HP High Court Upholds Section 6(2)(b) CGST Act Mandate: Simultaneous GST Proceedings by Dual Authorities Prohibited, Directs Adherence to Supreme Court Framework
Introduction
In a significant ruling reinforcing the statutory prohibition against concurrent adjudication by multiple tax authorities, the Himachal Pradesh High Court addressed the jurisdictional conflict arising from overlapping proceedings initiated by both Central and State GST departments. The matter of Saraswati Spinning and Weaving Mills Vs State of H.P. & others brought to the fore critical questions surrounding the interpretation and application of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, which explicitly bars dual authorities from pursuing parallel adjudicatory actions concerning identical subject matter.
The petitioner approached the constitutional court under Article 226 of the Constitution seeking judicial intervention to quash several administrative actions undertaken by GST authorities, including demand notices issued in FORM GST DRC-01 pertaining to assessment years 2019-20 and 2020-21, along with an adjudication order communicated through DRC-07 dated 5.2.2025.
Factual Matrix and Procedural Background
The petitioner organization filed the writ petition challenging the legitimacy of multiple procedural actions initiated by both the Central GST administration and the State GST department. The challenge encompassed:
- Summary of Show Cause Notice issued on 6.10.2023 in FORM GST DRC-01 (Annexure P-3)
- Summary of Show Cause Notice dated 30.11.2023 in FORM GST DRC-01 (Annexure P-4)
- Summary of adjudication order dated 5.2.2025 in FORM GST DRC-07 (Annexure P-5)
- Order-in-Original dated 3.2.2025 passed by CGST authorities
The fundamental grievance raised by the petitioner centered on the assertion that both administrative authorities had simultaneously commenced investigative and adjudicatory actions concerning the same factual matrix and tax liability, thereby violating the explicit statutory prohibition contained in the CGST Act.
Relief Sought Before the Constitutional Court
The petitioner approached the High Court seeking multiple forms of relief:
- Issuance of a writ of certiorari to quash the DRC-01 notices issued by the second and third respondents covering periods 2019-20 and 2020-21
- Issuance of a mandamus directing the respondent authorities to cease all further proceedings pursuant to the challenged DRC-01 notices on grounds of illegality and statutory non-compliance
- Quashing of the order dated 5.02.2025 communicated by the fourth respondent through Annexure P-7, which allegedly consolidated liabilities spanning 2017-18 to 2022-23, despite the petitioner having properly claimed input tax credit in accordance with statutory provisions
- Interim directions restraining the revenue authorities from adopting coercive measures during the pendency of the constitutional challenge
Core Legal Issue: Prohibition Against Parallel Proceedings
The central legal question before the High Court concerned the proper interpretation and application of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017. This provision establishes a clear statutory bar preventing the commencement of parallel proceedings on identical subject matter once one jurisdictional authority has already initiated action.
The Court observed that this issue had been comprehensively addressed and substantially resolved by the Supreme Court in the landmark judgment of M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr., AIR 2025 SC 3854, which provided authoritative guidance regarding:
- The precise meaning and scope of 'initiation of proceedings'
- The definition and parameters of 'subject-matter'
- The inter-relationship and coordination mechanism between Central and State GST authorities
Supreme Court Guidelines in Armour Security Case
Comprehensive Legal Framework
The Supreme Court in Armour Security (India) Ltd. v. Commissioner, CGST, AIR 2025 SC 3854 laid down an exhaustive framework through paragraphs 96 and 97, establishing binding principles and operational guidelines.
Key Conclusions (Paragraph 96)
The Apex Court summarized its conclusions as follows:
i. Statutory Bar on Parallel Proceedings
Clause (b) of sub-section (2) of Section 6 of the CGST Act and corresponding State legislation prohibits the "initiation of any proceedings" concerning the "same subject matter."
ii. Assignment-Based Action
Any measure emanating from audit of financial records or detailed examination of filed returns must necessarily be initiated by the tax administration to which the assessee has been assigned.
iii. Intelligence-Based Enforcement
Intelligence-driven enforcement action can be commenced by either the Central or State tax administration irrespective of the assessee's assignment to the other administration.
iv. Prevention of Concurrent Proceedings
Once one tax administration has already initiated intelligence-based enforcement action, the other tax administration should not commence parallel proceedings.
v. Investigative Actions Distinguished
All actions undertaken as measures for conducting inquiry, gathering evidence, or collecting information do not constitute "proceedings" within the contemplation of Section 6(2)(b) of the CGST Act.
vi. Definition of "Initiation of Proceedings"
The expression "initiation of any proceedings" appearing in Section 6(2)(b) refers exclusively to the formal commencement of adjudicatory proceedings through issuance of a show cause notice, and does not encompass the issuance of summons, conduct of search operations, or seizure activities.
vii. Meaning of "Subject Matter"
The expression "subject matter" denotes any tax liability, deficiency, or obligation arising from any particular contravention which the Department seeks to assess or recover.
viii. Overlap Test
Where any two proceedings initiated by the Department seek to assess or recover an identical or partially overlapping tax liability, deficiency, or obligation arising from any particular contravention, the prohibition under Section 6(2)(b) would be immediately attracted.
ix. Distinct Infractions
Where the proceedings concern distinct infractions, the same would not constitute "same subject matter" even if the tax liability, deficiency, or obligation is same or similar, and the bar under Section 6(2)(b) would not be attracted.
x. Twofold Test for Determining Identity
The twofold test for determining whether subject matter is "same" entails:
- First, determining if an authority has already proceeded on identical tax liability or alleged offence by the assessee on the same facts
- Secondly, verifying if the demand or relief sought is identical