M/S. Tansam Engineering And vs The Commissioner on 14 October, 2025

Summary of Judgment: M/S. Tansam Engineering And vs The Commissioner

1. Outcome

The writ petition filed by M/S. Tansam Engineering And (the petitioner) was allowed.

• The Show Cause Notice (SCN) dated 13.08.2021 issued by the Deputy Director, DGGI (Central Authority) was quashed.
• The consequential Order-in-Original dated 30.01.2025 passed by the Assistant Commissioner, CGST (Central Proper Officer) was set aside.
• The Summary of Orders in Form GST DRC-07 dated 31.01.2025, raising demands for FY 2017-18 and 2018-19, were also set aside.

2. Core Issue

The central legal issue was whether the Central GST authorities could initiate and conclude proceedings under Section 74 of the CGST Act on a subject matter for which the State GST authorities had already initiated proceedings. The court examined what constitutes "initiation of proceedings" under Section 6(2)(b) of the GST Acts and whether the bar on parallel proceedings was applicable in this case.

3. Key Facts

1. State Proceedings: The Additional State Tax Officer (State Proper Officer), based on intelligence received from Central authorities (CBIC and CGST Commissionerate), initiated proceedings against the petitioner for wrongful availment of Input Tax Credit (ITC) from alleged non-existent suppliers for FY 2017-18 and 2018-19.

   • SCNs Issued by State: Show Cause Notices were issued on 02.07.2021 and 30.07.2021.
   • Adjudication by State: Adjudication orders were passed on 12.04.2023, confirming the demand. These orders were subsequently appealed and disposed of by the State Appellate Authority.

2. Central Proceedings: Simultaneously, the Directorate General of GST Intelligence (DGGI), a Central authority, was also investigating the same matter.

   • Summons Issued by Centre: The DGGI issued a summons under Section 70 of the CGST Act to the petitioner on 24.05.2019.
   • SCN Issued by Centre: The DGGI issued its own SCN under Section 74 for the same tax periods and same allegations on 13.08.2021.

3. Petitioner's Response: The petitioner, in its reply to the Central SCN, explicitly stated that proceedings on the identical subject matter had already been initiated by the State authorities.

4. Adjudication by Centre: Despite this, the Assistant Commissioner, CGST (Central Proper Officer) proceeded with the adjudication and passed an Order-in-Original on 30.01.2025, confirming tax, interest, and penalty.

5. Writ Petition: The petitioner challenged the Central authority's SCN and the final order before the High Court, arguing that these proceedings were without jurisdiction and barred by law.

4. Arguments

• Petitioner's Arguments:

  • The proceedings initiated by the Central Proper Officer are barred by Section 6(2)(b) of the CGST/OGST Act, which prohibits a proper officer from initiating proceedings on a subject matter if proceedings have already been initiated by the corresponding State/Central officer.
  • The "initiation of proceedings" for the purpose of Section 6(2)(b) is the issuance of a Show Cause Notice for adjudication (e.g., under Section 74), not preliminary investigative steps like issuing a summons (under Section 70).
  • Since the State Officer issued SCNs on 02.07.2021 and 30.07.2021, before the Central Officer's SCN of 13.08.2021, the proceedings initiated by the Central authority are void ab initio.
  • The petitioner heavily relied on the Supreme Court's judgment in Armour Security (India) Ltd. which clarified this legal position.

• Respondents' Arguments (CGST):

  • The Central authority's action commenced earlier with the issuance of a summons under Section 70 on 24.05.2019, which should be considered the point of "initiation of proceedings".
  • The State authorities initiated their proceedings based on intelligence and Tax Evasion Reports forwarded by the Central authorities themselves.
  • The judgment in Armour Security was delivered after the impugned order was passed, so the officer did not have the benefit of that legal precedent.

5. Court’s Reasoning

1. Primacy of First SCN: The court identified that the State Proper Officer issued the SCNs under Section 74 before the Central Proper Officer did. The subject matter in both proceedings was identical—wrongful ITC availment from the same suppliers for the same periods.

2. Interpretation of "Initiation of Proceedings": The court placed heavy reliance on the Supreme Court's ruling in Armour Security (India) Ltd. It adopted the precedent that the expression "initiation of any proceedings" under Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings through the issuance of a show cause notice, not investigative actions like issuing summons or conducting searches.

3. Application of Section 6(2)(b): As the State authority was the first to issue the SCN, it had validly initiated the proceedings. Consequently, the subsequent SCN issued by the Central authority on the same subject matter was expressly barred by Section 6(2)(b) of the GST Acts. The Central proceedings were, therefore, without jurisdiction.

4. Effect of Invalid SCN: The court applied the legal maxim "Sublato fundamento cedit opus" (a foundation being removed, the superstructure falls). Since the SCN dated 13.08.2021, which formed the foundation of the Central proceedings, was held to be invalid and without jurisdiction, the consequential Order-in-Original and the demand notices could not be sustained in the eyes of the law.

6. Statutory References

• Constitution of India: Articles 226, 227
• Central Goods and Services Tax Act, 2017 (CGST Act) / Odisha Goods and Services Tax Act, 2017 (OGST Act):
  • Section 6: Authorisation of officers of State/Central Tax as Proper Officer, specifically Section 6(2)(b) which bars parallel proceedings.
  • Section 70: Power to summon persons to give evidence.
  • Section 74: Determination of tax not paid or short paid by reason of fraud, etc.
  • Section 107: Appeals to Appellate Authority.
  • Section 112: Appeals to Appellate Tribunal.
• Other References: Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019; CBIC Circular No. 132/2/2020-GST.

7. Precedents Cited

• Armour Security (India) Ltd. Vrs. Commissioner, CGST, Delhi East Commissionerate and Another, 2025 SCC OnLine SC 1700 = 2025 INSC 982: This was the cornerstone of the court's reasoning, defining "initiation of proceedings" and "same subject-matter" under Section 6(2)(b).
• M/s. Maa Tarini Traders v. State of Odisha and others, W.P.(C) No. 42015 of 2023: Referenced for the procedure to be followed in the absence of a constituted GST Appellate Tribunal.
• Badrinath Vrs. State of Tamil Nadu, (2000) 8 SCC 395: Cited to explain the legal principle that if the foundation of a proceeding is removed, any consequential action falls.
• Devendra Kumar Vrs. State of Uttaranchal, (2013) 9 SCC 363: Also cited for the maxim Sublato fundamento cedit opus.