Himachal Pradesh High Court Applies Section 6(2)(b) Bar on Parallel GST Proceedings to an Input Tax Credit Dispute

The Himachal Pradesh High Court, in H.M. Steels Ltd. v. Union of India & Ors. (CWP No. 6070/2024, judgment dated 16 July 2026), has applied the Supreme Court’s ruling in Armour Security (India) Ltd. v. Commissioner, CGST to hold that Section 6(2)(b) of the CGST Act bars Central and State GST authorities from pursuing overlapping adjudicatory proceedings on the same subject matter. A Division Bench of Justice Vivek Singh Thakur and Justice Ranjan Sharma directed the Central and State authorities to jointly determine, within four weeks of the taxpayer filing its replies, which one of them will continue where their respective show cause notices concern the same tax liability.

Background / Facts

H.M. Steels Ltd. had received multiple DRC-01 summary show cause notices covering financial years 2017-18 to 2023-24 — one issued by the Central GST authority and the remainder by State GST authorities — disputing input tax credit availed by the company. The company argued it had paid the purchase price and GST to its suppliers and held the documentation required to claim credit, and that it could not be made to guarantee something outside its control, namely whether its suppliers had actually deposited the tax collected with the government. During the hearing, the petitioner’s counsel indicated the company would be satisfied if the authorities were directed to reconsider its objections and supporting documents — specifically, whether the purchases were genuine, whether payment (including GST) had actually been made to suppliers, whether the transactions predated cancellation of the suppliers’ registrations, and whether the company had discharged its duty to verify supplier identity.

The Court’s Reasoning

The Division Bench held that the overlap between the Central and State notices was governed by the Supreme Court’s decision in Armour Security (India) Ltd. v. Commissioner, CGST, which held that Section 6(2)(b) of the CGST Act bars initiation of proceedings on the same subject matter once one tax administration has formally commenced adjudicatory proceedings through a show cause notice — and that proceedings “overlap” whenever they seek to assess or recover an identical, or even partly identical, liability arising from the same alleged contravention. Applying this, the Court directed H.M. Steels to file replies and supporting documents before both the Central and State authorities by 18 August 2026. Where the notices are found to concern the same subject matter, the two authorities must decide within four weeks which one will continue; the selected authority must then consider the company’s reply and pass a reasoned order within six weeks thereafter. The Court expressly did not decide the company’s underlying ITC entitlement on merits, disposing of the petition on these procedural directions alone.

Why It Matters

GST taxpayers — particularly those with multi-year, multi-authority notice histories — frequently face genuine uncertainty over which of overlapping Central and State notices they must respond to, and in what forum. This ruling reinforces, on a fresh fact pattern involving disputed ITC, that the Armour Security principle is being actively applied by High Courts to compel the two administrations to resolve jurisdictional overlap themselves, rather than leaving the taxpayer to fight duplicate battles on the same liability. It is also a useful precedent specifically for ITC disputes turning on supplier non-compliance (non-payment of tax, registration cancellation) — a fact pattern common across GST litigation since the Section 16(2)(c) jurisprudence developed.

Key Takeaways

• Section 6(2)(b) of the CGST Act, as construed by the Supreme Court in Armour Security, bars parallel Central and State adjudicatory proceedings once one authority has issued a show cause notice on the same subject matter — and “same subject matter” extends to partly identical liability, not only fully identical liability.
• Where a taxpayer faces overlapping notices, the correct remedy is not to litigate each notice separately but to seek a direction compelling the two authorities to determine, between themselves, which one will proceed.
• The Court set a clear procedural timeline: taxpayer replies by a fixed date, inter-authority decision on which authority proceeds within four weeks, and a reasoned order from the selected authority within six weeks thereafter — a useful template to cite when seeking similar relief.
• The underlying ITC entitlement — including the taxpayer’s argument that it cannot be held responsible for a supplier’s failure to deposit tax — was left open; this is a jurisdictional/procedural ruling, not a ruling on ITC merits.

Practical Implications

Where a client has received DRC-01 notices from both Central and State GST authorities covering the same or overlapping periods and issues — especially in ITC-denial matters premised on supplier non-compliance — this ruling provides a directly on-point precedent for seeking a writ direction under Section 6(2)(b), rather than responding piecemeal to each notice. Firms should specifically check multi-year notice histories (FY 2017-18 onward is common, given the limitation extensions seen across GST litigation) for exactly this pattern: one Central notice plus multiple State notices, or vice versa, on the same ITC claims.

Action Checklist

• Audit clients with GST notice histories spanning FY 2017-18 to date for overlapping Central and State DRC-01 notices on the same or related tax periods.
• Where overlap is identified, prepare a writ petition citing Armour Security and this Himachal Pradesh High Court application of it, seeking a direction for the authorities to jointly determine which will proceed.
• For ITC disputes premised on supplier non-payment or registration cancellation, assemble the standard documentation trail early: purchase invoices, proof of payment including GST component, and evidence of supplier registration status at the time of transaction.
• Track the 18 August 2026 reply deadline and subsequent four-week/six-week timeline set in this case as a template for realistic timelines to advise clients facing similar overlap.

Relevant Sections / Rules / Case Citation

• Section 6(2)(b), Central Goods and Services Tax Act, 2017 (cross-empowerment bar on parallel proceedings)
• Rule DRC-01, CGST Rules, 2017 (summary of show cause notice)
• Supreme Court: Armour Security (India) Ltd. v. Commissioner, CGST (binding precedent applied)
• Himachal Pradesh High Court: H.M. Steels Ltd. v. Union of India & Ors., CWP No. 6070/2024, judgment dated 16 July 2026, Division Bench of Justice Vivek Singh Thakur and Justice Ranjan Sharma

FAQs

Q: Does this ruling decide whether H.M. Steels is entitled to the disputed input tax credit?

A: No — the Court expressly left the ITC entitlement question open and disposed of the petition only on the procedural point of which authority should proceed.

Q: What counts as “overlapping” proceedings under Section 6(2)(b) per this ruling?

A: Following Armour Security, proceedings overlap whenever they seek to assess or recover an identical or even partly identical liability arising from the same alleged contravention — the overlap does not need to be a complete, exact match.

Q: If a client is currently facing both a Central and a State GST notice on the same issue, what should they do immediately?

A: File a comprehensive reply with supporting documentation to both notices within the applicable deadlines, and consider seeking a writ direction citing this precedent to compel the authorities to determine jointly which one will proceed — rather than allowing both proceedings to continue independently.

Prepared by Finoscape Editorial Team — contact@finoscape.com. This article is for general informational purposes and does not constitute legal or tax advice. Readers should consult a qualified professional and verify the primary judgment text before relying on this analysis for any specific matter.