The Supreme Court stayed an Allahabad High Court judgment holding that a Deputy Commissioner of State Tax was competent to issue a show-cause notice and initiate penalty proceedings under Section 122 of the Uttar Pradesh Goods and Services Tax Act, 2017.
A bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe issued notice to the State of Uttar Pradesh and other respondents in the special leave petitions filed against the High Court’s common judgment dated August 10, 2026.
The Supreme Court directed that the notice be returnable on October 9, 2026. In the meantime, it stayed the operation of the impugned orders.
Buy Now: E-Magazine: 1000+ Landmark GST Judgments (2017–2026)
The matter arose from three writ-tax petitions decided by the Lucknow Bench of the Allahabad High Court. The petitions principally raised the question of which officer qualifies as the competent “proper officer” to issue a penalty notice under Section 122 of the UPGST Act, particularly where the disputed penalty involves a substantial amount.
Deputy Commissioner’s jurisdiction questioned
The taxpayer had approached the Allahabad High Court under Article 226 of the Constitution seeking the quashing of a show-cause notice issued under Section 122(1)(ii) of the UPGST Act and the accompanying summary in Form GST DRC-01 dated November 19, 2025.
The challenge was subsequently extended to the penalty order dated June 24, 2026, passed under Sections 122(1)(ii) and 122(1)(vii), as well as the consequential summary in Form GST DRC-07.
The principal contention was that the Deputy Commissioner of State Tax who issued the original notice did not possess the jurisdiction to initiate the proceedings. According to the taxpayer, the notice concerning financial year 2022-23 suffered from an inherent jurisdictional defect.
The taxpayer argued that Section 122 did not itself identify the “proper officer” authorised to initiate and conclude penalty proceedings. It was therefore contended that, in the absence of an appropriate State-level clarification or assignment of functions, the Deputy Commissioner could not assume jurisdiction.
Reliance placed on CBIC monetary limits
The petitioner relied on CBIC Circular No. 254/11/2025-GST dated October 27, 2025, which clarified the competency of Central Tax officers to issue notices under various provisions of the CGST and IGST Acts, including Sections 74A and 122.
On the strength of the monetary limits contained in the circular, the taxpayer argued that a proceeding involving a proposed penalty exceeding ₹1 crore ought to have been initiated by an Additional Commissioner or Joint Commissioner of Central Tax.
Since the notice in the present matter had been issued by a Deputy Commissioner of State Tax, the taxpayer maintained that the proceedings were without jurisdiction. It was also argued that the Uttar Pradesh Government needed to issue a similar clarification identifying the officers competent to act under Section 122 of the State GST law.
State relied on UPGST circulars
The State Government opposed the challenge by relying on circulars dated December 11, 2018, and May 10, 2022, issued under the UPGST framework.
According to the State, the 2018 circular identified the proper officer for penalty proceedings under Section 122 by reading that provision with Section 127 of the UPGST Act.
Section 127 enables the proper officer to impose a penalty in cases not otherwise covered by specified proceedings, after giving the person concerned a reasonable opportunity of being heard.
The State argued that the administrative circulars expressly treated Section 127 as applicable to proceedings involving penalties under Section 122. Therefore, the mere absence of the words “proper officer” in Section 122 did not prevent an officer designated under the State’s administrative framework from exercising the relevant powers.
It was further submitted that where the registered person’s turnover exceeded ₹2.5 crore, the Deputy Commissioner was the officer competent to exercise jurisdiction.
High Court upheld the officer’s authority
The Division Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary rejected the taxpayer’s jurisdictional objection after examining the two State circulars.
The High Court held that the Deputy Commissioner had been vested with the authority to issue a show-cause notice under Section 122 of the UPGST Act.
It also observed that where the relevant amount or turnover exceeded ₹2.5 crore, the pecuniary jurisdiction rested with the Deputy Commissioner. The court consequently found no merit in the contention that the officer lacked jurisdiction merely because the penalty involved a substantial sum.
The High Court distinguished the administrative arrangement governing State GST officers in Uttar Pradesh from the competency and monetary limits prescribed for Central Tax officers under the subsequent CBIC circular.
In its view, the CBIC circular governing CGST and IGST proceedings could not displace the specific State circulars through which jurisdiction had been assigned to officers under the UPGST Act.
Taxpayer’s participation in proceedings considered
The High Court also took into account the taxpayer’s conduct after the show-cause notice was issued in November 2025.
Instead of immediately questioning the Deputy Commissioner’s jurisdiction, the taxpayer appeared before the officer and contested the allegations on their merits. The jurisdictional challenge was brought before the High Court only after the adverse penalty order was passed on June 24, 2026.
Describing this change of position as a “volte-face,” the High Court held that the petitioner’s participation in the adjudication proceedings was relevant while deciding whether discretionary relief should be granted under Article 226.
The bench acknowledged that a pure jurisdictional question could ordinarily be raised before a constitutional court at any stage. It nevertheless emphasized that writ jurisdiction is discretionary and must be exercised judiciously, especially where an effective statutory appellate remedy is available.
The High Court found, prima facie, that the Deputy Commissioner was not lacking in jurisdiction. It further held that the petitioner was affected by the doctrine of election after having participated in the adjudication proceedings on merits.
Taxpayer relegated to GST appellate remedy
The High Court consequently declined to quash the show-cause notice, the penalty order or the consequential DRC-07. It disposed of the writ petitions by granting the taxpayer liberty to pursue the statutory appeal available under the GST legislation.
At the same time, it directed that the period during which the writ petitions remained pending could be considered for exclusion under Section 14 of the Limitation Act, 1963, subject to the taxpayer satisfying the conditions prescribed under that provision.
Supreme Court puts High Court ruling on hold
The taxpayers challenged the common judgment before the Supreme Court..
The Supreme Court issued notice in the petitions and stayed the operation of the High Court’s orders until further consideration.
The interim order means that the Allahabad High Court’s ruling—including its conclusions regarding the Deputy Commissioner’s authority under the UPGST circulars and its direction relegating the taxpayers to the appellate remedy—will remain inoperative for the time being.
The Supreme Court has not yet pronounced upon the merits of the jurisdictional controversy. The legal question concerning the competency and pecuniary jurisdiction of a Deputy Commissioner to initiate substantial penalty proceedings under Section 122 of the UPGST Act therefore remains open for further examination.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
