Supreme Court Clarifies GST Investigations: Summons Not “Initiation of Proceedings”

New Delhi, August 15, 2025 – In a landmark judgment with wide implications for tax enforcement, the Supreme Court has ruled that issuance of summons under Section 70 of the Central Goods and Services Tax Act, 2017 (CGST Act) does not constitute “initiation of proceedings” under Section 6(2)(b). The Court held that summons, searches, and seizures are investigative steps, not adjudicatory proceedings, thereby allowing Central and State GST authorities to conduct parallel inquiries at the investigation stage without violating the principle of single interface.

The decision in Armour Security v. Commissioner of CGST Delhi resolves long-standing judicial uncertainty created by divergent High Court rulings and establishes a structured framework to prevent taxpayers from being subjected to double adjudication while still permitting coordinated investigations by multiple authorities.

Background of the Case

Armour Security, a Delhi-based public limited company engaged in providing private security and manpower services, came under the scrutiny of the Delhi GST Department in November 2024. The State jurisdictional authority issued a show cause notice alleging significant discrepancies in the company’s declared turnover, wrongful availment of input tax credit (ITC), and non-payment of GST during the financial year 2020–21.

Two months later, in January 2025, the Central GST Delhi East Commissionerate conducted a search and seizure operation under Section 67(2) at the company’s offices, seizing records, invoices, and digital data. Following this, summons were issued to Armour Security’s directors under Section 70 of the CGST Act for recording statements and producing further evidence.

The company challenged the CGST action, arguing that the State GST Department had already initiated proceedings on the same subject matter. Invoking Section 6(2)(b), Armour Security contended that once one authority initiates proceedings, the other is barred from commencing a parallel action on the same cause of action.

The Delhi High Court dismissed the petition, holding that investigations and adjudications are distinct. Armour Security then appealed before the Supreme Court.

The Legal Context

At the heart of the dispute lies the interpretation of Section 6(2)(b) of the CGST Act, which provides:

“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.”

The key questions before the Supreme Court were:

1. Does issuance of summons under Section 70 amount to “initiation of proceedings”?
2. What constitutes the “same subject matter” for the purposes of Section 6(2)(b)?
3. Can parallel investigations by Central and State authorities co-exist without violating the principle of single interface under GST?

Court’s Reasoning

A Bench of Justices JB Pardiwala and R Mahadevan delivered the ruling, carefully delineating the boundary between investigation and adjudication.

The Court held that:

• “Proceedings” under Section 6(2)(b) are confined to adjudicatory steps such as determination of tax liability, imposition of penalty, or recovery of dues under Sections 73 and 74.
• Investigative actions like summons, searches, inspections, and seizures are merely fact-finding measures and do not amount to initiation of proceedings.
• The issuance of a show cause notice marks the initiation of proceedings, as it crystallizes the dispute into an adjudicatory process.
• The expression “same subject matter” is to be understood in terms of the cause of action in adjudication, not merely the overlap of tax periods, facts, or transactions.

The Court clarified that while multiple authorities can simultaneously investigate, the law ensures that adjudication on the same liability cannot occur twice. In other words, the taxpayer cannot face two show cause notices for the same cause of action.

Guidelines Issued by the Court

To ensure clarity and prevent harassment of taxpayers, the Court framed a nine-point guideline:

1. Taxpayers must comply with summons, notices, or investigative directions, even if another authority has begun inquiry.
2. Taxpayers are obligated to disclose in writing any parallel inquiry already initiated by another authority.
3. Authorities must conduct inter-departmental verification to confirm if duplication exists.
4. Where inquiries are distinct (different issues, different periods), taxpayers must be informed in writing with recorded reasons.
5. If duplication exists, only one authority will continue, and the other must transfer records and evidence to it.
6. The authority that has issued the first show cause notice will have primacy in adjudication.
7. If only investigative actions (like summons) are ongoing, both authorities may proceed independently.
8. Taxpayers may seek remedy before High Courts under Article 226 in case of abuse or breach of safeguards.
9. The principle of “single adjudication but permissible multiple inquiries” must guide the interpretation of Section 6(2)(b).

Implications of the Ruling

The judgment has far-reaching implications:

• For taxpayers – It closes the door on the strategy of resisting investigation by arguing duplication. Taxpayers must comply with summons from both Central and State authorities during the inquiry stage. However, they are protected from facing two adjudications on the same liability.
• For authorities – The ruling provides a clear operational framework for coordination, preventing jurisdictional turf wars and ensuring efficient data sharing. It also protects revenue interests by allowing simultaneous inquiries where fraud or complex transactions straddle jurisdictions.
• For GST law – The decision strengthens the GST regime’s twin objectives of uniformity and cooperative federalism, ensuring that cross-empowerment between Centre and States functions smoothly.

On the facts of Armour Security, the Court dismissed the appeal, holding that the CGST summons were independent investigative steps that did not contravene Section 6(2)(b). The company remains liable to face both Central and State inquiries, though only one adjudicating authority will ultimately pass orders on its liability for the relevant period.

Broader Legal Landscape

The ruling also reconciles conflicting jurisprudence:

• The Madras High Court had previously held that parallel inquiries could continue unless a show cause notice was issued.
• The Bombay High Court cautioned against harassment by multiple authorities and stressed coordination.
• The Delhi High Court had delivered inconsistent rulings, prompting confusion among taxpayers and officers alike.

By drawing a clear doctrinal line between investigation and adjudication, the Supreme Court has now settled the law and ensured nationwide uniformity.

Counsel Appearance

Senior Advocate Sridhar Potaraju led the arguments for the petitioner, assisted by advocates Srinivas Kotni, Rishabh Dev Dixit, Rohit Dutta, Gaichangpou Gangmei, Akshay Kumar, Aayush, Lalit Mohan, Niharika Singh, Sai Swaroop, and Gurdeep Singh.

Advocate Gurmeet Singh Makker represented the CGST Department.

Conclusion

The Armour Security judgment is a significant milestone in GST jurisprudence. By clarifying that summons are investigative, not adjudicatory, the Court has reinforced the principle of single adjudication while allowing authorities the flexibility to pursue coordinated investigations.

For businesses, the ruling signals the need for greater compliance and transparency, as resisting parallel inquiries will no longer be a viable defense. For GST authorities, it mandates structured coordination to avoid duplication and taxpayer harassment.

Ultimately, the judgment strikes a balance between protecting taxpayer rights and preserving revenue enforcement powers, offering much-needed clarity in India’s evolving GST framework.

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