• Madras HC holds proceedings initiated by more than one tax authority ultra-vires in absence of notification providing for cross-empowerment

 This Tax Alert summarizes a recent judgement of the Madras High Court (HC). The issue involved was whether taxpayers who have been assigned either to the Central tax authorities or the State tax authorities under the respective Goods and Services Tax (GST) enactments can be subjected to investigation and proceedings by their counterparts.

The key observations of the HC are:

• Section 6(1) of the respective GST enactments empowers Government to issue notification on the recommendation of GST Council for cross-empowerment.
• Since, no notifications have been issued for cross-empowerment with the advice of GST Council, except for the purpose of refund of tax, impugned proceedings are to be held without jurisdiction.
• Thus, if an assessee has been assigned administratively with the Central authorities basis the Circular, the State authorities have no jurisdiction to interfere with the assessment proceedings in absence of a corresponding notification.
• Similarly, if a taxpayer has been assigned to the State authorities, the officers of the Central tax cannot interfere although they may have such intelligence regarding the alleged violation by the taxpayer.

Basis above, HC quashed the proceedings by counterparts and directed the appropriate tax authority to initiate proceedings for purported loss of revenue.

Comments

• The ruling is likely to benefit the industry and eliminate parallel proceedings by Central as well as State officers.
• There are divergent rulings of high courts on the issue of parallel proceedings, however, the ground of absence of relevant Notification regarding cross-empowerment under the law, has not been discussed in any of the earlier rulings.
• The matter is expected to be taken up by the GST Council, recommending the issuance of relevant notification once the difference between the Center and States is reconciled.

Apart from cross-empowerment, conflicts have arisen regarding multiple proceedings being initiated by different wings of the same department, i.e., jurisdictional officer, audit wing, anti-evasion wing, DGGI etc