Introduction
The Goods and Services Tax (‘GST’) regime in India, introduced in 2017, has been the subject of several legal debates and discussions. One such debate revolves around the jurisdiction of the Central and State tax authorities, particularly in cases where an assessee is assigned to one but subjected to proceedings by the other. This issue of cross-empowerment was recently addressed by the Madras High Court (‘HC’) in Ram Agencies v. Assistant Commissioner of Central Tax[i], providing clarity on the jurisdictional boundaries under the GST regime.
Brief Facts
The Petitioner challenged the order-in-original dated 26.12.2023 (‘impugned order’) passed by the Respondent for the assessment years (‘AYs’) 2017-18, 2018-19, and 2019-20.
The Petitioner’s primary contention was that the impugned order was passed despite a stay being granted by the Principal Seat of the HC against the operation of notifications G.O.(Ms) Nos. 9 and 56 and G.O.(Ms) Nos. 41 and 1, which extended the period of limitation. The Petitioner further argued that they were assessed by the State tax authorities, and therefore, the impugned order passed by the Central tax authorities was contrary to the law.
The Respondent confirmed that the Petitioner was assessed by the State authorities pursuant to the allocation made by the Central Government in terms of the circular[ii] dated 20.09.2017 but contended that based on the judgment rendered in Kuppan Gounder P. G. Natarajan v. Directorate General of GST Intelligence, New Delhi[iii], both the Central and State authorities held concurrent jurisdiction for intelligence-based enforcement actions.
Held
The HC quashed the impugned order passed by the Respondent and ruled in favour of the Petitioner. The issue of cross-empowerment and the jurisdiction of counterparts to initiate proceedings when an assessee has been allocated either to the Central tax authorities or to the State tax authorities was examined.
The HC dismissed the Respondent’s reliance on Kuppan Gounder (supra), reaffirming the principle established in Tvl. Vardhan Infrastructure v. The Special Secretary[iv], which concluded that in the absence of a notification issued for cross-empowerment, the authorities from the counterpart department cannot initiate proceedings where an assessee is assigned to the counterpart. The HC also relied on s. 6 of the Central GST Act, 2017 and the Tamil Nadu GST Act, 2017, reinforcing that proper officers under one act cannot initiate proceedings on matters already handled by the other.
The HC granted liberty to the State authorities to proceed against the Petitioner in terms of the observations contained in the order passed in Tvl. Vardhan Infrastructure’s (supra) case.
Our Analysis
This judgment provides crystal-clear clarification on the aspect of the jurisdictional demarcation between the Central and State tax authorities under the GST regime. The HC’s decision reaffirms the principle that an assessee assigned to one tax authority cannot be subjected to proceedings by the other, thereby emphasizing the procedural sanctity and adherence to the statutory framework established by the GST Council’s circulars. However, the ruling also highlights the need for express notifications regarding cross-empowerment to prevent jurisdictional conflicts.
The impact of this decision extends beyond the immediate parties as far as it prompts a re-evaluation of the cross-empowerment provisions under the GST regime. This could potentially lead to legislative changes to ensure clearer demarcation of jurisdiction and smoother implementation of the GST laws. The ruling also raises questions about the effectiveness of the current GST framework in dealing with complex jurisdictional issues, necessitating further academic and legal discourse on this matter.
End Notes
[i] [2024] 162 taxmann.com 240 (Madras), [dated: 10.04.2024]
[ii] Circular No. 1/2017-GST (Council) dated 20.09.2017.
[iii] [2022] 143 taxmann.com 289
[iv] [2024] 160 taxmann.com 771 (Madras)
Authored by Srishty Jaura, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.