Supreme Court Clarifies ‘Initiation of Proceedings’ u/s 6(2)(b) of GST, Lays Down Twofold Test for ‘Same Subject Matter’ [Read Order]

The Supreme Court of India clarified the meaning of “initiation of proceedings” under Section 6(2)(b) of the Central Goods and Services Tax ( CGST ) Act and laid down a twofold test for determining when the “subject matter” is the same.

M/s Armour Security (India) Ltd., a public limited company engaged in providing security services, is registered under the Delhi GST. On 18 November 2024, the State GST authority issued a show cause notice under Section 73 of the CGST Act for the tax period April 2020 to March 2021, demanding Rs. 1.24 crore on the grounds of under-declared turnover and excess input tax credit claims.

On 16 January 2025, officers from the Central GST conducted a search at the company’s premises under Section 67(2), seized electronic devices and documents, and issued summons under Section 70 to the directors. Another summons was issued on 23 January 2025.

The company argued that the summons were without jurisdiction because the State GST authority had already initiated proceedings on the same subject matter which was under Section 6(2)(b) of the CGST Act, barred parallel proceedings.

The Delhi High Court dismissed the company’s writ petition. It observed that the term “any proceedings” in Section 6(2)(b) referred to assessment-related proceedings, not searches or investigations, and that summons were only a step to gather information before any formal adjudication.

Before the Supreme Court, the company’s counsel argued that Section 6(2)(b) should be interpreted broadly to include summons, and that the Central GST lacked jurisdiction once the State GST had begun investigating the same issue.

The bench of Justices J.B. Pardiwala and R. Mahadevan explained that “all actions that are initiated as a measure for probing an inquiry or gathering of evidence or information do not constitute ‘proceedings’ within the meaning of Section 6(2)(b).”

The court further explained that “the expression ‘initiation of any proceedings’ occurring in Section 6(2)(b) refers to the formal commencement of adjudicatory proceedings by way of issuance of a show cause notice, and does not encompass the issuance of summons, or the conduct of any search, or seizure etc.”

The court also set out a twofold test, that is “First, the subject matter will be considered the same if an authority has already proceeded on an identical liability of tax or alleged offence by the assessee on the same facts; and secondly, if the demand or relief sought is identical.”

The Supreme Court dismissed the company’s petition, upheld the High Court’s order, and issued detailed guidelines for handling situations where multiple authorities investigate the same matter.

It also pointed out that the Directorate General of GST Intelligence should consider creating a robust mechanism for seamless data and intelligence sharing between Central and State authorities to avoid duplication and promote cooperative federalism.

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