Officers Of DGGI Are "Central Excise Officers"; Can Issue Show Cause Notices And Adjudicate Service Tax Demand: Madras High Court

The Single Bench of Justice C. Saravanan, while considering a bunch of writ petitions, held that that the definition of "Central Excise Officer" in Section 2(b) of Central Excise Act, 1944 is expansive and that any person, including an officer of the State Government, who is invested by the CBEC with any of the powers of a Central Excise Officer under the Central Excise Act, is a "Central Excise Officer".

Writ petitions were filed before the Madras High Court challenging the Notification No. 22/2014, dated 16.09.2014, issued by the Central Board of Excise and Customs (CBEC) (presently the Central Board of Indirect Taxes and Customs), vide which the CBEC appointed officers from the Directorate General of Audit, Directorate General of Central Excise Intelligence and from the Directorate General of Service Tax as "Central Excise Officers".

The CBEC invested the said officers with all the powers under Chapter V of the Finance Act, 1994 and the Rules made thereunder, to be exercised by them pan India, as exercisable by the Central Excise Officers.

The petitioners, including M/s. Redington (India) Limited, also challenged the Show Cause Notices issued by the officers of the Directorate of Central Excise Intelligence (now called The Directorate of GST Intelligence) to recover the service tax allegedly evaded by the petitioners under the provisions of the Finance Act, 1994, on the ground that the said officers had no jurisdiction to issue the said Show Cause Notices.

The petitioners submitted before the Madras High Court that the said Notification was ultra vires Rule 3 of Service Tax Rules, 1994. The petitioners averred that there is no other Notification under Rule 3 of the Service Tax Rules, 1994 that confers powers on the said officers and that the said Notification is the only source of authority that empowers officers belonging to the Director General of Goods and Service Tax Intelligence to issue Show Cause Notices and adjudicate service tax demands under Section 73 of the Finance Act, 1994.

The petitioners contended that the power to issue the said Notification, as well as the power to appoint jurisdictional 'Central Excise Officers', emanates from Rule 3 of the Service Tax Rules. The petitioner added that Rule 3 of the Service Tax Rules empowers the CBEC to appoint such 'Central Excise Officers' as it thinks fit for exercising the powers under the Finance Act, 1994, within such 'local limits' as it may assign to them and in respect of 'specified taxable services.

The petitioners argued that the Finance Act, 1994 only contemplates a specific and particular Central Excise Officer, and not just "any" Central Excise Officer, who can issue and adjudicate a Show Cause Notice under Section 73 of the Finance Act.

The petitioners averred that the Central Excise Officer, as contemplated under Section 73 of the Finance Act, 1994, is the officer within whose jurisdiction the assessee obtains registration, pays taxes, files returns and complies with all other formalities and compliances under the Finance Act.

Hence, the petitioner submitted that the officers belonging to the Directorate General of Goods and Service Tax Intelligence do not have the jurisdiction to issue the said Show Cause Notices.

The Court observed that Section 73 of the Finance Act, 1994 provides a machinery for recovery of Service Tax not levied or paid, or short-levied or short-paid, or erroneously refunded.

The Court noted that the "Central Excise Officers" were given the task to perform the functions under Chapter V of the Finance Act, 1994, and it is the Central Excise Officers who can issue Show Cause Notices under Section 73 of the Finance Act, 1994 to an assessee where any service tax is not levied or paid, or is short-levied or short-paid, or is erroneously refunded. The Court observed that it is also the "Central Excise Officer" who can adjudicate such Show Cause Notices.

The Court observed that as per the Rule 3 of the Service Tax Rules, 1994, CBEC may appoint such "Central Excise Officers" as it thinks fit for exercising the power under Chapter V of the Finance Act, 1994 "within such local limits" as it may assign to them.

The Court noted that the expression 'Central Excise Officers' has been defined in Section 2(b) of the Central Excise Act, 1944, which includes within its ambit any person, including an officer of the State Government, who has been invested by the CBEC with any of the powers of a Central Excise Officer under the Central Excise Act.

Thus, the Court held that the definition of "Central Excise Officer" in Section 2(b) of Central Excise Act, 1944 is expansive and that by default all the officers of the Central Excise Department are "Central Excise Officers". The Court added that apart from the officers specified therein from the Central Excise Department, any other officer, including an officer of the State Government, who is invested by the CBEC with any of the powers of a Central Excise Officer, would also fall under the category of a "Central Excise Officer".

Hence, the Court ruled that it was clear that any person, including an officer of the State Government, who is invested by the CBEC with any of the powers of a Central Excise Officer under the Central Excise Act, is a "Central Excise Officer". The Court added that it is the CBEC which can delineate the jurisdiction under Rule 3 of the Central Excise Rules, 2002.

The Court observed that there is a long history before the said Notification No. 22/2015-ST, dated 16.9.2014, was issued. The Court noted that earlier, Notification No.46/98-S.T., dated 28.01.1998, was issued under Section 2 (b) of the Central Excise Act, 1944 read with Rule 3 of the Service Tax Rules, 1994. By virtue of this 1998 Notification, the officers of Director General (Service Tax) were appointed as "Central Excise Officers" and the CBEC invested the said officers with all the powers that were exercisable by the Chief Commissioner of Central Excise.

Later, the Court noted that under Notification No. 38/2001-C.E. (N.T), dated 26.06.2001, the CBEC invested the officers of the Directorate of Central Excise Intelligence (now called The Directorate of GST Intelligence), with all the powers of a Central Excise officer, to be exercised by them throughout the territory of India.

The Court held that, without doubt, the said officers of the Directorate of GST Intelligence were "Central Excise Officers" for the purpose of Rule 3 of the Service Tax Rules since they were vested with the powers of "Central Excise Officers".

Hence, the Court ruled that officers of the Directorate of GST Intelligence were "Central Excise Officers" for the purpose of Section 2(b) of the Central Excise Act, 1994 and they were empowered to exercise powers pan India under Notification No. 38/2001-C.E. (N.T), dated 26.06.2001.

The Court held that since the CBEC can invest the powers of a Central Excise Officer on "any person" including "an officer of the State Government", the officers of the Directorate of GST Intelligence were "Central Taxes Officers" for the purpose of Finance Act, 1994.

The Court ruled that Notification No. 22/2014-ST, dated 16.09.2014, is to be read in conjunction with Notification No.38/2001- C.E. (N.T), dated 26.06.2001. The Court held that under Rule 3 of the Service Tax Rules, 1994, the CBEC can appoint any other officer to exercise powers within the "local limits". The Court clarified that the officers of the Directorate of Central Excise Intelligence (now called The Directorate of GST Intelligence), who are already "Central Excise Officers" under Notification No.38/2001-C.E. (N.T), dated 26.06.2001, can also exercise powers pan India vide Notification No. 22/2014-ST, dated 16.09.2014.

Thus, the Court held that no restriction could be inferred on the powers of the CBEC to appoint the officers of the Directorate of GST Intelligence to act as "Central Excise Officers".

Therefore, the Court ruled that it could not be said that the officers who had been vested with the powers under the Notification No. 22/2014-S.T., dated 16.09.2014, are not the "Central Excise Officers". The Court, thus dismissed the writ petitions challenging the said Notification. Hence, the Court ruled that the officers of the Directorate of GST Intelligence had the jurisdiction to issue the said Show Cause Notices.

Case Title: M/s. Redington (India) Limited versus Principal Additional Director General

Dated: 17.06.2022 (Madras High Court)

Citation: 2022 LiveLaw (Mad) 280

Counsel for the Petitioners: Mr. S.R. Raja Gopal Senior Counsel for Mr. V. Anil Kumar; Mr. Raghavan Ramabadran for M/s. Lakshmi Kumaran & Sridharan Attorneys; Mr. Hari Radhakrishnan; Mr. Rahul Unnikrishnan; M/s. M. Sneha.

Counsel for the Respondents: Mr. V. Sundareswaran Senior Panel Counsel; Mr. Rajnish Pathiyil Senior Standing Counsel; Mr. M. Santhanaraman Senior Standing Counsel; Mrs. R. Hemalatha Senior Standing Counsel.

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