
Aggrieved by the summons from Respondent No. 1, the petitioner filed a writ petition before the High Court of Delhi, arguing that Respondent No. 1 lacked jurisdiction due to Respondent No. 2’s prior investigation on the same issue, invoking Section 6(2)(b) of the CGST Act.
High Court’s Impugned Order:
The High Court of Delhi dismissed the writ petition, refusing to interfere with the summons. The High Court reasoned that:
- The expression “any proceeding” in Section 6(2)(b) does not include a search or investigation.
- Summons or investigations following a search are considered precursors to formal proceedings, intended primarily to elicit information, unlike assessment proceedings.
- The statute aims to prevent parallel assessment proceedings, particularly those under Sections 73 and 74 of the CGST Act. At the summons stage, authorities are merely gathering information, and the specific course of action is not yet determined.
- The High Court also distinguished the petitioner’s case from Vivek Narsaria v. State of Jharkhand, where parallel inquiries required reversal of input tax credit, noting that the search in the present case occurred subsequent to the pending proceedings and was not related to prior assessments.
Petitioner’s Submissions before the Supreme Court:
The Petitioner, argued that Section 6(2)(b) expressly prohibits parallel proceedings on the same subject matter by State and Central GST authorities. Key arguments included:
- The summons issued by Respondent No. 1 concerning the availability of ITC from cancelled dealers were barred as Respondent No. 2 had already issued an SCN on the same subject.
- The High Court erred in limiting Section 6(2)(b) to proceedings under Sections 73 and 74, arguing that the statutory bar should apply to summons issued under Section 70.
- The common GST portal reflects all proceedings, making both authorities aware of ongoing matters.
- The GST regime is founded on cooperative federalism, requiring one authority to aid proceedings initiated by the other, rather than conducting parallel investigations.
- Reliance was placed on Circular dated October 5, 2018, emphasizing harmonious exercise of powers.
- The CGST Act is a self-contained code, and Section 6(2)(b) should be interpreted literally, where “any proceedings” implies a broad and inclusive scope.
Supreme Court’s Analysis and Key Rulings:
The Supreme Court focused on whether the issuance of summons amounted to “initiation of proceedings” concerning the “same subject matter” under Section 6(2)(b) of the CGST Act.
I. Whether issuance of summons is “initiation of proceedings” under Section 6(2)(b)?
The Supreme Court examined contrary views from various High Courts and affirmed the High Court of Delhi’s decision:
- Definition of “Proceedings”: The Court held that summons issued under Section 70 of the CGST Act do not constitute “initiation of proceedings” within the meaning of Section 6(2)(b). Summons are merely a step in an inquiry or investigation to gather information, not the culmination.
- Distinction between “Inquiry” and “Proceedings”: The Court concurred with the Allahabad High Court (K. Trading v. Union of India) and the Kerala High Court (K.T. Saidalavi v. State Tax Officer) that “inquiry” under Section 70 is not synonymous with “proceedings” under Section 6(2)(b). Proceedings under Section 6(2)(b) involve actions related to assessment, demand, and penalty, typically initiated by a show cause notice.
- Show Cause Notice as Commencement of Proceedings: The Court emphasized that “initiation of any proceedings” refers to the formal commencement of adjudicatory proceedings through the issuance of a show cause notice (SCN). A SCN is a mandatory precondition for raising a demand, sets the law in motion concerning liability, and marks the commencement of quasi-judicial adjudication. Until an SCN is issued, the Department retains the discretion not to initiate proceedings.
- Search vs. Proceedings: A search operation under Section 67(2) is distinct from proceedings initiated after an SCN. Even after a discovery during a search, the Department must decide whether to issue an SCN or drop the matter.
II. Whether “subject matter” includes all matters dealt with in summons?
The Court clarified the term “subject matter” under Section 6(2)(b):
- “Subject matter” is intrinsically tied to the determination of specific tax liability or contravention articulated in a show cause notice. It refers to the alleged offence or non-compliance, together with the relief or demand sought by the Revenue.
- The bar under Section 6(2)(b) is attracted only when both proceedings seek to assess or recover an identical or overlapping liability. If the proceedings concern distinct infractions, the bar is not attracted, even if the tax liability is similar.
- Twofold Test for “Same Subject Matter”:
- An authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts.
- The demand or relief sought is identical.
- In the present case, the summons alone could not reveal the subject matter; it could only be ascertained from the SCN.
III. Purport of an “Order” under Section 6(2)(a) of the CGST Act
Section 6(2)(a) mandates that if a proper officer issues an order under the CGST Act, they must also issue a corresponding order under the SGST or UTGST Act, with intimation to the jurisdictional officer. This provision aims to:
- Insulate taxpayers from multiple authorities for the same subject matter.
- Enable officers to render a comprehensive order, avoiding multiplicity of proceedings.
- Ensure that any action by the Department is duly apprised to the jurisdictional counterpart.
Framework of Single Interface and Cross-Empowerment:
The GST regime balances two concepts:
- Single Interface: Taxpayers should not be subjected to dual administrative control, with one tax administration exercising exclusive control over all aspects of GST compliance (CGST, SGST, IGST).
- Cross-Empowerment: Both Central and State tax administrations are empowered to undertake intelligence-based enforcement actions across the entire value chain, irrespective of administrative assignment.
The Circular dated October 5, 2018, clarifies that the authority initiating intelligence-based enforcement action is empowered to complete the entire process, including investigation, SCN issuance, adjudication, and recovery. This circular’s intent is to prevent a bar on enforcement action by one authority against a taxpayer assigned to another.
Supreme Court’s Conclusion and Guidelines:
The Supreme Court summarized its findings and issued vital guidelines to ensure harmonious operation of the GST framework:
Key Conclusions:
- Section 6(2)(b) bars the “initiation of any proceedings” on the “same subject matter”.
- Audit/scrutiny-based actions belong to the assigned tax administration.
- Intelligence-based enforcement actions can be initiated by either Central or State tax administrations.
- Parallel proceedings should not be initiated by another tax administration once one has initiated intelligence-based enforcement action.
- Actions for probing an inquiry or gathering evidence/information do not constitute “proceedings” under Section 6(2)(b).
- “Initiation of any proceedings” refers to the formal commencement of adjudicatory proceedings via a show cause notice, not summons, search, or seizure.
- “Subject matter” refers to any tax liability, deficiency, or obligation arising from a particular contravention.
- The bar is attracted where two proceedings seek to assess or recover an identical or partially overlapping tax liability.
- Distinct infractions, even with similar tax liability, do not constitute the “same subject matter”.
- The twofold test for “same subject matter” involves identical liability/offence on same facts, and identical demand/relief sought.
Guidelines for Authorities and Taxpayers:
- Compliance with Summons: An assessee must comply with summons, as their mere issuance does not indicate initiation of proceedings.
- Assessee’s Obligation to Inform: If an assessee is aware of an overlap in inquiry/investigation by different authorities, they must forthwith inform the authority that initiated the subsequent action in writing.
- Inter-Authority Communication: Upon receiving such intimation, tax authorities shall communicate with each other to verify the claim and avoid duplication.
- Intimation of Distinct Subject Matters: If the overlap claim is untenable, an intimation with reasons and distinct subject matters shall be conveyed to the taxpayer.
- Quashing Overlapping SCNs: Any show cause notice for a liability already covered by an existing SCN shall be quashed.
- Decision on Continuing Inquiry: If authorities find an overlap, they shall decide inter-se which authority will continue the inquiry/investigation, with the other forwarding all relevant material. The taxpayer cannot choose which authority proceeds.
- First to Initiate Rule: If authorities cannot agree, the authority that first initiated the inquiry/investigation shall continue, and courts may transfer the matter to that authority.
- Writ Petition as Recourse: If guidelines are not complied with, the taxpayer may file a writ petition under Article 226 of the Constitution.
- Taxpayer Cooperation: Taxable persons must ensure complete cooperation with authorities.
Suggestions for Seamless Data Sharing:
The Supreme Court also urged the DGGI to consider developing a robust mechanism for seamless data and intelligence sharing between Central and State authorities. This includes providing real-time visibility of actions taken pursuant to intelligence inputs, fostering harmony and cooperative federalism, and mitigating taxpayer hardship due to overlapping proceedings.
This judgment provides much-needed clarity, streamlining the investigative and adjudicatory processes under the GST regime and reinforcing the principle of preventing undue harassment to taxpayers from multiple authorities.
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(Author can be reached at info@a2ztaxcorp.com)
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