The Delhi High Court has upheld the mechanism for selecting a Common Adjudicating Authority to decide composite show-cause notices issued by the Directorate General of Goods and Services Tax Intelligence (DGGI) to multiple noticees located across different GST Commissionerates.
The Bench of Justice Anil Kshetrapal and Justice Shail Jain ruled that the Central Board of Indirect Taxes and Customs’ circular prescribing the “highest amount of demand” criterion merely allocates adjudication work among officers who already possess pan-India jurisdiction. It does not independently confer or expand their jurisdiction.
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The Court consequently dismissed eight writ petitions filed by five exporters and three suppliers challenging show-cause notices, a consequential adjudication order and the relevant CBIC circulars.
The petitions arose from show-cause notices dated July 29, 2022 and February 26, 2024, followed by an Order-in-Original dated February 5, 2025 under the Central Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017.
The petitioners also challenged Circular No. 31/05/2018-GST dated February 9, 2018, as amended by Circular No. 169/01/2022-GST dated March 12, 2022 and Circular No. 239/33/2024-GST dated December 4, 2024.
The amended circulars lay down the procedure for determining the Common Adjudicating Authority when a composite DGGI show-cause notice covers multiple noticees falling under different territorial jurisdictions.
Although the petitioners raised objections concerning both the merits of the demands and the adjudicating officer’s jurisdiction, the High Court confined its consideration to the jurisdictional issue.
The proceedings originated from intelligence received by the DGGI’s Gurugram Zonal Unit regarding an alleged large-scale fraudulent IGST refund network involving exporter firms operating across India.
According to the findings recorded by the adjudicating authority, the alleged arrangement involved a three-layer invoicing chain without an actual movement of goods.
At the lowest level, 18 allegedly non-existent entities, described as “L-2 suppliers,” issued invoices without supplying goods to “L-1 suppliers.” The L-1 entities allegedly claimed input tax credit on these invoices and subsequently transferred the credit to exporter or end-user firms through another set of invoices unsupported by genuine supplies.
The end-user entities allegedly utilised the credit to discharge their tax liabilities and claim IGST refunds on exports.
The authorities alleged that two individuals controlled the exporter and supplier entities and routed invoices between different concerns. A common transporter was allegedly used to create an appearance of an actual movement of goods.
Based on the investigation, a show-cause notice under Section 74(1) of the CGST Act was issued to 146 noticees. The notice proposed the recovery of allegedly wrongly availed or passed-on ITC, along with interest and penalties.
The Additional Commissioner, CGST, Delhi, thereafter confirmed ITC demands and interest against the end-user firms. Demands, interest and penalties were also confirmed against the alleged L-1 suppliers, while separate penalties were imposed upon the proprietors, partners, directors and persons alleged to have controlled the entities.
The petitioners argued that jurisdiction under the CGST Act could be assigned or transferred only through a statutory notification and not through a circular issued to ensure uniformity in tax administration.
They contended that Notification No. 2/2022-Central Tax conferred jurisdiction only upon a class of Additional or Joint Commissioners. It did not identify the specific officer competent to adjudicate proceedings against a particular assessee.
According to them, it was only through the disputed circular that a particular officer was selected on the basis of the noticee facing the highest demand. The circular, therefore, effectively conferred jurisdiction despite not being a statutory notification, they submitted.
It was further argued that the circulars did not mention their statutory source or record the Board’s approval under Section 168(2) of the CGST Act.
The petitioners, whose places of business were in Haryana, also contended that a Delhi-based authority could not adjudicate their cases. They questioned the absence of a separately notified pan-India Commissioner (Appeals) and expressed concern about the appellate authority, GST Appellate Tribunal Bench and High Court that would exercise jurisdiction over subsequent proceedings.
The “highest demand” criterion was also challenged as arbitrary and violative of Article 14 of the Constitution.
The High Court distinguished between an instrument that confers jurisdiction and an administrative direction that distributes work among officers who already possess jurisdiction.
It observed that Section 2(91) of the CGST Act defines a “proper officer” with reference to the particular function assigned by the Commissioner in the Board. Sections 3 and 5 provide the statutory framework for appointing officers and delegating powers, while Section 167 permits the Commissioner to direct, through a notification, that a function under the Act may be performed by a specified officer.
The Court held that a notification is the statutory vehicle for creating a class of officers, vesting functions in that class or transferring functions from one class of officers to another.
Section 168, in contrast, authorises the Board to issue orders, instructions and directions to ensure uniform implementation of the CGST Act. It does not, by itself, create or transfer jurisdiction.
“Section 168 does not independently confer, transfer or assign jurisdiction. Its role is administrative and interpretative, intended to ensure uniformity in the exercise of an existing jurisdiction, and not to create or confer such jurisdiction,” the Court observed.
The Court noted that Notification No. 2/2017-Central Tax assigned territorial jurisdiction to central tax officers across the country and identified officers ordinarily competent to adjudicate notices against assessees within specified Commissionerates.
Notification No. 2/2022-Central Tax subsequently inserted paragraph 3A and Table V into the earlier notification. This amendment conferred pan-India jurisdiction upon the Additional and Joint Commissioners specified in Table V to adjudicate DGGI show-cause notices, notwithstanding their ordinary territorial limits.
The Court acknowledged that the notification did not specify which officer, among several officers possessing pan-India jurisdiction, should decide a composite notice involving taxpayers from different Commissionerates.
However, it held that this was merely an administrative gap concerning the allocation of business—not a gap concerning the existence of jurisdiction.
The circular filled that administrative gap by providing that a composite notice should be adjudicated by the officer having jurisdiction over the noticee against whom the highest demand had been raised.
“The NN-2/2017 and NN-2/2022 determine who may adjudicate, while the Impugned Circular determines which of the competent officers shall adjudicate a particular composite SCN,” the Court explained.
The circular neither appointed a new officer nor extended an officer’s jurisdiction beyond the limits already prescribed by the notifications. It only selected one officer from a group of officers who were already equally competent to adjudicate the matter.
Rejecting the contention that the circulars did not identify their statutory source or mention the Board’s approval, the Court held that such an omission did not invalidate the administrative directions.
The validity of an administrative instrument depends on whether the competent authority possessed and duly exercised the requisite power—not merely on whether the instrument expressly recites the provision from which that power originates.
The petitioners had not produced any material demonstrating that the circular was issued without the necessary authority or approval. The absence of an express recital was, therefore, at most a drafting deficiency and not a jurisdictional defect.
The Court also rejected the argument that Notification No. 2/2022 required ratification by the GST Council under Section 6(1) of the Haryana GST Act. No statutory provision establishing such a requirement was placed before the Bench.
The High Court held that selecting the Common Adjudicating Authority according to the noticee facing the highest demand did not violate Article 14.
It described the criterion as objective, quantifiable and uniformly applicable. The test had a rational connection with the legitimate objective of ensuring that a single authority adjudicated proceedings arising from one investigation and a common set of facts.
Common adjudication also prevents different officers from recording conflicting findings concerning the same alleged transaction chain, the Court added.
The Bench rejected the allegation of impermissible sub-delegation. The officer issuing the composite show-cause notice did not exercise discretion while selecting the adjudicating authority but merely applied the predetermined criterion prescribed by the Board.
Addressing the petitioners’ concern about the appellate forum, the High Court held that the appellate authority was not created for the first time by Circular No. 250/07/2025-GST dated June 24, 2025.
Table III of Notification No. 2/2017 had already notified the Commissioner (Appeals) for the Commissionerate in which the Common Adjudicating Authority was posted. Circular No. 250/2025 merely clarified the existing legal position.
Since the Common Adjudicating Authority in the present case was posted under the Principal Commissioner, Delhi North, appeals against its order would lie before Commissioner (Appeals-I), Delhi.
The Court observed that the adjudicatory, appellate and tribunal hierarchy remained within the notified jurisdiction of the same Commissionerate. Any inconvenience caused to an assessee by the pan-India composite notice mechanism could not, by itself, invalidate the jurisdiction of an otherwise competent authority.
The petitioners had also failed to demonstrate any actual prejudice arising from adjudication by the Delhi-based authority. There was no material showing that they had been denied an opportunity of hearing, prevented from effectively responding to the notices or treated less fairly than they would have been by an officer situated in Haryana.
The Bench noted that writ jurisdiction can be invoked in exceptional cases where the very existence of jurisdiction is questioned, despite the availability of an appellate remedy under Section 107 of the CGST Act.
It therefore examined the jurisdictional challenge. However, after finding that the Common Adjudicating Authority derived its jurisdiction from valid statutory notifications, the Court refused to examine the merits of the tax demands.
The petitioners were granted liberty to file statutory appeals under Section 107 and raise all remaining contentions, including objections relating to evidence, the merits of the demands and alleged violations of natural justice.
The appellate authority was directed to decide those questions independently and without being influenced by observations made in the High Court’s judgment.
The Court also permitted the petitioners to seek exclusion under Section 14 of the Limitation Act, 1963 of the period during which their writ petitions remained pending. Any such applications must be considered by the appellate authority in accordance with law.
Accordingly, the High Court dismissed the challenge to the jurisdiction of the Common Adjudicating Authority and the validity of the disputed CBIC circulars.
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