GST | A Show Cause Notice Is the Point Where Law Is Set in Motion — Not a Summons: Supreme Court

"Summons Are Not Proceedings", In a landmark judgment the Supreme Court of India laid down an authoritative interpretation of Section 6(2)(b) of the Central Goods and Services Tax Act, 2017 (CGST Act). The central issue was whether the Central GST authorities could issue summons under Section 70, when proceedings had already been initiated by the State GST authority on the same subject matter.

Dismissing the Special Leave Petition (SLP No. 6092 of 2025), the Court ruled that "issuance of summons is not equivalent to initiation of proceedings under Section 6(2)(b)", and clarified that only a show cause notice marks the commencement of proceedings under the GST law. The Court's decision provides clarity on the interplay between inquiry and adjudication under the GST regime and seeks to prevent unnecessary jurisdictional overlap.

The petitioner, M/s Armour Security (India) Ltd., is a Delhi-registered company engaged in the business of providing security services. On 18 November 2024, the company was issued a show cause notice by the State GST authorities under Section 73 of the CGST Act, raising a demand of over ₹1.24 crores on grounds of excess ITC claims and discrepancies in returns.

Subsequently, the Central GST (CGST) officers conducted a search at the petitioner’s premises on 16 January 2025, seizing documents and electronic devices. Summons were issued under Section 70 on 16 and 23 January 2025 to the directors of the company, seeking production of documents.

The petitioner challenged the summons before the Delhi High Court, arguing that the CGST authorities lacked jurisdiction under Section 6(2)(b), as proceedings had already been initiated by the State authority. The High Court dismissed the petition, holding that summons do not constitute "proceedings". Aggrieved, the petitioner approached the Supreme Court.

The key legal question before the Supreme Court was whether summons issued under Section 70 of the CGST Act can be considered as “initiation of proceedings” under Section 6(2)(b), thereby prohibiting further action by the Central authority when the State authority had already acted.

The Court held unequivocally: “Issuance of summons is not the culmination of an investigation, but merely a step in its course... Such evidence-gathering and inquiry do not constitute ‘proceedings’ under Section 6(2)(b).”

Emphasizing the distinction between inquiry and adjudication, the Court stated:

“A summons is a tool of inquiry. Proceedings begin only when a show cause notice is issued, laying down the grounds of liability and inviting the taxpayer to explain.”

In clarifying this distinction, the Court drew upon authoritative precedents and parliamentary intent, and noted that the “word ‘proceedings’ must be read in the context of adjudicatory actions, not preliminary fact-finding exercises.”

"Show Cause Notice Is the Birth of Adjudication" — What Constitutes Proceedings?

The Supreme Court elaborated on what constitutes the “initiation of proceedings” under Section 6(2)(b), observing:

“A show cause notice is a document that sets the law in motion. It marks the commencement of quasi-judicial adjudication and contains the precise case against the taxpayer, which he must answer.”

The Court rejected the petitioner’s argument that the phrase “any proceedings” includes inquiry, summons, and search. It explained that:

“‘Any proceedings’ in Section 6(2)(b) refers specifically to the issuance of a notice under the relevant provisions of the GST enactment. Without a show cause notice, there is no identifiable subject matter.”

The Court pointed out that treating summons as proceedings would lead to absurd consequences:

“To interpret otherwise would render the cross-empowerment scheme under the GST regime unworkable and allow taxpayers to thwart preliminary inquiries by invoking jurisdictional objections.”

"Same Subject Matter Must Mean Same Liability" — The Interpretation of 'Subject Matter'

The Court further clarified what the phrase “same subject matter” under Section 6(2)(b) entails. It held:

“The expression ‘subject matter’ refers to the specific tax liability or contravention that the department seeks to assess or recover, as set out in a show cause notice — not in summons or in general allegations.”

Expounding the meaning, the Court stated: “It is the show cause notice that reveals the charges and reliefs sought. Unless both proceedings are directed toward the same tax deficiency or contravention, there is no bar.”

To assess whether the "subject matter" is the same, the Court formulated a two-fold test:

1. Is the alleged tax liability or offence identical and based on the same facts?

2. Is the demand or relief sought the same?

If the answer to both is yes, the bar under Section 6(2)(b) applies. Otherwise, “parallel inquiries can proceed lawfully without breaching the provision.”

“Cross-Empowerment Is the Cornerstone of GST Enforcement” — Upholding the 2018 Circular

Referring to the Circular dated 5 October 2018 issued by the Central Board of Indirect Taxes, the Court reiterated:

“Both Central and State tax administrations shall have the power to take intelligence-based enforcement action in respect of the entire value chain.”

Accordingly, even if a taxpayer is assigned to the State, the Central authority can initiate enforcement action, and vice versa. However:

“Once a show cause notice is issued on a subject matter, the other authority must step back — unless the matters are demonstrably distinct.”

The Court also highlighted the importance of inter-departmental communication:

“Departments must coordinate to avoid duplicate proceedings. Taxpayers should not suffer from administrative inefficiencies or territorial turf wars.”

Guidelines Issued by the Court to Prevent Overlapping Investigations

Recognizing the recurring nature of such jurisdictional conflicts, the Supreme Court issued binding operational guidelines:

“When a summons is issued, the taxpayer must appear and cooperate. But if he believes a show cause notice already exists on the same issue, he must inform the authority immediately.”

In such a situation: “Authorities must coordinate and, if duplication exists, one must transfer the file to the other. If a deadlock arises, the first authority to initiate proceedings must continue.”

The Court also gave taxpayers the liberty to:

“Approach the High Courts under Article 226 if authorities refuse to comply with these directions.”

Dismissing the Special Leave Petition, the Supreme Court affirmed the validity of the CGST summons and the correctness of the Delhi High Court’s ruling. It observed:

“The petitioner’s apprehension of parallel proceedings is premature. Until a second show cause notice is issued on the same subject matter, Section 6(2)(b) is not attracted.”

This decision will resonate deeply in the GST enforcement landscape, offering much-needed clarity, discipline in jurisdictional boundaries, and protection to taxpayers from harassment through duplicate actions. At the same time, it reaffirms the authority of both Central and State tax officials to pursue intelligence-driven inquiries, reinforcing the efficacy of India’s unified indirect tax system.

Date of Decision: 14 August 2025