Who Qualifies As 'Proper Officer' To Issue Show Cause Notices U/S 74 Of CGST Act? Jharkhand High Court Clarifies

The Division Bench of Justices Sujit Narayan Prasad and Arun Kumar Rai observed that “If the definition of the Poper Officer will be taken into consideration along with the provision of Section 168 of the Act, 2017, the Commissioner if authorized to act by the Board in view of the power as conferred under Section 168 of the CGST Act, 2017, the Commissioner or the Joint Secretary will be said to exercise the power of Commissioner or Joint Secretary construed to be with the approval of the Board.”

Section 74(1) of the Central Goods and Services Tax Act 2017, provides that if a proper officer determines that tax has not been paid, has been short paid, or has been erroneously refunded, or if input tax credit has been wrongly availed due to fraud or misstatement to evade tax, they will issue a notice to the liable person. This notice will require the individual to explain why they should not pay the specified amount, along with interest under section 50 and a penalty equal to the tax amount mentioned.

Section 4 of the Central Goods and Services Tax Act 2017, provides that the Board may appoint officers, in addition to those notified by the Government under section 3, as it deems fit. It may also authorize officers mentioned in section 3(a) to (h) to appoint central tax officers below the rank of Assistant Commissioner for the administration of this Act.

Section 5 of the Central Goods and Services Tax Act 2017, outlines the powers of central tax officers. Officers may exercise the powers and discharge the duties assigned to them under this Act, subject to conditions set by the Board. They can also exercise powers delegated to any subordinate officers. The Commissioner has the authority to delegate his powers to subordinate officers, with specific conditions as he sees fit.

Section 168 of the Central Goods and Services Tax Act 2017, provides that the Board has been conferred with the power to issue instructions or directions upon the Commissioner to exercise the power specified in the other sections with the approval of the Board.

In this case, the assessee had challenged the show cause notices on the ground of jurisdiction of the authority who has issued the said show cause notices. As per the assessee the said notices have been issued under the signature of Additional Director, Directorate General of Goods and Services Tax Intelligence, Regional Unit, Jamshedpur and Deputy Director, Directorate General of Goods and Services Tax Intelligence, Regional Unit, Jamshedpur who have got no authority to issue the said notices.

The assessee has challenged the demand notice-cum-show cause notices issued by the Additional Director, DGGI/respondent no.2 under Section 74(1) of the Central Goods and Services Tax Act, 2017.

The bench observed that if the definition of the Poper Officer will be taken into consideration along with the provision of Section 168 of the Act, 2017, the Commissioner if authorized to act by the Board in view of the power as conferred under Section 168 of the Act, 2017, the Commissioner or the Joint Secretary will be said to exercise the power of Commissioner or Joint Secretary construed to be with the approval of the Board.

The bench looked into the Notification No. 14/2017 – Central Tax dated 1^st July, 2017 and observed that initially the notification dated 1^st July, 2017 was issued in exercise of power conferred under Sections 3 and 5 but subsequently, it has been modified said to be replacement by the words that the “Central Board of Excise and Customs” be read as “the Government”.

The bench after going through the provisions of Sections 3, 4 and 5 of the CGST Act, 2017, opined that as per Section 3, it is the Government, by notification, is to appoint the officers for the purpose of the Act while Section 4 confers power upon the Board in addition to the appointment which is to be made in pursuance of the provision of Section 3 to appoint such persons as it may think fit to be the officers under the Act.

“since the notification dated 01^st July, 2017 has been issued in exercise of power conferred under Section 3 read with Section 5 under which the Board has been conferred with the power, in addition to appointment to be made by the Government, to impose the power upon the officer under the act and hence, the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit has been notified to exercise the power of Commissioner and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit has been authorized to exercise the power of Deputy Commissioner/Assistant Commissioner” added the bench.

The bench further stated that the Central Government has come out with the notification as also the Board, two separate notifications said to be issued in exercise of power conferred under Sections 3 and 5 of the Act, 2017. The moment the notification has been issued in exercise of power conferred under Section 4 which confers power upon the Board to appoint the Commissioner in addition to appointment of Commissioner under Section 3 by the Government, the conferment of power to act as a Proper Officer will be there within the meaning of Section 2(91) of the Act, 2017.

The bench concluded that “……….by virtue of the power exercised by the Board under Section 5 of the Act, 2017, a notification has been issued conferring power upon the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit to act as a Commissioner and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit to act as Deputy Commissioner/Assistant Commissioner and as such, it is incorrect on the part of the writ petitioners/assessee to take the ground that the Additional Director General, Goods and Services Tax Intelligence or Additional Director General, Goods and Services Tax or Additional Director General, Audit and the Deputy/Assistant Director, Goods and Services Tax Intelligence or Deputy/Assistant Director, Goods and Services Tax or Deputy/Assistant Director, Audit are having no power to initiate a proceeding under the Act, 2017.”

In view of the above, the bench directed the assessee to respond to the show cause notices and accordingly dismissed the petition.

Counsel for Petitioner/ Assessee: Kartik Kurmy, Nitin Kr. Pasari and Sidhi Jalan

Counsel for Respondent/ Department: P.A.S. Pati, Amit Kumar, Anurag Vijay, Om Prakash and Debolina Sen Hirani

Case Title: M/s Aka Logistics Private Limited v. Union of India

LL Citation: 2024 LiveLaw (Jha) 160

Case Number: W.P.(T) No. 5071 of 2023

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