The Karnataka High Court has ruled that the Central GST authorities cannot initiate parallel proceedings against a taxpayer on the same subject matter once the State GST authorities have already commenced proceedings.

Justice B.M. Shyam Prasad relied on the express restriction contained in Section 6(2)(b) of the Central Goods and Services Tax Act, 2017, while quashing a show-cause notice and adjudication order issued by the Central Tax authorities against a sole proprietorship engaged in supplying goods and services for street-light projects.

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The Court observed that the plain language of Section 6(2)(b) prevents a proper officer under the CGST Act from initiating proceedings where a State GST officer has already started proceedings on the same subject matter.

“It cannot be disputed that the State Authorities have initiated prior proceedings for adjudication under Section 73 of the Act,” the Court said, holding that the later proceedings instituted by the Central authorities could not survive.

The dispute arose from three connected writ petitions filed by the taxpayer concerning GST proceedings for the financial years 2019-20 and 2021-22.

The State GST authorities had first initiated proceedings by issuing show-cause notices dated June 15, 2023 and February 19, 2024. These proceedings culminated in adjudication orders dated July 30, 2024 and December 9, 2025, respectively.

Subsequently, the Central Tax authorities issued another show-cause notice dated September 26, 2025 covering the same tax periods. That notice resulted in an adjudication order dated February 25, 2026.

The taxpayer argued that the Central and State authorities could not simultaneously proceed against it for the same tax periods and on the same grounds. It was also submitted that the taxpayer could not be exposed to two separate liabilities arising from substantially identical proceedings.

Both the State and Central GST authorities drew the Court’s attention to Section 6 of the CGST Act. Section 6(2)(b) provides that where a proper officer under a State GST enactment has initiated proceedings on a subject matter, no proceedings shall be initiated by a proper officer under the CGST Act on that same subject matter.

Accepting this position, the High Court held that the proceedings which could legally survive were those first instituted by the State GST authorities through the notices dated June 15, 2023 and February 19, 2024.

Accordingly, the Court quashed the Central GST show-cause notice dated September 26, 2025, its summary in Form GST DRC-01, the adjudication order dated February 25, 2026 and the corresponding summary order in Form GST DRC-07.

On the merits of the State GST proceedings, the taxpayer claimed exemption under Notification No. 12/2017 dated June 28, 2017 for supplies made in connection with street-light projects undertaken for different government departments and entities.

According to the taxpayer, the value of goods supplied under the works contracts was less than 25% of the total contract value. The authorities, however, concluded that the taxpayer had failed to produce the necessary sales registers, contract receipts and invoices to establish that the value of goods remained below the prescribed 25% threshold.

The taxpayer told the High Court that it was in a position to produce the relevant sales invoices, works contract agreements and other supporting records to substantiate its claim for exemption.

The Court noted that even the adjudication order dated July 30, 2024 indicated that the exemption might be available if the taxpayer could demonstrate that the goods supplied under the works contracts did not constitute more than 25% of the contract value.

“If indeed the petitioner can demonstrate for the tax periods that its Works Contracts involved supply of goods which did not constitute 25% of the value of the Works Contract, the petitioner may have to be admitted to exemption,” the Court observed.

This possibility persuaded the Court to grant the taxpayer another opportunity to present its records and establish the exemption claim.

The taxpayer also contended that a specific request for a personal hearing had been made while responding to the show-cause notice dated June 15, 2023. The hearing was sought to explain the alleged mismatch between the details reported in Form GSTR-1 and Form GSTR-3B.

However, according to the taxpayer, no personal hearing was provided even though the proceedings could result in an adverse order.

Regarding the notice dated February 19, 2024, the taxpayer submitted that it could not file a response for bona fide reasons. It stated that multiple notices had been issued and that the freezing of its bank accounts created difficulties in coordinating with its consultant and filing replies in every proceeding.

Considering these circumstances and the taxpayer’s assertion that it could produce documents supporting the exemption, the High Court decided to reopen the State GST adjudication proceedings subject to conditions.

The Court partly allowed the two petitions concerning the State GST proceedings and quashed the adjudication orders dated July 30, 2024 and December 9, 2025.

It also set aside three garnishee notices—one dated November 5, 2024 and two dated December 29, 2025—which had been issued to recover the disputed GST demand from the taxpayer’s bank account and amounts payable by municipal authorities.

The Commercial Tax Officer was given liberty to reconsider the matter after receiving fresh responses from the taxpayer to the State GST show-cause notices dated June 15, 2023 and February 19, 2024.

The taxpayer was directed to submit its replies and supporting documents by September 30, 2026. As a condition for reopening the proceedings, it was also ordered to deposit 10% of the tax demanded by the same date.

The High Court clarified that all questions were left open for consideration by the State GST authority during the fresh adjudication.

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