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Understanding of Cross Interference - Cross Empowerment in GST

RAMESH CHANDRA JENA

B. A (Hons)., M.A (Eco)., D.M.M., LL.B. Advocate & Tax Consultant

The concept of cross empowerment means irrespective of jurisdiction one authority (CGST) can adjudicate cases of
(SGST) authority and vice versa. Presently, the issue of cross empowerment is the burning topic across the country. There
are many notices were issued by the CGST / SGST authorities but the adjudications proceedings were being challenged
before the Court on the ground of beyond jurisdiction as the implementation of cross empowerment has not been notified
till date.

GST Council in its 9th meeting held on 16.01.2017, a decision was taken regarding cross empowerment to ensure a single
interface with authorities for the future GST laws. The relevant para of minutes of meeting is reproduced as under:

"28- After further discussion, the Council agreed to the decisions as recorded below in respect of cross-empowerment to
ensure single interface under GST.

(i) There shall be a division of taxpayers between the Central and the State tax administrations for all
administrative purposes;
(ii) Of the total number of taxpayers below Rs. 1.5crore turnover, all administrative control over 90% of the
taxpayers shall vest with the State tax administration and 10% with the Central tax administration;
(iii) In respect of the total number of taxpayers above Rs. 1.5 crore turnover, all administrative control shall be
divided equally in the ratio of 50% each for the Central and the State tax administration;
(iv) The division of taxpayers in each State shall be done by computer at the State level based on stratified random
sampling and could also take into account the geographical location and type of the taxpayers, as may be
mutually agreed;
(v) The new registrants shall be initially divided one each between the Central and the State tax administration and
at the end of the year, once the turnover of such new registrants was ascertained, those units with turnover
below Rs. 1.5 crore shall be divided in the ratio of 90% for the State tax administration and 10% for the
Central tax administration and those units above the turnover of Rs.1.5 crore shall be divided in the ratio of
50% each for the State and the Central tax administration;
(vi) The division of the taxpayers may be switched between the Centre and the States at such interval as may be
decided by the Council;
(vii) The above arrangement shall be reviewed by the Council from time to time;
(viii) Both the Central and the State tax administrations shall have the power to take intelligence-based enforcement
action in respect of the entire value chain;
(ix) Powers under the IGST Act shall be cross-empowered to the State tax administration on the same basis as
under the CGST and the SGST Acts either under law or under Article 258 of the Constitution but with the
exception that the Central tax administration shall alone have the power to adjudicate a case where the
disputed issue relates to place of supply, or when an affected State requests that the case be adjudicated by the
CGST authority and for such issues of export and import as may be discussed in the Law Committee of
officers and brought back to the Council for decision;
 (x) The territorial water within the twelve nautical miles shall be treated as the territory of the Union of India
unless the Hon'ble Supreme Court decides otherwise in the ongoing litigation on the issue but the power to
collect the State tax in the territorial waters shall be delegated by the Central Government to the States
Subsequently, a Circular No. 1/2017-GST (Council) dated 20.09.2017 was issued for a division of taxpayer base between
the Centre and States to ensure a Single Interface under GST Enactments between Tax Officers and Central Tax Officers
under GST/IGST Acts of 2017. In this circular it is mentioned that "Suitable notifications regarding cross-empowerment
of State and Central Tax officers under CGST/IGST and SGST Acts respectively are being issued separately." This is clear
that cross empowerment notification will be issued later.

Further, GST Council in its 22nd meeting held on 06-10-2017 discussed the agenda item 9: proposal for issuing
notifications on cross empowerment for ensuring single interface under GST. But the Council approved the following:

(i) To issue notifications by the Central Government and the State Governments, cross empowering officers of the
Central and State Governments to sanction refund and that an order of refund passed by an officer of the
Central or State Government shall cover both the Central tax and the State tax. Similar notification to be issued
under the IGST Act by the Central Government;
(ii) Until the division of taxpayers is effected between the Central and State administration, an officer of the
Central and the State Government was authorised to process any refund claim filed by an applicant under his
jurisdiction subject to a declaration being given by the applicant that the same refund claim has not been
claimed from the other administration having jurisdiction over the applicant.
No parallel proceeding and investigation:

Section 6(2)(b) of the CGST Act, 2017 prescribes the administrative power of the Central GST Authority and State GST
Authority/Union Territory Authority. The relevant portion of administrative and jurisdictional power is reproduced as
under:

"(2) Subject to the conditions specified in the notification issued under sub-section (1), -

(a) where any proper officer issues an order under this Act, he shall also issue an order under the State Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act, as authorised by the State Goods and
Services Tax Act or the Union Territory Goods and Services Tax Act, as the case may be, under intimation to
the jurisdictional officer of State tax or Union territory tax;
(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services
Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper
officer under this Act on the same subject matter."

(3) Any proceedings for rectification, appeal and revision, wherever applicable, of any order passed by an officer
appointed under this Act shall not lie before an officer appointed under the State Goods and Services Tax Act or the
Union Territory Goods and Services Tax Act."

Board clarification:

The Government of India in Ministry of Finance/Department of Revenue, Central Board of Excise & Customs, in D.O.F.
No. CBEC/20/43/01/2017-GST (Pt.), dated 5-10-2018 made it clears in the following paras as follows:

"3.It is accordingly clarified that the officers of both Central tax and State tax are authorized to initiate intelligence
based enforcement action on the entire taxpayer's base irrespective of the administrative assignment of the taxpayer
to any authority. The authority which initiates such action is empowered to complete the entire process of
investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action.
4. In other words, if an officer of the Central tax authority initiates intelligence based enforcement action against a
taxpayer administratively assigned to State tax authority, the officers of Central tax authority would not transfer the
said case to its State tax counterpart and would themselves take the case to its logical conclusions.
5. Similar position would remain in case of intelligence based enforcement action initiated by officers of State tax
authorities against a taxpayer administratively assigned to the Central tax authority.
6. It is also informed that GSTN is already making changes in the IT system in this regard."

GST Council Clarification:

The GST Council has issued Office Memorandum vide F. No. 757/Follow-up/GSTC/2018/8198, dated October 19, 2022
[2022 (66) G.S.T.L. C4] the Authority regarding action consequential to the issuance of Show Cause Notice and for
issuance of recurring SCN in case of an enforcement action initiated by the Central authorities against a taxpayer assigned
to State and vice versa.

Varied practices are being followed by the held formations regarding the issuance of recurring Show Cause Notices
(SCNs) as well as other consequential actions in cases where investigation has been initiated and analized by Central Tax
Authorities in respect of the taxpayers under State Tax Administration and vice versa. In some cases, the authority which
initiates the investigation is also issuing recurring SCN whereas in some other cases, it is being left for the concerned
jurisdictional Tax authority, who is administrating the taxpayer, to issue recurring SCN. This may create confusion and
may lead to a situation in which none of the authorities issue the recurring SCN in timely manner and therefore, there is a
need to have a uniform practice in such matters.

2. The matter was deliberated by the GST Council in its 47th meeting, where the Council recommended to clarify the
issue as follows:

(i) A taxpayer located within a State is open to enforcement action by both authorities. For example, an
enforcement action against a taxpayer, assigned to State Tax Authorities, can be initiated by the Central Tax
Authorities (and vice versa). In such cases, all the consequential action relating to the case including, but not
limited to, appeal, review, adjudication, rectification, the revision will lie with the authority which had initiated
the enforcement action i.e. the Central tax authorities in the instant case.
Refund in such cases may, however, be granted only by jurisdictional tax authority, administering the taxpayer.
(ii) Issuance of recurring SCNs does not involve any fresh investigation as the subject matter as well as ground of
SCN remain the same, and therefore, it may be desirable that such further/recurring SCNs are issued by the
actual jurisdictional authorities (which is responsible for assessment of returns of the taxpayer), as they will be
in a position to access the records and returns of the taxpayers, and to check whether the grounds of SCN still
exist or not and take a view/action for issuance of recurring SCN, based on facts in the said period. Besides, if
the same authority, who has taken enforcement based action (but does not administer the said taxpayer), is
mandated to issue recurring SCN also, it will put unnecessary burden on the investigating tax authority to keep
a track on subsequent practice of the taxpayer after conclusion of investigation and to collect all the data and
records for issuance of recurring SCN. Accordingly, the recurring SCNs may be issued by the concerned
jurisdictional tax authorities administering the taxpayer, i.e. even if investigation is conducted by Central Tax
Authorities and initial SCN is issued by them, the recurring SCN may be issued only by the jurisdictional tax
authority administering the taxpayer and if the such jurisdictional tax authority is State tax, the recurring SCN
may be issued by the concerned State tax authority.
Recent Case Law:

The Hon'ble High Court of Madras in the case of TVL. Vardhan Infrastructure and Other v. Union of India and Others,
reported in (2024) 16 Centax 509 (Mad.), held that "Section 6(1) of the respective GST Enactments empowers
Government to issue notification on the recommendation of GST Council for cross-empowerment - However, no
notification has been issued except under Section 6(1) of the respective GST Enactments for the purpose of refund
although officers from the Central GST and State GST are proper officers under the respective GST Enactments - Since,
no notifications have been issued for cross-empowerment with advise of GST Council, except for the purpose of refund of
tax under Chapter-XI of the respective GST Enactments r/w Chapter X of the respective GST Rules, impugned
proceedings are to be held without jurisdiction - Consequently, the impugned proceedings are liable to be interfered -
Thus, if an assessee has been assigned administratively with the Central Authorities, pursuant to the decision taken by the
GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017 dated
20.09.2017, the State Authorities have no jurisdiction to interfere with the assessment proceedings in absence of a
corresponding Notification under Section 6 of the respective GST Enactments - Similarly, if an assessee has been assigned
to the State Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing
Reference F.No.166/Cross Empowerment/GSTC/2017 dated 20.09.2017, the officers of the Central GST cannot interfere
although they may have such intelligence regarding the alleged violation of the Acts and Rules by an assessee - Therefore,
in absence of a notification for cross-empowerment, the action taken by the respondents are without jurisdiction - Officers
under the State or Central Tax Administration, as the case may be, cannot usurp the power of investigation or adjudication
of an assessee who is not assigned to them - There shall be a direction to the Central Authority/State Authority, as the case
may be, to whom the respective petitioners have been assigned for administrative purpose to initiate appropriate
proceedings afresh against them strictly in accordance with the provisions of the respective GST Enactments and GST
Enactments Rules and Circular issued thereunder ."

Joint investigation: Therefore, joint investigation by the CGST officer and SGST officers are may not be possible for the
following reasons:

(i) Section 6(1) of the respective GST Enactments empowers Government to issue notification on the
recommendation of GST Council for cross-empowerment. However, no notification has been issued except
under Section 6(1) of the respective GST Enactments for the purpose of refund although officers from the
Central GST and State GST are proper officers under the respective GST Enactments.
(ii) Since, no notifications have been issued for cross-empowerment with advise of GST Council, except for the
purpose of refund of tax under Chapter-XI of the respective GST Enactments read with Chapter X of the
respective GST Rules, investigation proceedings are to be held without jurisdiction.
(iii) Thus, if an assessee has been assigned administratively with the Central Authorities, pursuant to the decision
taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross
Empowerment/GSTC/2017 dated 20.09.2017, the State Authorities have no jurisdiction to interfere with the
assessment proceedings in absence of a corresponding Notification under Section 6 of the respective GST
Enactments.
(iv) Similarly, if an assessee has been assigned to the State Authorities, pursuant to the decision taken by the GST
Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017
dated 20.09.2017, the officers of the Central GST cannot interfere although they may have such intelligence
regarding the alleged violation of the Acts and Rules by an assessee.
(v) The manner in which the provisions have been designed are to ensure that there is no cross interference by the
counterparts. Only exception provided is under Section 6 of the respective GST enactment. Therefore, in
absence of a notification for cross-empowerment, the action taken by the officers under the State or Central
Tax administration as the case may be cannot usurp the power of investigation or adjudication of an assessee
who is not assigned to them thereby investigation without jurisdiction.
The Hon'ble High Court of Orissa in the case of M/s Satyam Castings Pvt. Ltd, Cuttack v. Deputy Director, DGGI,
Bhubaneswar in W.P(C) No. 2530/2024 [(2024) 18 Centax 244 (Ori.)], wherein the court held "that there is no ambiguity
in the language of Section 6(2)(b) of the CGST Act where a proper officer under the State Goods and Services Tax Act or
the Union territory Goods and Services Tax Act has initiated proceeding on a subject matter. If the subject matter of the
proceeding is entirely different, there is no bar to the maintainability of proceeding. What is barred is the limitation of the
proceeding on the same subject matter by the proper officer. In view of the order which we intend to pass in the present
matter, we refrain ourselves from recording any definite opinion at this stage that the impugned show cause notice issued
by the DGGI is barred or not by virtue of operation of Section 6(2)(b) of the CGST/OGST . Act considering the dispute
raised in this regard on behalf of opposite parties No.1 and 2. We see no reason why the petitioner did not respond to the
summons issued by the DGGI taking a plea that it was barred by Section 6(2)(b) of the CGST/OGST Act. Further, in the
present case, a show cause-cum-demand notice has already been issued on 29.12.2023. Such being the position, we
decline to interfere in the present matter. The petitioner shall have the liberty to respond to the said shoe cause-cum-
demand notice dated 29.12.2023 and take appropriate recourse to the provisions of the CGST Act. Since we have
refrained ourselves from expressing any definite opinion as to whether the case of the petitioner is covered by Section 6(2)
(b) of the CGST / OGST Act, it would be open for petitioner take the said plea before the appropriate forum in appropriate
proceeding."

Conclusion: Thus, Section 6(2) (b) of the CGST Act is very much clear but requires issuance of notification from the
Government for cross interference for investigation so that CGST officer can initiate investigation for the State
jurisdiction and vice versa. It is to mention that Section 6(1) of the respective GST enactments empowers Government to
issue notification on the recommendation of GST Council for cross empowerment. However, no notification has been
issued except under Section 6(1) of the respective GST enactments for the purpose of refund claim u/s 54 of the Act. In
absence of such notification for cross empowerment with advice of GST council, State authorities have no jurisdiction to
interfere with the assessment proceedings of the Central matter and vice versa and thereby the investigation will be held as
no jurisdiction. It is high time the Central Government should come out with notification for cross empowerment to
resolve the burning litigation across the country and clarify the issue within the provisions of GST law.

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