Central, State GST Officers Can Exercise Cross-Empowerment Powers Without Separate Notification: Madras High Court

The Madras High Court has ruled that Central and State GST officers can exercise cross-empowerment under Section 6 of the Central Goods and Services Tax Act even without a separate government notification.

The notification is required only when the government wants to impose conditions on the exercise of those powers, the court observed.

A Division Bench of Justice Anita Sumanth and Justice S. Raveekumar was dealing with a batch of 22 writ appeals. Sixteen were filed by State GST authorities and six by Central GST authorities.

The appeals challenged a March 2024 decision that had quashed summons and assessment proceedings in the absence of a notification for cross-empowerment under Section 6.

The bench relying on the Supreme Court's ruling in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate, which held that cross-empowerment is permissible under the GST framework, ruled,

“Hence, Section 6 would not be fettered merely by the absence of a Notification that may be issued in due course, stipulating conditions in the exercise of powers of cross-empowerment. This argument is thus no longer available to the assessee.”

In simple terms, Section 6 allows State GST officers to be treated as proper officers under the central GST law, while the corresponding State GST provisions allow Central GST officers to exercise powers under State GST law. The provision also allows the government to impose conditions on this cross-empowerment through a notification.

The dispute was whether the power itself would remain unavailable until such a notification was issued. The court rejected that interpretation.

The bench relied on a June 22, 2020, clarification issued by the CBIC. It recorded that no separate notification is required for exercising the cross-empowerment power. A notification is required only if conditions are to be imposed on that power.

The bench also relied on the Supreme Court's ruling in Armour Security (India) Ltd v Commissioner, CGST, Delhi East Commissionerate. The Supreme Court held that intelligence-based enforcement can be initiated by either Central or State GST authorities even where the taxpayer is assigned to the other administration. At the same time, the other administration cannot initiate parallel proceedings on the same subject matter once such enforcement has commenced.

Section 6(2)(b) bars initiation of proceedings on the same subject matter by both administrations. The Supreme Court clarified that formal proceedings begin with a show-cause notice. Summons, search or seizure during an inquiry do not by themselves amount to commencement of such proceedings.

The High Court set aside the earlier orders and remanded the matters for disposal in light of Armour Security. It also gave the appellants four weeks to file counters in cases where pleadings had not been completed.

Except for one, all appeals were allowed by way of remand. That appeal was closed after the relief sought had already been granted during the writ proceedings and a statutory appeal under Section 107 of the CGST Act was pending.

For the GST authorities: Additional Solicitor General AR.L. Sundaresan, along with M. Santhanaraman and K.S. Ramaswamy, Senior Standing Counsel

For the Central GST authorities; G. Dhana Madhri, Special Government Pleader (Taxes) and R. Sivaraman for the State GST Department. Shree Amman Traders

For the assessees/respondents: C.J. Yeswanthram, T. Ramesh, G. Derrick Sam, B. Raveendran and Dr. S. Sathiyanarayanan