Dual Authorities Pursue Liability, Ensuring Compliance

Dual Liability, Ensuring Compliance are critical aspects of the GST framework, as evidenced by the recent judgments in Radha Krishan Industries v. Union of India & Others [2026-VIL-476-HP dated 05.05.2026] and Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr., reported in 2025-VIL-63-SC(14.08.2025), which have shed light on the importance of preventing overlapping adjudications and ensuring procedural fairness in GST proceedings. The GST system, designed on the principle of cooperative federalism, aims to prevent Dual Liability and ensure compliance through various provisions, including Section 6(2)(b) of the CGST Act, which prohibits parallel adjudicatory proceedings on substantially the same subject matter.

Key Facts

• The Himachal Pradesh High Court judgment in Radha Krishan Industries v. Union of India & Others [2026-VIL-476-HP dated 05.05.2026] reiterated the issue of multiple GST proceedings.
• The Supreme Court’s judgment in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. [2025-VIL-63-SC(14.08.2025)] emphasized the distinction between "inquiry" and "initiation of proceedings" under Section 6(2)(b) of the CGST Act.
• Section 74(1) of the CGST Act allows for the issuance of a Show Cause Notice by the Central GST authorities.
• Section 6(2)(b) of the CGST Act prohibits parallel adjudicatory proceedings on substantially the same subject matter once one authority has initiated proceedings.
• The Supreme Court’s judgment in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. provided a two-part test to determine whether proceedings involve the "same subject matter".
• The judgment in Radha Krishan Industries applied the principles laid down in Armour Security to prevent overlapping adjudications and ensure procedural fairness.

Statutory Context & Tax Analysis

The GST framework is designed to prevent overlapping adjudications and ensure procedural fairness through various provisions, including Section 6(2)(b) of the CGST Act. This section prohibits parallel adjudicatory proceedings on substantially the same subject matter once one authority has initiated proceedings. The Supreme Court’s judgment in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. emphasized the distinction between "inquiry" and "initiation of proceedings" under Section 6(2)(b) of the CGST Act. The Court clarified that investigative measures such as summons, searches, seizures, inspections, and evidence collection are merely fact-finding exercises and do not by themselves amount to ‘initiation of proceedings’ under Section 6(2)(b). The Court also provided a two-part test to determine whether proceedings involve the "same subject matter", which assesses whether both authorities are acting against essentially the same alleged violation based on the same facts and whether both proceedings aim to evaluate or recover the same or very similar tax liability, deficiency, or obligation.

The CGST Act also provides for the issuance of a Show Cause Notice under Section 74(1), which crystallizes the allegations, identifies the proposed liability, and activates the adjudicatory process under GST law. The Supreme Court’s judgment in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. emphasized the importance of the Show Cause Notice in determining the scope of the proceedings and the liability of the taxpayer. The Court also noted that an adjudicating authority generally cannot go beyond the allegations specified in the SCN, especially in light of Section 75(7) of the CGST Act.

Client Impact & Compliance Procedure

The judgments in Radha Krishan Industries and Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. have significant implications for taxpayers facing multiple GST proceedings. To ensure compliance and prevent overlapping adjudications, taxpayers should:

1. Respond to summons and notices issued by the GST authorities, as issuing a summons does not, in itself, mean that separate proceedings are underway.
2. Notify the authorities in writing if they learn that another authority is already examining the same issue.
3. File replies and raise all objections before the authorities, and simultaneously direct both Central and State authorities to coordinate to ensure that the taxpayer is not exposed to multiple adjudicatory proceedings on the identical controversy.
4. Maintain detailed records of all proceedings, including summons, notices, and Show Cause Notices, to demonstrate that the authorities have been notified and that the taxpayer has cooperated with the investigation.
5. Seek remedies under Article 226 of the Constitution if the authorities do not coordinate properly and the taxpayer is exposed to multiple adjudicatory proceedings on the same issue.
6. File Form GST CMP-05 to notify the authorities of any changes in the taxpayer’s details or any other relevant information.
7. Maintain a record of all communications with the authorities, including emails, letters, and meetings, to demonstrate that the taxpayer has cooperated with the investigation and has provided all required information.

By following these steps, taxpayers can ensure compliance with the GST framework and prevent overlapping adjudications, thereby minimizing the risk of Dual Liability and ensuring a smooth and efficient tax administration process. The GST authorities should also ensure that they coordinate with each other to prevent overlapping adjudications and ensure procedural fairness, as emphasized by the Supreme Court’s judgment in Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East & Anr. and the Himachal Pradesh High Court’s judgment in Radha Krishan Industries.

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