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TMI BlogCROSS EMPOWERMENT UNDER GST: DISCORDANT INTERPRETATIONSX X X X Extracts X X X X X X X X Extracts X X X X ..... CROSS EMPOWERMENT UNDER GST: DISCORDANT INTERPRETATIONS - By: - Vinay Goyal - Goods and Services Tax - GST - Dated:- 3-9-2024 - - Cross Empowerment Under GST: Discordant Interpretations Introduction The GST has introduced a unique concept in India where both the Centre and the states [1] levy taxes on a joint base. Many of the indirect taxes (17 in total) which were earlier taxed separately by the states and the Centre are subsumed in this one tax. One tax, in fact, is a slight misnomer in intra-state supply, as CGST and SGST are levied under different statues, though these are collected concurrently. What we have is a dual GST model suitable to the federal structure of the country wherein the administrative machineries of the states as well as the Centre are deployed. Every taxpayer has been assigned a jurisdiction of either Centre or state. The rationale is to ensure single interface for the purpose of tax administration under the respective GST Enactment . [2] The matter does not end with a single interface. The GST Acts also contemplate a cross empowerment to Center and states over the taxpayers assigned to each other. As of now, both the Center as well as state administratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are working under the belief that they are authorized to enforce GST laws on the taxpayers assigned to the other. However, whether this mandate for cross-empowerment contemplated under the GST Acts has been validly brought into force or not has become critical issue due to conflicting judgments of various High Courts . This article analyses the constitutional provisions, the statutory provisions, the CBIC Clarifications, the Court pronouncements, and the GST Council meetings relevant to the issue. Constitutional Framework 1 . The Constitution contains a threefold distribution of legislative power under Article 246 , as enumerated in the Seventh Schedule. The subjects enumerated in the Union List are assigned exclusively to the Parliament, those in the State List are assigned exclusively to the States, and those in the Concurrent List are assigned both to the Centre and the States. Prior to introduction of GST, for the purpose of indirect taxes, this distribution of powers as mentioned in the three lists was followed by the Parliament and the States. 2 . The constitutional framework for GST was introduced by the 101 st amendment which introduced simultaneous legislative powers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Centre and the States except in case of inter-state trade and commerce where the power remained exclusively with the Centre. The 101 st Amendment introduced inter alia following Articles: 2.1 Article 246A makes special provision with respect to goods and services tax . This article empowers the Parliament and Legislature of every state to make laws with respect goods and services tax imposed by the Union or by such State. This Article obviates the need to travel to Seventh Schedule for the purpose of taxing goods and services. This Article introduces the principle of simultaneous levy and does away with exclusivity of subject matter in respect of supply of goods and services. However, this Article provides the power to make laws so far as inter-state supply of goods or services exclusively to the Parliament. 2.2 Article 269A makes provision for Levy and collection of goods and services tax in course of inter-State trade or commerce. Under this article, the Government of India has the exclusive jurisdiction to levy and collect goods and services tax on supplies in the course of inter-State trade or commerce, though such tax is ultimately apportioned between the Union and the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates. Further, only Parliament is empowered to formulate the principles for determining the place of supply when a supply takes place in the course of inter-State trade or commerce. Anyhow, these constitutional provisions are silent on the issue of cross-empowerment. 2.3 Article 279A provides for the constitution of a federal body namely GST Council. This Article also provides that the duly constituted GST Council shall make recommendations to the Union and the States on model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of inter-State trade or commerce under article 269A and the principles that govern the place of supply. While discharging the functions conferred by this article, the GST Council shall be guided by the need for a harmonized structure of goods and services tax and for the development of a harmonized national market for goods and services. An important aspect is that the first 18 meetings of the GST Council were conducted in pre-GST regime, that is, prior to 01.07.2017, and later meetings have been conducted after the introduction of GST. This assumes significance as discussed infra. Adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trative Framework 3. Chapter II of the CGST Act, 2017 (as well as Chapter II State GST Acts) deals with administration under the GST. The provisions under this chapter define the officers of Central GST, their appointment, and their powers. These provisions also refer to cross-empowerment of officers. 3.1 Section 3 provides that central government shall appoint the specified classes of officers for the purpose of CGST Act, 2017 . It also provides that the officers appointed under the Central Excise Act, 1944 shall be deemed to be appointed as officers under the CGST Act, 2017 . 3.2 Section 4 provides that Board may , in addition to the officers as may be notified by the Government under section 3 , appoint such officers of central tax as it may think fit to be officers under this Act . 3.3 Section 5 provides that subject to such conditions limitations as the Board may impose, an officer of the central tax may exercise the powers and discharge the duties conferred on him under this Act. 3.4. Thus Sections 3 to 5 deal with what we may call linear jurisdiction , the jurisdiction of CGST officers in respect of the taxpayers have been assigned jurisdiction as Centre . Similar provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are there in state enactments in respect of the officers assigned as state jurisdiction. But for the purpose of this article, our focus is on the cross jurisdiction of the CGST officers in respect of the taxpayers assigned to the states and vice versa. 3.5. Section 6 of the CGST Act, 2017 deals with so called cross empowerment. The text of the same is reproduced below: SECTION 6 . Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances. (1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. (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 G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods 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 There are similar pari materia provisions under Section 6 of the SGST Acts, regarding the authorization of CGST Officers for the purpose of SGST Act. 3.6 This provision for cross empowerment has following four dimensions : (i) Sub-section (1) provides that the officers appointed SGST Act are authorised to be the proper officers for the purposes of CGST Act , subject to such conditions as the Government shall, on the recommendations of the Council , by notification, specify. (ii) The sub-section (2) , which itself is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the conditions specified in the notification issued under ss. (1), provides under clause (a) that where any proper officer issues an order under CGST Act, he shall also issue an order under the SGST Act , as authorized by the SGST be, under intimation to the jurisdictional officer of State tax. (iii) Under clause 2 (b), if a proper officer under the SGST Act has initiated any proceedings on a subject matter, no parallel proceedings shall be initiated by an officer under CGST Act on the same subject matter. (iv) Any proceedings for rectification, appeal and revision, wherever applicable , of an order passed by an officer appointed under CGST Act shall not lie before an officer appointed under SGST Act. Thus for rectification, appeal and revision proceedings, there will only be linear jurisdiction flowing from the administrative setup of same formation Centre or State under which the appointed officer passed the order. 3.7 In addition, we have another dimension to cross empowerment for IGST . Chapter II of the IGST Act, 2017 deals with administration of IGST Act, and the same is reproduced below: CHAPTER II ADMINISTRATION SECTION 3 . Appointment of officers. The Board may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppoint such central tax officers as it thinks fit for exercising the powers under this Act. SECTION 4 . Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances. Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such exceptions and conditions as the Government shall, on the recommendations of the Council, by notification, specify. Thus, IGST is a central legislation based on powers given under Article 246A (2) and 269A (para 2 above), and for the purpose IGST Act, the CGST officers are appointed by the Board (CBIC). However, as per Section 4 of the IGST Act , SGST officers are Act are authorized to be the proper officers for the purposes of this Act, subject to such exceptions and conditions as the Government shall, on the recommendations of the Council, by notification, specify Controversy in Nutshell 4. In the above scenario, the fine kettle of fish is the wording of the Section 6 (1) of the CGST Act (and of Section 4 of the IGST Act ), as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced below: Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specif y The above, provision has been interpreted in two ways. First, that the officers appointed under the SGST are authorized under CGST Act subject to any subsequent conditions as the Government shall, on the recommendations of the Council, by notification, specify. Second, the officers appointed under the SGST are to be authorized under CGST Act by a Notification which shall be on the recommendation of the council; that such notification is a condition precedent and not contingent on conditions to be applied. Refund Notification 5. In October 2017, Central Government issued a Notification No. 39/2017-C.T., dated 13-10-2017 authorizing State Tax officers empowered for processing and grant of refund under section 54 or section 55 of the CGST Act read with the rules made thereunder except rule 96 of the Central Goods and Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Tax Rules, 2017 . This notification is issued in exercise of the powers conferred by sub-section (1) of section 6 of the Central Goods and Services Tax Act, 2017 on the recommendations of the Council. [3] This notification gave the impression that for authorization of SGST officers for CGST Act purposes, a notification under ss. 6 (1) was required to be issued, as mentioned in second interpretation under previous paragraph. CBIC Clarifications 6 . CBIC however clarified vide D.O.F. No. CBEC/20/43/01/2017-GST (Pt.) dated 05.10.2018 [4] as follows: It has been brought to the notice of the Board that there is ambiguity regarding initiation of enforcement action by the Central tax officers in case of taxpayer assigned to the State tax authority and vice versa . 2. In this regard, GST Council in its 9th meeting held on 16-1-2017 had discussed and made recommendations regarding administrative division of taxpayers and concomitant issues. The recommendation in relation to cross-empowerment of both tax authorities for enforcement of intelligence based action is recorded at para 28 of Agenda note no. 3 in the minutes of the meeting which reads as follows :- viii. Both the Central and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State tax administrations shall have the power to take intelligence-based enforcement action in respect of the entire value chain 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system in this regard. (emphasis supplied) 7 . CBIC vide F. No. CBEC-20/10/07/2019-GST, dated 22-6-2020 , further clarifies that Intelligence based enforcement actions initiated by Central Tax Officers against taxpayers assigned to State Tax administration and Section 6(1) of CGST Act, 2017 Clarification . Subject : Reference form DGGI on Cross empowerment under GST Reg. I am directed to refer to DGGI letter F.No. 574/CE/66/2020/Inv./15308, dated 26-5-2020 on the issues related to cross empowerment of officers in terms of provisions of section 6 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act ) 2. Issue raised in the reference is whether intelligence based enforcement actions initiated by the Central Tax officers against those taxpayers which are assigned to the State Tax administration gets covered under Section 6(1) of the CGST Act and the corresponding provisions of the SGST/ UTGST Acts or whether a specific notification is required to be issued for cross empowerment on the same lines as notification No. 39/2017-C.T., dated 13-10-2017 authorizing the State GST Officers for the purpose of refunds under sections 54 and 55 of the CGST Act . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1 The issue has been examined in the light of relevant legal provisions under the CGST Act, 2017 . It is observed that Section 6 of the CGST Act provides for cross empowerment of State Tax officers and Central Tax officers and reads as :- 6. (1) Without prejudice to the provisions of this Act, the officers appointed under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. 3.2 Thus in terms of sub-section (1) of section 6 of the CGST Act and sub-section (1) of section 6 of the respective State GST Acts respective State Tax officers and the Central Tax officers respectively are authorised to be the proper officers for the purposes of respective Acts and no separate notification is required for exercising the said powers in this case by the Central Tax Officers under the provisions of the State GST Act. It is noteworthy in this context that the registered person in GST are registered under both the CGST Act and the respective SGST/ UTGST Act . 3.3 The confusion s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eems to be arising from the fact that, the said sub-section provides for notification by the Government if such cross empowerment is to be subjected to conditions. It means that notification would be required only if any conditions are to be imposed. For example, Notification No. 39/2017-C.T., dated 13-10-2017 restricts powers of the State Tax officers for the purposes of refund and they have been specified as the proper officers only under Sections 54 and 55 of the CGST Act and not under rule 96 of the CGST Rules, 2017 (IGST Refund on exports). If no notification is issued to impose any condition, it means that the officers of State and Centre have been appointed as proper officer for all the purposes of the CGST Act and SGST Acts. 4. Further, it may kindly be noted that a notification under section 6(1) of the CGST Act would be part of subordinate legislation which instead of empowering the officer under the Act, can only be used to impose conditions on the powers given to the officers by the section. In the absence of any such conditions, the power of Cross-empowerment under section 6(1) of the CGST Act is absolute and not conditional. (emphasis supplied) Thus, the CBIC has clar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified twice that officers empowered under SGST Act stand authorised under CGST Act, and no separate notification is required to be issued, except when required for imposing specific conditions. CBIC vide clarification dated 22.06.2020 also noted a crucial fact that that the registered person in GST are registered under both the CGST Act and the respective SGST/ UTGST Act . Judicial Pronouncements 8 . Various dimensions of cross-empowerment as detailed in para 3.6 and 3.7 above have been dealt with various High Courts. Some of the judicial pronouncements on the issue are as detailed below: 8.1 . In M/S. INDO INTERNATIONAL TOBACCO LTD. M/S. SSM EXPORTS VERSUS SHRI VIVEK PRASAD, ADDITIONAL DIRECTOR GENERAL, DGGI ORS., COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX AND CGST DELHI WEST. ORS. - 2022 (1) TMI 554 - DELHI HIGH COURT , the Hon ble Delhi High Court held that Section 6 of the CGST Act is intended to give the effect of harmonious convergence of the States and the Union for the same event for taxation . The High Court held that Circular dated 05.10.2018 is one example where Section 6 shall have its full play . In terms of Section 6(1), the State or the Central Tax Officer as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case maybe, is also authorised to act as the proper officer for the purposes of the other Act CGST or the SGST Act as the case maybe. Therefore, when such officer initiates intelligence based enforcement action , he acts and is empowered to so act not only under the CGST Act but also under the SGST or the UGST Act. In terms of Section 6(2)(a), he has to pass a comprehensive order, both under the CGST and the SGST/UGST Act. In terms of Section 6(2)(b), as he has initiated intelligence based enforcement action , the other jurisdiction officer must hold his hands and the officer initiating such intelligence based enforcement action need not transfer the case to the jurisdiction officer to whom otherwise the taxpayer is administratively assigned. However, the basic issue in the cited case was regarding territorial jurisdiction of the jurisdictional officers vis- -vis all India jurisdiction of DGGI, and the Hon ble Court held that since intelligence based enforcement action had repercussion or involvement of taxpayers beyond territorial jurisdictional limit of officer initiating such action and such action had a common thread or involvement of multiple taxpayers, and transfer of all in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigations to DGGI, having pan-India jurisdiction was not prohibited. However, in this case, an SLP appears to be pending in Hon ble Supreme Court [ M/S SSM EXPORTS VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX AND CGST ORS. - 2024 (9) TMI 169 - SC ORDER ] In AMIT GUPTA VERSUS UNION OF INDIA AND ORS. - 2023 (10) TMI 143 - DELHI HIGH COURT Hon ble Tribunal followed its findings in case of Indo International regarding power of DGGI for all India jurisdiction. 8.2 In VIVEK NARSARIA VERSUS THE STATE OF JHARKHAND, THE COMMISSIONER OF STATE TAXES, JOINT COMMISSIONER OF STATE TAXES, RANCHI, THE PRINCIPAL COMMISSIONER, CENTRAL GOODS SERVICE TAX AND CENTRAL EXCISE, THE SENIOR INTELLIGENCE OFFICER, DIRECTORATE GENERAL OF GST INTELLIGENCE, JAMSHEDPUR - 2024 (1) TMI 809 - JHARKHAND HIGH COURT Hon ble Jharkhand High Court held that bare perusal of Section 6 of the Act, especially Section 6(2)(b), when read with the Clarification dated 5-10-2018 (para 6 above), further read with Clarification dated 22-6-2020 (para 7 above) , when read together, clearly denotes and implies that it is a chain of a particular event happening under the Act and every any enquiry/investigation carried out at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the behest of any of the Department are interrelated. When the Search Seizure by the State Authorities was prior in point of time (than DGGI which started the investigations later in point of time) all the proceedings are interrelated, and the State Authorities should continue with the proceedings. The Hon ble High Court held that officers of the DGGI does not enjoy any special power or privilege in comparison with the officers of the State GST Authorities 8.3 In M/S BRIGHT ROAD LOGISTICS VERSUS STATE OF HARYANA AND OTHERS - 2023 (8) TMI 693 - PUNJAB AND HARYANA HIGH COURT , the Hon ble Punjab and Haryana High Court held that State Tax Officers appointed under sub-section (1) of Section 5 read with clause (91) of Section 2 of State Goods and Services Tax Act, 2017 had power to take action under IGST Act in view of the enabling provisions of Section 20 and Section 4 of the IGST Act. (Another dimension of cross-empowerment as pointed out under para 3.7 above). 8.4 In M/S RAMESH CHAND KANNU MAL VERSUS STATE OF UP AND 2 OTHERS - 2018 (5) TMI 761 - ALLAHABAD HIGH COURT Hon ble Allahabad High Court held that State Authorities empowered under Uttar Pradesh Goods and Services Tax Act, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 can also enforce the provisions of Central Goods and Services Tax Act, 2017 or Integrated Goods and Services Tax Act, 2017 , but it does not mean that they can apply provisions of Uttar Pradesh Goods and Services Tax Act, 2017 or Rules made thereunder to cases of inter -State trade in violation of Section 20(xv) of Integrated Goods and Services Tax Act, 2017 . Similar findings were given by the Allahabad High Court in SATYENDRA GOODS TRANSPORT CORP. THRU. PROP. BHUWAN KOHLI A VERSUS STATE OF U.P. THRU. PRIN. SECY. TAX REGISTRATION OTHERS - 2018 (4) TMI 807 - ALLAHABAD HIGH COURT . 8.9 The above judgments basically uphold the provisions of Section 6 of the CGST Act / SGST Act and Section 4 of the IGST Act regarding cross-empowerment under respective enactments without the need of a further specific notification. The matter, however, took a different trajectory in TVL. VARDHAN INFRAASTRUCTRE, REPRESENTED BY ITS PARTNER, S. MANIKANDAN, CHENNAI VERSUS THE SPECIAL SECRETARY, THE CHAIRMAN, CENTRAL BOARD OF INDIRECT TAXES, THE ADDITIONAL CHIEF SECRETARY COMMISSIONER OF STATE TAXES, THE DIRECTOR GENERAL OF GST INTELLIGENCE, SOUTH, THE SENIOR INTELLIGENCE OFFICER, THE ASSISTANT COMMISSION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ER (ST) - 2024 (3) TMI 1216 - MADRAS HIGH COURT wherein the Hon ble Madras High Court held that 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 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 . 8.10 In the aforesaid Judgment, Hon ble Madras High Court inter alia noted following contents of meetings of GST Councils. A. Para No. 28 of the Minutes of the 9 th GST Council Meeting held on 16-1-2017 discussed the issue regarding cross-empowerment. Para No. 28 of the Minutes of the 9 th GST Council Meeting held on 16-1-2017 is extracted 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 administration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for all administrative purposes ; (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. (emphasis supplied) B. Text of GST Council Circular No. 1/2017-GST (Council), dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-9-2017 bearing reference F. No. 166/Cross Empowerment/GSTC/2017 containing the guide- lines for Division of Taxpayers between the Centre and State Authorities to ensure single interface for the purpose of tax administration under the respective GST Enactment reads as below :- Subject : Guidelines for division of taxpayer base between the Centre and States to ensure Single Interface under GST - Regarding Based on the decisions taken in the 9th Meeting of the GST Council held on 16 January, 2017 and 21st Meeting of the GST Council held on 9 September, 2017 , the following criteria should be followed for the division of taxpayer base between the Centre and the States to ensure single interface : (i) Of the total number of taxpayers below Rs. 1.5 crore turnover, all administrative control over 90% of the taxpayers shall vest with the State tax administration and 10% with the Central tax administration; (ii) 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; 3. The State Level Committees comprising Chief Commissioner/Commissioner Commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Taxes of respective States and jurisdictional Central Tax Chief Commissioners/Commissioners are already in place for effective co-ordination between the Centre and the States. The said Committees may now take necessary steps for division of taxpayers in each State keeping in view the principles stated above. Supplementary decisions, if any, may be taken by the said Committees to implement the decision of the GST Council, keeping in view the broad principles stated hereinabove. 4. Suitable notifications regarding cross-empowerment of State and Central Tax Officers under CGST/IGST and SGST Acts respectively are being issued separately . (emphasis supplied) C. The GST Council in its 22nd Meeting held on 6-10-2017 addressed the concern arising out of the gap between the issuance of Notifications under various GST Enactments of 2017 and IGST Act, 2017 . Agenda No. 9 of the 22nd Meeting held on 6-10-2017 captures the deliberations. It is extracted below :- Agenda item 9: Proposal for issuing notifications on cross-empowerment for ensuring single interface under GST 35. The Commissioner (GST Policy), CBEC stated that it was proposed to issue notification on cross-empowerment prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the decisions of the Council taken during its 9th Meeting (held on 16 January, 2017) and 21st Meeting (held on 9 September, 2017). He stated that while there was a broad agreement for cross-empowerment under the CGST and SGST Acts, there was disagreement on the issue of cross-empowerment under the IGST Act in relation to the Place of Supply Rules. The Secretary stated that notification of cross-empowerment was urgently required to enable refund to the taxpayers and this notification could be issued. He added that due to persistent differences on cross-empowerment for the Place of Supply Rules issues under IGST, notification regarding cross empowerment in respect of other matters could be deferred. He stated that by cross empowering States and Central Tax Officers for giving refund, it would be ensured that only one officer issued an order of refund for both CGST and SGST . The Council approved the proposal to issue a notification by the Central Government and the State Governments cross empowering officers of the Central and State Government to sanction refund and that an order of refund passed by an officer of the Central or State Government shall cover both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... central tax and the State tax and a similar notification to be issued under the IGST Act. These GST Council provisions insinuate that suitable notifications regarding cross-empowerment of State and Central Tax Officers under CGST/IGST and SGST Acts respectively were to be issued separately; and that while there was a broad agreement for cross-empowerment under the CGST and SGST Acts, there was disagreement on the issue of cross-empowerment under the IGST Act in relation to the Place of Supply Rule. In the paras 25 and 26 of the Judgment, the Hon ble Madras High Court also noted model notifications and observed that these notifications remain Draft Notifications till date. Accordingly, Hon ble High Court has such cross-proceedings as without jurisdiction. This Judgment in case of Tvl. Vardhan Infrastructure has been followed by the Madras High Court in M/S. RAM AGENCIES, REP. BY ITS PROPRIETRIX MRS. ADAIKKAMMAL VERSUS THE ASSISTANT COMMISSIONER OF CENTRAL TAX, THANJAVUR - 2024 (4) TMI 656 - MADRAS HIGH COURT ] With these judgments of Hon ble Madras High Court, the interpretation of Section 6 of CGST/SGST Acts and Section 4 of the IGST Act has veered towards the second interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mentioned in para 4 above. Important Observations of GST Conuncil in 11 th Meeting Have Not Got Adequate Attention An interesting issue which missed the entire discussion above, including the judicial pronouncements, is the discussion of the GST Council in the 11 th GST Council Meeting (held on 04.03.2017) under paras 6.5.1 to 6.5.3 and observations para 7.4, which are reproduced as below: 6.5.1. The Hon'ble Minister from Telangana stated that in Section 6, cross-empowerment should be part of the Act instead of implementing it through a notification . The Hon'ble Minister from Uttar Pradesh supported this suggestion. The Secretary stated that the situations of cross-empowerment would be dynamic in nature and to have flexibility, it need not be put in the Law. He added that the Council had already taken a decision regarding the distribution of taxpayers between the Central and the State administration and that this need not be put in the Law. The Hon'ble Chairperson observed that the ambit of Section 6 would be in accordance with the Council's decision and that the content of notification would be as decided by the Council. He added that the Government was to only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue such a notification and not determine its content, which would be determined by the Council. He added that the power to vary the content of the notification should rest with the Council. The Hon'ble Minister from West Bengal observed that the complexion of the Council could change in due course and, therefore, suggested that the following formulation should be incorporated as part of Section 6 of the CGST Act: 'Without prejudice to the provisions of this Act, officers appointed under the State Goods and Services Tax Act are authorised to be the proper officers for the purposes of this Act, subject to such conditions as may be notified bv Government on the recommendations of the Council.' The Hon'ble Chairperson stated that the present formulation in Section 6 of the draft CGST Act also conveyed the same meaning. 6.5.2. The Hon'ble Minister from Karnataka stated that the issue of cross-empowerment was different from dividing the taxpayer base in the ratio of 90% and 10%. He stated that while the numerical distribution rested with the Council, a provision for cross-empowerment under the GST regime must be put in the Law, as otherwise there would be severe di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficulties in implementing GST. The Hon'ble Chairperson stated that in pith and substance, the existing draft was identical to the one suggested by the Hon'ble Minister from West Bengal and that the only difference was that the second clause had been made the first clause and the first clause had been made the second clause. He summed up with the observation that there shall be cross-empowerment under the Law and that its extent would be decided from time to time. 6.5.3. The Hon'ble Minister from Tamil Nadu observed that if cross-empowerment was vested on SGST officers through notification, then there was a chance that the decision already taken on dual control might be subject to frequent alterations. He, therefore, suggested that the notification route should be avoided and that, instead, it might be done through Rules made under the relevant Law. He suggested the following revised formulation for Section 6 of the draft CGST Law: 'Without prejudice to the provisions of this Act, the Government shall, on the recommendations of the Council, and subject to such conditions as may be prescribed and specified under rules framed under this Act, authorize officers appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the State Goods and Services Tax Act to be the proper officers for the purposes of this Act and for this purpose the State officers may exercise all or any of the powers they have under the State Goods and Service Tax Act.' The Hon'ble Chairperson suggested that the Law Committee could reformulate the existing text of Section 6 of the draft CGST Act taking into account the suggestions of the Hon'ble Minister from West Bengal. The Council agreed to the suggestion. . 7.4. The Law Committee to reformulate the existing text of Section 6 of the draft CGST Act taking into account the suggestions of the Hon'ble Minister from West Bengal and the Hon'ble Minister from Karnataka to give effect to the understanding that SGST officers shall be cross-empowered under the CGST Act in the Act itself and that only one order shall be passed for one dispute involving taxes under both the CGST and the SGST Act and that only one order shall be passed for one dispute involving taxes under both the CGST and the SGST Act and that if a CGST officer passed an order, which also included demand for tax under the SGST Act, the SGST officer shall be barred from passing order on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same dispute. (emphasis supplied) Thus, the GST Council allowed the objection of the Hon ble Minister from West Bengal and the Hon'ble Minister from Karnataka to give effect to the understanding that SGST officers shall be cross-empowered under the CGST Act in the Act itself. The enacted provision of Section 6 (1) in the CGST Act is as proposed in para 6.5.1 of the minutes of meeting and as approved in para 7.4 therein . It is important to note that in case of statutes, enacted provisions need to be strictly interpreted. Only in case there is an ambiguity, external aids can be taken. If so, which external aid is appropriate is also a matter of judicial interpretation. Conclusion Jurisdiction of officers is at the core of implementing a taxing statute. It determines the authority and power under which the administration is working. It is the threshold issue in any proceeding. If the jurisdiction of the administration itself comes under question, all execution takes a back stage. Cross empowerment under a taxing statute is a novel concept. We see that Constitutional provisions introduced vide 101 st Amendment are silent on the issue of cross-empowerment. 9 th GST Council meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alluded to cross-empowerment, but actual mechanism is to be implemented through statutes. Provisions of the CGST/SGST/ IGST Acts do contemplate cross empowerment. The back-drop of 11 th GST Council meeting has not got the adequate attention. The CBIC has issued clarifications, but the Hon ble Madras High Court has relied on the proceedings of 22 nd GST Council Meeting . There are conflicting judgments of High Court on the matter. The final word in the matter seems some distant away. Disclaimer: The article is only for academic purposes, and is not legal opinion of any sort. Further, views, thoughts, and opinions expressed in the text belong solely to the author and are purely for educational purposes. For any query, the author can be reached at [email protected] [1] For the purpose of this Article state acts includes union territory acts [2] GST Council Circular No. 1/2017-GST (Council), dated 20-9-2017 [3] This authorization was modified vide Notification No. 10/2018-C.T., dated 23-1-2018. [4] https://www.taxmanagementindia.com/visitor/detail_circular.asp?ID=57522 ; - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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