When GST got introduced, Taxpayers of previous tax regime (i.e. Central Excise, Service-tax, and VAT) were divided between the Centre and States on a defined formula to ensure that there will be a single interface for all of them under GST. However, the contentious issue of dual control and cross empowerment between Centre and the States under GST regime was looming since then.
Section 6 of CGST Act 2017 authorises officers of State tax or Union territory tax as “proper officer” for purpose of refund of tax under the Act except this no notifications issued by CBIC for cross-empowerment of officers under GST.
With this background, the Hon’ble High Court of Madras in the case of Tvl. Vardhan Infrastructure and others (W.P. No.34792 of 2019 / Date of Pronouncement: 11/03/2024) has dealt the matter in great length and is worth noting.
In this case, the Petitioners (i.e. Tvl. Vardhan Infrastructure and others) filed the Writ in the Madras High Court challenging cross-empowerment of tax authorities w.r.t inspection, search, seizure and arrest (under Chapter XIV) of CGST Act. Their arguments were that they have been assigned either to the State Authorities or to the Central Authorities for administrative purposes under the provisions of the respective GST enactments but are/were being subjected to inspection, search, seizure and arrest proceedings by their counterpart. The Petitioners submitted before the Court that in the absence of a proper Notification u/s 6 of the respective GST enactments for cross-empowerment, the impugned proceedings by the respective counterparts were without jurisdiction.
The Hon’ble High Court while dealing with the matter noted that a separate Model Notification on cross-empowerment was circulated amongst the States during September 2017. Also, GST Council at its 22nd Meeting held on 06.10.2017, vide Agenda No.9 had deliberated the “Proposal for issuing notifications on cross empowerment for ensuring single interface under GST”. However, the said Model Notification have not been notified (and remain as Draft Notifications till date) due to disagreement in relation to place of supply rules under IGST Act at the said GST council Meeting.
The Hon’ble Madras High Court delivered the Judgement in the following para:
“62. Since, no notifications have been issued for cross-empowerment with advise of GST Council, except for refund, impugned proceedings are to be held without jurisdiction.
- Thus, if an assessee has been assigned administratively with the Central Authorities, the State Authorities have no jurisdiction to interfere with the
assessment proceedings in absence of a corresponding Notification u/s 6 of the respective GST enactments. - Similarly, if an assessee has been assigned to the State Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017 dated 20.09.2017, the officers of the Central GST cannot interfere although they may have such intelligence regarding the alleged violation of the Acts and Rules by an assessee.
- The manner in which the provisions have been designed are to ensure that there is no cross interference by the counterparts. Only exception provided is under Section 6 of the respective GST enactment. Therefore, in absence of a notification for cross-empowerment, the action taken by the respondents are without jurisdiction. Officers under the State or Central Tax Administration as the case may be cannot usurp the power of investigation or adjudication of an assesse who is not assigned to them.
- Therefore, the proceedings initiated are to be held as without jurisdiction and warrants interference.
- At the same time, it is noticed that there is possibly case made out against each of the petitioners and proceedings should be initiated against each of the petitioners by the Authority to whom they have been assigned for the purported loss of Revenue under the respective GST Enactments.
- Therefore, while quashing the impugned proceedings, there shall be a direction to the Central Authority/State Authority as the case may be to whom the respective petitioners have been assigned for administrative purpose to initiate appropriate proceedings afresh against them strictly in accordance with the provisions of the respective GST Enactments and GST Enactments Rules and Circular issued thereunder. The time between the initiation of the proceedings impugned in these writ petitions and time during the pendency of the present writ petition till the date of receipt of this order shall stand excluded for the purpose of computation of limitation.”
Conclusion:
The Hon’ble Madras High Court ordered that in absence of a notification for cross empowerment, inspection, search, seizure and arrest matters under Chapter XIV of CGST Act to be initiated by assigned jurisdictional officer and not any other authority or by their counterpart.
Knowledge sharing initiative of D.S. Mahajani & Associates, Cost Accountants. The views expressed hereinabove are the individual views of CMA D.S. Mahajani. He can be reached on +91-98256 00655 | Email: dsmahajani@gmail.com
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