The Supreme Court has clarified the powers of Central and State tax administrations, holding that while audit or scrutiny-related actions must be taken by the authority to which a taxpayer is assigned, intelligence-based investigations can be initiated by either administration.
The bench of Justice J.B. Pardiwala and Justice R. Mahadevan has barred parallel proceedings on the same subject matter by different authorities, narrowly defined what constitutes “initiation of proceedings” under Section 6(2)(b) of the CGST Act, and laid down a twofold test to determine when matters are considered identical.
The bench stated that any action arising from the audit of accounts or detailed scrutiny of returns must be initiated by the tax administration to which the taxpayer is assigned. Intelligence based enforcement action can be initiated by any one of the Central or the State tax administrations despite the taxpayer having been assigned to the other administration. Parallel proceedings should not be initiated by other tax administration when one of the tax administrations has already initiated intelligence-based enforcement action. All actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute “proceedings within the meaning of Section 6(2)(b).
The bench stated that the expression “initiation of any proceedings” occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a SCN, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc. of the CGST Act. The twofold test for determining whether a subject matter is “same” entails, first, determining if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts, and secondly, if the demand or relief sought is identical.
The apex court has stated that the DGGI may consider adopting necessary measures to develop a robust mechanism for seamless data and intelligence sharing between the Central and State authorities, including provision for real-time visibility to both authorities of any action taken pursuant to an intelligence input, thereby advancing the objectives of harmony and cooperative federalism.
Protocol for Parallel Inquiries: Guidelines on Handling Multiple Investigations into the Same Matter
The Apex Court has given guidelines to be followed in cases where, after the commencement of an inquiry or investigation by one authority, another inquiry or investigation on the same subject matter is initiated by a different authority.
Firstly, where a summons or a show cause notice is issued by either the Central or the State tax authority to an assessee, the assessee is, in the first instance, obliged to comply by appearing and furnishing the requisite response, as the case may be. We say, so because, mere issuance of a summons does not enable either the issuing authority or the recipient to ascertain that proceedings have been initiated.
Secondly, where an assessee becomes aware that the matter being inquired into or investigated is already the subject of an inquiry or investigation by another authority, the assessee shall forthwith inform, in writing, the authority that has initiated the subsequent inquiry or investigation.
Thirdly, upon receipt of such intimation from the assessee, the respective tax authorities shall communicate with each other to verify the veracity of the assessee’s claim. So as this course of action would obviate needless duplication of proceedings and ensure optimal utilization of the Department’s time, effort, and resources, bearing in mind that action initiated by one authority enures to benefit of all.
Fourthly, if the claim of the taxable person regarding the overlap of inquiries is found untenable, and the investigations of the two authorities pertain to different “subject matters,, an intimation to this effect, along with the reasons and a specification of the distinct subject matters, shall be immediately conveyed in writing to the taxable person.
Fifthly, the taxing authorities are well within their rights to conduct an inquiry or investigation until it is ascertained that both authorities are examining the identical liability to be discharged, the same contravention alleged, or the issuance of a show cause notice. Any show cause notice issued in respect of a liability already covered by an existing show cause notice shall be quashed.
Sixthly, however, if the Central or the State tax authority, as the case may be finds that the matter being inquired into or investigated by it is already the subject of inquiry or investigation by another authority, both authorities shall decide inter-se which of them shall continue with the inquiry or investigation. In such a scenario the other authority shall duly forward all material and information relating to its inquiry or investigation into the matter to the authority designated to carry the inquiry or investigation to its logical conclusion. The taxable person except for being afforded the statutory protection from duplication of proceedings, otherwise has no locus to claim which authority should proceed with the inquiry or investigation in a particular matter.
Seventhly, however, where the authorities are unable to reach a decision as to which of them shall continue with the inquiry or investigation, then in such circumstances, the authority that first initiated the inquiry or investigation shall be empowered to carry it to its logical conclusion, and the courts in such a case would be competent to pass an order for transferring the inquiry or investigation to that authority.
Eightly, if it is found that the authorities are not complying with these aforementioned guidelines, it shall be open to the taxable person to file a writ petition before the concerned High Court under Article 226 of the Constitution of India.
Lastly, at the same time, taxable persons shall ensure complete cooperation with the authorities. It is incumbent upon them to appear in response to a summons and/or reply to a notice.
Background
A public limited company providing security services, registered under Delhi GST, was issued a show cause notice on 18.11.2024 by the Delhi GST authority for April 2020–March 2021, demanding ₹1.24 crore for under-declared tax and excess ITC claims.
On 16.01.2025, Central GST officers conducted a search at the company’s premises, seizing devices and documents, and later issued summons to its directors. The company objected, saying the matter was already being investigated by the State GST authority and that Section 6(2)(b) of the CGST Act bars parallel proceedings on the same subject.
The Delhi High Court dismissed the company’s writ petition, ruling that Section 6(2)(b) prevents parallel assessment proceedings, not searches or investigations, which are only meant to gather information. The Court distinguished the case from Vivek Narsaria v. State of Jharkhand, where both State and Central GST were conducting parallel assessments.
Case Details
Case Title: Armour Security (India) Ltd. Versus Commissioner, CGST
Case No.: Special Leave Petition (C) No. 6092 Of 2025
Date: 14th August, 2025
Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
