This landmark judgment by the Supreme Court of India provides critical clarity on the jurisdictional boundaries between Central and State GST authorities, particularly concerning the interpretation of “proceedings” and “same subject matter” under the CGST Act, 2017.

M/S Armour Security (India) Ltd. v. Commissioner, CGST(SC)

Factual Matrix (Paras 3-7)

1. Initial Action (SGST): The petitioner, M/S Armour Security, received a Show Cause Notice (SCN) under Section 73 from the State GST (SGST) authorities on 18.11.2024. The notice alleged underpayment of tax (₹1.24 crore) for the 2020-21 period, citing issues with turnover reconciliation and excess Input Tax Credit (ITC) claims.
2. Parallel Action (CGST): Subsequently, on 16.01.2025 and 23.01.2025, the Central GST (CGST) authorities conducted a search and issued summons under Section 70 to the petitioner’s directors, demanding documents related to ITC claimed from cancelled suppliers.
3. Petitioner’s Contention: The petitioner challenged the CGST summons before the High Court, arguing that since the SGST had already initiated proceedings via an SCN on the same issue (ITC), the CGST action was barred by Section 6(2)(b) of the CGST Act.
4. High Court Ruling: The Delhi High Court dismissed the petition, holding that an investigation or the issuance of a summons under Section 70 is merely a precursor to formal proceedings and does not constitute “initiation of proceedings” as contemplated under Section 6(2)(b).

Core Issues Before the Supreme Court

1. Whether the issuance of a summons under Section 70 of the CGST Act amounts to the “initiation of proceedings” for the purpose of the bar under Section 6(2)(b)?
2. What is the precise scope and meaning of “proceedings” and “same subject matter” under Section 6(2)(b)?
3. How should the principle of cross-empowerment for intelligence-based enforcement actions be harmonized with the prohibition on parallel proceedings?

1. “Initiation of Proceedings” vs. “Inquiry” (Paras 57-59, 72-74) The Court definitively held that an “inquiry” under Section 70 is distinct from “proceedings” under Section 6(2)(b).

• Summons is Not Initiation: The issuance of a summons is a tool for gathering information and evidence during an inquiry. It is a preliminary, fact-finding step. At this stage, the department has not yet formed a conclusive view to proceed against the assessee.
• SCN is the Trigger: The “initiation of any proceedings” occurs only with the formal commencement of adjudication, which is marked by the issuance of a Show Cause Notice (SCN) under Sections 73 or 74. The SCN is the bedrock of any demand, sets the law in motion, and frames the specific charges the assessee must answer. It is only at the SCN stage that the department’s case crystallizes.

2. Defining “Same Subject Matter” (Paras 78-90) The Court clarified that “subject matter” is not a vague or general concept but refers to the specific dispute being adjudicated.

• More than a Topic: The term does not merely refer to a broad topic like “ITC” but to the specific tax liability, deficiency, or contravention that is quantified and alleged in the SCN.
• Twofold Test: To determine if the subject matter is the “same,” the Court laid down a twofold test:
  1. Do the proceedings concern an identical liability of tax or alleged offence based on the same set of facts?
  2. Is the demand or relief sought identical or overlapping?
• Clarity from SCN: The subject matter can only be definitively ascertained from the contents of an SCN, not from a summons, which may be part of a broader inquiry. The apprehension of an overlap during the summons stage is premature.

3. Cross-Empowerment and Harmonious Construction (Paras 34-51, 75-77) The judgment reinforces the dual framework of GST administration:

• Single Interface: For routine administrative matters (audit, scrutiny of returns), the taxpayer is assigned to a single authority (Central or State) to avoid dual control.
• Cross-Empowerment: For intelligence-based enforcement actions, both Central and State authorities are empowered to act against any taxpayer across the entire value chain. The authority that initiates such an action is empowered to take it to its “logical conclusion,” which includes issuing an SCN and adjudicating the matter.

Guidelines Issued by the Court (Para 97)

To prevent administrative friction and taxpayer harassment, the Court issued crucial procedural guidelines:

1. An assessee receiving a summons must first comply, as the existence of parallel proceedings is not certain at that stage.
2. If the assessee believes the subject matter is already under investigation by another authority, they must inform the second authority in writing.
3. The respective tax authorities must then communicate with each other to verify the claim and decide which authority will proceed.
4. If the authorities cannot agree, the authority that first initiated the inquiry/investigation shall be empowered to continue it to its logical conclusion.
5. If these guidelines are not followed, the taxpayer has the right to approach the High Court under Article 226.