Telangana High Court Stays Central GST Proceedings Pending Outcome of State Appeal on Overlapping Issues

In the complex landscape of the Goods and Services Tax (GST) regime in India, the concept of "cross-empowerment" and dual jurisdiction often leads to friction between assessees and revenue authorities. A recurring point of contention is whether Central Tax authorities can initiate proceedings against an assessee when State Tax authorities have already adjudicated on the same or substantially similar subject matter.

The Telangana High Court, in the case of Aarush Enterprises Vs Assistant Commissioner of Central Tax, addressed this critical issue. The Court provided significant relief to the assessee by ordering that Show Cause Notices (SCN) issued by Central authorities must be kept in abeyance until appellate proceedings initiated against a State Tax order are concluded. This judgment reinforces the legislative intent behind Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act), which aims to prevent multiple authorities from harassing an assessee regarding the same transaction.

Before delving into the specifics of the case, it is essential to understand the statutory framework governing the division of powers between Central and State GST officers.

Section 6 of the CGST Act

Section 6 of the CGST Act lays down the foundation for authorization of officers. Specifically, Section 6(2)(b) states that where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the CGST Act on the same subject matter.

This provision is designed to avoid "double jeopardy" in administrative proceedings, ensuring that an assessee is not subjected to parallel adjudications by two different sets of authorities for the same alleged contravention.

The Interplay of Section 74 and Section 122

The dispute often arises when one authority levies a penalty under Section 122 (for offences such as issuing fake invoices), and the other authority subsequently issues a notice under Section 74 (for wrongful availment of Input Tax Credit) based on the same set of facts. While the sections differ, the underlying "subject matter"—the genuineness of the transaction—remains the same.

Factual Matrix of the Case

The petitioner, Aarush Enterprises, approached the Telangana High Court challenging a Show Cause Notice dated 19.09.2025. This notice was issued by the Central Tax authorities invoking provisions under Sections 73 and 74 of the CGST Act and the Telangana Goods and Services Tax Act, 2017 (TGST Act) for the financial year 2021–22.