Cross Empowerment of State Officials under GST: Kerala HC refers matters to Division Bench [Read Judgment]

In a recent case, the Kerala High Court has remanded the matter of cross empowerment of State Goods and Services Tax ( GST ) Officials to take actions such as issuance of show cause notices ( SCN ) in the absence of specific notifications under Section 6(1) of the Central Goods and Services Tax Act.

The petitioner, Pinnacle Vehicles and Services Private Limited, challenged the show cause notice issued by the State Tax Authority, arguing that it lacked jurisdiction as no notification had been issued under Section 6(1) of the Central Goods and Services Tax ( CGST ) Act to empower State officers to take such action. This matter also draws from the Madras High Court’s decision in the case of Tvl. Vardhan Infrastructure, which held that cross-empowerment requires a specific notification.

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The counsel appearing for the petitioner placed reliance on Ext.P8 judgment of the Madras High Court in Tvl. Vardhan Infrastructure v. Special Secretary, Head of the GST Council Secretariat;, which takes the view that, without there being a notification as contemplated by the provisions of Section 6(1) of the CGST Act, ] there is no cross-empowerment, and the Central Authority or the State Authority to which a taxpayer is assigned must be the one  to initiate proceedings under the provisions of the CGST/SGST Acts

The Senior Government Pleader submitted that a reading of the provisions of Section 6(1) of the CGST Act will show that empowerment of the State Authorities as proper officers under the CGST Act is contemplated by the provision itself, and it is only when any restriction on such powers is to be placed that a notification as contemplated by the provisions of Section 6(1) of the CGST Act has to be issued. 

In support of this submission, the Senior Government Pleader also made available for my perusal a copy of the letter issued by the GST Policy Wing of the Central Board of Indirect Taxes and Customs, which answers a reference from the Directorate General of GST Intelligence and takes the view that it is only when any restriction has to be placed on the power of the State Authorities that a notification as contemplated by the provisions of Section 6(1) of the  CGST Act has to be issued.  It was thus submitted that the petitioner has not made out any ground for interference with Ext.P4 show cause notice on the ground that it is issued without jurisdiction.

The bench noted that a reading of Section 6(1) of the CGST Act makes it clear that the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be proper officers for the purposes of the Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. 

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Further, it was remarked that, unaided by authority, a reading of the provision suggests to me that by virtue of the operation of the provision itself, the officers appointed under the State Goods and Services Tax Act are proper officers for the purposes of the Central Goods and Services Tax Act, and it is only when any restriction or condition has to be placed on the exercise of power by any officer appointed under the State Goods and Services Tax Act that a notification as contemplated by the provisions of Section 6(1) of the CGST Act has to be issued.

The Kerala High Court bench of Justice Gopinath P, after considering the arguments, referred the issue to a Division Bench, highlighting the need for an authoritative ruling given the contrasting views on the matter.

It was thus held that, “ Since the issue raised in this writ petition will affect several proceedings, and  taking  note  of the  view  expressed by the Madras  High  Court  in Tvl. Vardhan Infrastructure (Supra), which is contrary to the prima facie view that I have taken, I am of the opinion that this issue requires an authoritative pronouncement by a Division Bench of this Court.”

The case is still under consideration and will proceed to a Division Bench for further analysis.

To Read the full text of the Order CLICK HERE

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