Kerala High Court Affirms Automatic Cross-Empowerment Under Section 6(1) of the CGST Act

1. Introduction

The case Pinnacle Vehicles and Services Private Limited v. Joint Commissioner (Intelligence & Enforcement) was decided by a Division Bench of the Kerala High Court, comprising the Hon’ble Dr. Justice A.K. Jayasankaran Nambiar and the Hon’ble Mr. Justice Easwaran S., on January 15, 2025. This writ petition examined whether officers appointed under the State Goods and Services Tax Act (SGST Act) have the authority to issue notices under the Central Goods and Services Tax Act (CGST Act) without a separate notification cross-empowering them for such purposes.

The petitioner—Pinnacle Vehicles and Services Private Limited—challenged the jurisdiction of State Tax Officers to proceed against it under Section 74 of the CGST Act. The petitioner alleged that absent a specific government notification, the State GST Officers could not be considered “proper officers” under the CGST Act. However, the Kerala High Court ruled that Section 6(1) of the CGST Act inherently provides cross-empowerment, clarifying that no further notification is initially required unless conditions or limitations are to be imposed.

Key Parties and Their Roles

• Petitioner: Pinnacle Vehicles and Services Private Limited, represented by its Director, Mr. Gabi Gafoor.
• Respondents:
  • Joint Commissioner (Intelligence & Enforcement), State GST Department.
  • Joint Commissioner (General), Office of the Commissioner of State GST.
  • Commissioner, Taxes.
  • The Secretary, GST Council.

The crux of the dispute revolved around the jurisdiction of SGST officers to issue authorizations and show cause notices (SCNs) under the CGST Act, based on the statutory framework and interpretation of Section 6(1) of CGST.

2. Summary of the Judgment

In a detailed judgment, the Kerala High Court dismissed the petitioner’s contention that separate notifications are required to cross-empower SGST Officers under the CGST Act. The Court:

1. Rejected the Madras High Court’s contrary view in Tvl. Vardhan Infrastructure v. Special Secretary, Head of the GST Council Secretariat, which had held that the absence of specific notifications rendered such proceedings void.
2. Emphasized that Section 6(1) of the CGST Act itself contemplates an “automatic” cross-empowerment; the requirement for notifications arises only if the government elects to place conditions or restrictions on this empowerment.
3. Held that the petitioner is free to exhaust statutory remedies (by replying to the SCN and pursuing any further appeals) if it wishes to challenge the merits or procedure of enforcement.

Ultimately, the Bench recognized the broader legislative intent to streamline GST administration by ensuring that either Central or State authorities can proceed under both the CGST Act and corresponding SGST/UTGST statutes, thus avoiding duplicative or parallel actions for the same subject matter.

3. Analysis

3.1 Precedents Cited

Two primary authorities were juxtaposed:

• Tvl. Vardhan Infrastructure (Madras High Court): Held that, without a specific Section 6(1) notification, State Officers lacked the power to invoke the CGST Act. The Kerala High Court disagreed, citing the contrary interpretation of Section 6(1).
• Indo International Tobacco Ltd. and Ors. v. Additional Director General, DGGI and Ors. (Delhi High Court): Supported a view similar to that of the Kerala High Court—Section 6(1) automatically cross-empowers State Officers, without the necessity of a separate notification, unless conditions or restrictions are specified. The Supreme Court’s refusal to interfere with the Delhi High Court’s interpretation further validates this view.

3.2 Legal Reasoning

The Court’s reasoning rests heavily on the plain language of Section 6(1) of the CGST Act, which states:

“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.”

The Division Bench emphasized:

• The text “are authorised to be the proper officers” indicates an immediate empowerment. Any subsequent notification would only arise if specific conditions (e.g., limitations, scope restrictions) are to be placed upon such officers.
• Adopting a contrary reading would undermine the GST framework’s efficiency, leading to confusion and potential double jeopardy for taxpayers.
• The legislative intent behind Section 6 ensures a seamless convergence of assessment, investigation, and adjudication for both CGST and SGST, preventing multiplicity of proceedings.

3.3 Impact

The immediate effect of this ruling:

• Clarity on Cross-Empowerment: State GST Officers do not require a specific government notification to act under the CGST Act. This fosters unified action and prevents duplication.
• Precedent for Other Jurisdictions: Although decided by the Kerala High Court, this judgment might influence other High Courts to align with the Delhi High Court interpretation, thereby forming a persuasive precedent for uniform treatment across the country.
• Reduced Litigation: Many pending and future challenges on the jurisdiction of SGST Officers in CGST matters could potentially be dismissed under this principle, overruling the narrower interpretation set by the earlier Madras High Court decision.

4. Complex Concepts Simplified

Cross-Empowerment (Section 6(1) of CGST Act): This concept means that the officers under one GST statute (e.g., the SGST Act) can exercise the powers under another GST statute (e.g., the CGST Act). The Kerala High Court confirms that cross-empowerment does not wait for a separate notification; it is enacted directly by statute.

Proper Officer: In GST law, the term “proper officer” refers to the specific official authorized to exercise statutory powers under the relevant GST enactment. This authorization is crucial for initiating investigations, issuing notices, adjudicating disputes, and enforcing compliance.

Show Cause Notice (SCN) Under Section 74: Section 74 of the CGST Act deals with tax not paid or short-paid or erroneously refunded, or input tax credit wrongly availed or utilized by reason of fraud, willful misstatement, or suppression of facts. Whether served by central or state officers, this notice initiates proceedings that may result in substantial liabilities or penalties for a taxpayer if proven.

5. Conclusion

The Kerala High Court has conclusively settled that Section 6(1) of the CGST Act inherently empowers officers under the State GST Act to function as “proper officers” under the CGST Act without any further notification. While the Madras High Court had earlier held a contrasting view, this judgment reconciles the legislative text’s full effect with the core objectives of the GST regime—streamlining administration and achieving uniformity.

For taxpayers, this ruling clarifies that they are subject to the jurisdiction of State Officers who may initiate and continue proceedings under the CGST Act. However, they retain the usual statutory rights to contest such actions and pursue appeals. In the broader legal context, this judgment stands as a robust confirmation of the legislative scheme designed to integrate state and central enforcement functions under the unified framework of GST.

Overall, the decision strengthens the streamlined operation of GST, reduces duplicative proceedings, and underscores how courts strive to interpret statutes in a manner consistent with the legislation’s fundamental objectives.