The Madras High Court has held that only joint/additional commissioners can decide DGGI notices; the GST order by the Assistant Commissioner is invalid.
The bench of Justice C. Saravanan has quashed an Order-in-Original passed by an Assistant Commissioner of GST in a case arising out of a show cause notice issued by the Directorate General of GST Intelligence (DGGI), holding that the order was passed by an authority lacking the requisite jurisdiction under the applicable CBIC notifications.
The dispute arose from the classification of maintenance services provided in relation to wind-operated electricity generators.
The petitioner contended that it had bona fide classified the services under Entry No. 234 of Notification No. 1/2017-Central Tax (Rate), which attracted GST at 5% and was subsequently revised to 12%. The department, however, alleged that the services ought to have been classified under Entry No. 135 of the Fourth Schedule, attracting a substantially higher tax rate.
According to the petitioner, the issue involved a genuine interpretational dispute regarding classification and not any deliberate suppression of facts warranting invocation of the extended limitation period under Section 74 of the CGST Act, 2017.
The principal challenge before the Court was not on the merits of classification but on the jurisdiction of the adjudicating authority.
The petitioner argued that Notification No. 2/2022-Central Tax dated March 11, 2022 inserted Clause 3A and Table V into Notification No. 2/2017-Central Tax, specifically authorizing only Additional Commissioners or Joint Commissioners of Central Tax to pass adjudication orders in respect of notices issued by DGGI officers.
Despite this statutory framework, the impugned order had been passed by an Assistant Commissioner of GST & Central Excise.
The Revenue argued that the Assistant Commissioner continued to remain a “proper officer” under the original notification and that subsequent amendments merely expanded the powers of higher officers without taking away the authority of lower-ranking officers.
The Court undertook a detailed examination of Notification No. 2/2017-Central Tax and the subsequent amendments introduced through Notification No. 2/2022-Central Tax.
The court noted that Table V specifically vested the power of passing orders on notices issued by DGGI officers under Sections 67, 73, 74, 76, 122, 125, 127, 129 and 130 of the CGST Act in Additional Commissioners or Joint Commissioners of Central Tax.
The Court observed that the notification scheme clearly designated only those officers for adjudicating DGGI-issued notices.
After examining the notifications, the High Court held that the Assistant Commissioner who passed the impugned order lacked the authority to adjudicate the DGGI show cause notice.
The Court observed that in respect of notices issued by DGGI officers, only Additional Commissioners or Joint Commissioners had been notified to exercise adjudicatory powers. Consequently, the Order-in-Original passed by the Assistant Commissioner was contrary to Notification No. 2/2022-Central Tax and suffered from a jurisdictional defect.
Justice Saravanan held that the order had been passed in violation of the statutory notification framework and was therefore unsustainable in law.
Allowing the writ petition, the Court quashed the Order-in-Original dated January 16, 2025 and remanded the matter for fresh adjudication by a competent authority in accordance with Notification No. 2/2017-Central Tax as modified by subsequent amendments, including Notification No. 27/2024 dated November 25, 2024.
The Court directed that the matter be decided afresh on merits and in accordance with law after providing the taxpayer with a proper opportunity of personal hearing.
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