Cross-Empowerment Under Section 6 of CGST Act Is Inherent and Automatic – No Notification Required: J&K High Court Upholds Central Authority’s Jurisdiction in Intelligence-Based GST Enforcement

“Intelligence-Based Action Overrides Administrative Allocation – Centre or State Can Act Across Entire Value Chain” - In a significant judgment delivered, the High Court of Jammu & Kashmir and Ladakh at Jammu, comprising Justice Sanjeev Kumar and Justice Sanjay Parihar, upheld the jurisdiction of the Central GST authorities to issue show cause notices to taxpayers administratively assigned to the State/UT tax departments. The decision came in a batch of writ petitions challenging notices issued by the Joint Commissioner, CGST Jammu, under Section 74 of the Central Goods and Services Tax Act, 2017, for fraudulent availment of Input Tax Credit (ITC) through paper transactions.

The Court held that Section 6(1) of the CGST Act provides automatic and inherent cross-empowerment, and no separate notification is required for a Central officer to act against a State-assigned taxpayer in cases involving intelligence-based enforcement.

“The cross-empowerment envisaged under sub-section (1) of Section 6 is automatic and a result of legislative mandate. No separate notification by the Government on the recommendations of the GST Council is required to effectuate cross-empowerment.

“Enforcement Is Not Audit – Intelligence-Based GST Action Valid Irrespective of Jurisdiction Allocation”

Rejecting the core argument of the petitioners that the Central officer lacked jurisdiction, the Bench clarified that enforcement action based on intelligence inputs, unlike audit or scrutiny of returns, can be initiated by either Central or State authorities.

The petitioners, firms operating from Jammu and Kashmir Integrated Textile Park, Kathua, had challenged the legality of notices issued by CGST authorities, contending they were assigned to the State GST jurisdiction, and therefore outside the purview of the Central officer. However, the Court found that searches were conducted based on specific intelligence inputs suggesting a network of 12 firms engaged in ITC fraud through non-existent or circular transactions, involving bogus invoices and no actual movement of goods.

“The show cause notice was issued pursuant to intelligence inputs received by the authorities with regard to the availing of bogus claim of input tax credit by twelve units. Searches were conducted, and the intelligence inputs were found substantiated.”

The Court emphasized that the distinction between administrative allocation for convenience and investigative authority based on intelligence was well clarified by the Supreme Court’s recent ruling in M/S Armour Security India Ltd. v. CGST Delhi East, 2025 INSC 982, which was extensively quoted in the judgment

“No Notification Needed When No Conditions Are Imposed on Cross-Empowerment”

Addressing the core statutory interpretation, the Court held that Section 6(1) of the CGST Act does not mandate a notification for effectuating cross-empowerment unless the Government intends to impose conditions.

Quoting from CBIC’s own clarification dated 22.06.2020, the Court noted: “If no notification is issued to impose any condition, it means that the officers of State and Centre have been appointed as proper officers for all the purpose of the CGST Act and SGST Acts.”

It further explained: “Reading the words ‘subject to such conditions…by notification specified’ to mean that cross-empowerment can be effectuated only through notification would be tantamount to doing violence to the plain language of the Subsection.”

Referring to Notification No. 30/2017-CT, which limited powers of State officers in matters of refund, the Court reiterated that notifications are only required when the Government wants to impose limitations—not to create cross-empowerment itself.

“Joint Commissioner Has Statutory Authority to Issue Show Cause Notices Regardless of Amount Involved”

On the objection that the Joint Commissioner was not competent to issue notices involving amounts below ₹1 crore, the Court dismissed the argument as untenable, citing Section 5(2) of the CGST Act which authorizes superior officers to exercise powers of their subordinates.

“The fixation of monetary limits is only an administrative measure for optimal distribution of work… The Joint Commissioner had the right to issue the notice, being the authority higher than the one empowered to initiate action.”

The circular dated 09.02.2018, which the petitioners relied upon to argue for monetary limitations, was held to be administrative in nature, not one that restricted jurisdiction or statutory power.

“No Legal Bar on Bunching Multiple Assessment Years in a Single Notice – Issue Left Open”

The Court addressed the third ground concerning bunching of five financial years (2017–18 to 2021–22) into a single show cause notice, and noted that Section 74 of the CGST Act does not explicitly prohibit such clubbing.

However, taking a cautious approach, the Bench left the issue open to be raised before the adjudicating authority, observing:

“There is no prohibition against the issuance of a show cause notice for evasions that have taken place in more than one financial year… Petitioners are well within their rights to raise this issue before the concerned authority.”

“Single Interface for Taxpayers, But Full Enforcement Powers to Both Central and State Authorities”

Tracing the constitutional and legislative backdrop to GST, the Court underscored that Articles 246A and 279A of the Constitution permit both Centre and States to levy GST, and the GST Council laid down administrative mechanisms to create a “single interface”, primarily to simplify taxpayer experience—not to limit enforcement authority.

Quoting from Supreme Court’s Armour Security (2025 INSC 982), the Court reiterated:

“Intelligence-based enforcement action can be initiated by any one of the Central or the State tax administrations despite the taxpayer having been assigned to the other administration.”

“Administrative allocation does not translate into exclusive jurisdiction for enforcement.”

Writ Petitions Dismissed – Petitioners to Raise Other Grounds Before Adjudicating Authority

Dismissing the batch of petitions, the High Court ruled: “We find no merit in these petitions and the same are, accordingly, dismissed. Other than our conclusions on the interpretation of Section 6 of CGST Act, the other views are only a reflection of prima facie opinion and shall not prejudice the petitioners from raising the same issues before the authority issuing the show cause notices.”

The Court made it clear that statutory defences, including challenge to factual findings or penalties under Section 122, are to be adjudicated at the appropriate forum under the CGST Act and not in writ jurisdiction at the stage of show cause notices.

Date of Decision: 30th September 2025