🛑 No Parallel Proceedings: Orissa High Court Quashes GST Demand Overlapping with DGGI Investigation

 

The dual structure of India's Goods and Services Tax (GST) regime, involving both Central (CGST) and State (SGST) authorities, is designed to be based on cooperative federalism. However, the execution often leads to jurisdictional conflicts, subjecting taxpayers to parallel investigations and unnecessary harassment.

In a landmark ruling, the Orissa High Court has reinforced the principle of "one tax, one investigation," setting aside a show cause notice (SCN) and subsequent demand orders issued by the State GST authority against a taxpayer, M/s. Sai Marketing (Proprietor Anurag Suri). The Court held that the State authority lacked the jurisdiction to proceed when the Central GST intelligence unit (DGGI) was already conducting an intelligence-based investigation on the same subject matter and period.

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1. The Conflict: State vs. Central GST Authority

The dispute arose when the taxpayer, M/s. Sai Marketing, found themselves entangled in two simultaneous investigations for the same period (specifically, March 2018):

Authority	Action Initiated	Status
Directorate General of GST Intelligence (DGGI)	Initiated an intelligence-based enforcement action, impounding business premises, seizing documents, and issuing summons.	Proceedings were ongoing and pending.
State GST Authority	Issued a separate Show Cause Notice (SCN) followed by an order under Section 74 of the OGST Act, demanding tax, interest, and penalty.	Orders were passed despite the taxpayer informing the authority of the pending DGGI investigation.

The taxpayer's primary contention, brought before the High Court, was that the parallel proceedings by the State GST authority violated the jurisdictional framework laid down under the GST Act and, crucially, a binding circular issued by the Central Board of Excise and Customs (CBEC).

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2. The Legal Foundation: Section 6(2)(b) and the CBEC Circular

The Orissa High Court’s judgment hinged on the statutory and administrative framework designed to prevent jurisdictional overreach:

A. Section 6(2)(b) of the CGST Act, 2017

This crucial section establishes the principle of non-duplication. It states that if a proper officer under the State GST Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the Central GST Act on the same subject matter, and vice-versa.

B. The CBEC Clarification (D.O. Letter)

The Court heavily relied on the Central Board of Excise and Customs (CBEC) Circular dated October 5, 2018, which clarifies the division of powers, especially in intelligence-based enforcement:

The authority that initiates an intelligence-based enforcement action (either Central or State) is empowered to complete the entire process—including investigation, issuance of SCN, adjudication, and recovery—arising out of that action.

The Circular explicitly dictates that the initiating authority "would not transfer the said case to its State tax counterpart" and would themselves "take the case to its logical conclusions." This prevents a situation where the taxpayer is subjected to two concurrent investigations or assessments.

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3. The High Court’s Holding

In its judgment, the Orissa High Court ruled decisively in favor of the petitioner, Anurag Suri.

Ø  Violation of Jurisdictional Rule: The Court held that once the Central Authority (DGGI) had initiated proceedings against the petitioner, the State Authority was strictly precluded from launching a parallel investigation or issuing an SCN for the same subject matter and the same period.

Ø  Quashing the Orders: The Court quashed the SCN and the subsequent demand orders passed by the State GST authority, finding them to be a clear violation of the CBEC circular and the spirit of the GST law.

Ø  Coercive Action Barred: Furthermore, the Court directed the State authority to refrain from taking any coercive action against the petitioner until the DGGI proceedings are brought to their logical conclusion.

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4. Key Implications for Taxpayers and Authorities

This judgment serves as a robust defense for taxpayers facing the daunting prospect of double investigation and duplication of efforts:

Ø  Single Investigation Authority: It affirms the legal principle that once one authority (be it Central or State) initiates an investigation or enforcement action, that authority assumes the exclusive jurisdiction to complete the entire adjudication process.

Ø  Protection Against Harassment: The ruling protects taxpayers from the immense burden, time, and financial cost associated with responding to two separate sets of proceedings, summons, and demands for the same alleged contravention.

Ø  Defining "Proceedings": While the Supreme Court has clarified that mere summons or investigation may not constitute "initiation of proceedings" under Section 6(2)(b) unless an SCN is issued, this Orissa High Court case reinforces that once an intelligence-based action is initiated (as by DGGI), the initiating authority must be allowed to complete the process without interference from the parallel wing.

Ø  Actionable Advice: Taxpayers who receive notices from a second authority while an investigation is already pending with the first should immediately cite the CBEC Circular and this, and similar High Court judgments, to challenge the jurisdiction of the second authority.