The Madras High Court has upheld the validity of the Central Board of Excise and Customs’ Notification No. 22/2014, affirming that officers of the Directorate General of GST Intelligence (DGGI) are empowered to exercise pan-India jurisdiction for investigation and issuance of show cause notices under the Finance Act, 1994.
The bench of Justice G. Jayachandran and Justice N. Mala ruled that the absence of pre-consultation before issuance of a show cause notice, as contemplated in the departmental Master Circular, does not invalidate such notices.
The Bench dismissed a batch of writ appeals challenging investigations, show cause notices, and adjudication proceedings initiated by DGGI and Central Excise officers outside the territorial jurisdiction of the assessees.
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The appeals arose from investigations initiated by officers of the Directorate General of GST Intelligence against various taxpayers for alleged non-payment of service tax under the Finance Act, 1994. The assessees contended that officers stationed outside their local Commissionerates lacked authority to conduct investigations and issue show cause notices.
Several taxpayers also challenged Notification No. 22/2014-Service Tax dated 16 September 2014, arguing that it unlawfully conferred nationwide jurisdiction on Central Excise officers despite Rule 3 of the Service Tax Rules, 1994 referring to officers exercising powers within “local limits.” Some appellants additionally argued that the Department violated the CBEC Master Circular dated 10 March 2017 by issuing show cause notices without first undertaking mandatory pre-consultation.
The appellants argued that the phrase “local limits” in Rule 3 of the Service Tax Rules restricted officers to a defined territorial jurisdiction and did not permit nationwide authority.
They further submitted that subordinate legislation, including Notification No. 22/2014, could not override the parent statute by enlarging jurisdiction beyond what the Finance Act contemplated. Reliance was placed on earlier Supreme Court decisions such as Sayed Ali and Canon India, which emphasised that proceedings should be initiated only by the proper jurisdictional officer.
The taxpayers also maintained that failure to conduct pre-consultation before issuing show cause notices rendered the notices legally unsustainable.
The department argued that the Finance Act, 1994 deliberately empowered the Central Board to appoint Central Excise officers for implementation of service tax provisions and that Notification No. 22/2014 merely operationalised those statutory powers.
The department submitted that the expression “local limits” does not prevent the Board from assigning nationwide jurisdiction where administrative efficiency so requires. According to the Department, DGGI officers had long been exercising pan-India jurisdiction under earlier notifications and the validity of such notifications had already been judicially recognised.
The Bench agreed with the department and upheld the reasoning of the Single Judge.
The Court observed that Notification No. 22/2014 was issued under powers conferred by the Central Excise Act, the Finance Act, 1994, the Central Excise Rules, and the Service Tax Rules. It held that the expression “Central Excise Officer” cannot be interpreted narrowly so as to restrict officers only to the territorial jurisdiction of individual taxpayers.
Rejecting the argument based on the expression “local limits,” the Court held that the Board possesses wide discretion while assigning jurisdiction and is legally competent to confer pan-India powers on Central Excise officers for implementation of service tax provisions.
The Bench further observed that nationwide investigations are often necessary to avoid multiple overlapping proceedings across different Commissionerates and to ensure effective administration of tax laws.
The Court relied extensively on the Supreme Court’s decision in National Building Construction Company Ltd. v. Union of India, wherein the apex court recognised that the Board has broad powers to assign all-India jurisdiction to Central Excise officers.
The Bench quoted the Supreme Court’s observation that the phrase “local limits” does not prohibit the Board from granting pan-India jurisdiction and that centralised investigations help prevent duplication and overlapping inquiries.
The Court also noted that the concerns expressed in earlier customs decisions regarding multiple authorities had subsequently been clarified by a larger Bench of the Supreme Court, which recognised that administrative mechanisms could adequately address issues relating to multiple proceedings.
On the challenge relating to the absence of pre-consultation, the High Court held that the Master Circular dated 10 March 2017 is merely recommendatory and cannot override statutory provisions.
The Court observed that departmental circulars do not possess the force of law where they are inconsistent with the governing statute. Consequently, failure to undertake pre-consultation does not invalidate an otherwise lawful show cause notice.
The Bench therefore refused to quash the notices solely on the ground of non-compliance with the administrative circular.
With respect to adjudication orders already passed in certain cases, the Court held that disputed factual issues should be examined by the statutory appellate authorities rather than in writ proceedings.
Accordingly, the Bench upheld the Single Judge’s direction permitting the assessees to avail the appellate remedies available under the statute against the respective Orders-in-Original.
The Madras High Court upheld the constitutional validity of Notification No. 22/2014 and confirmed that DGGI and authorised Central Excise officers can exercise pan-India jurisdiction in service tax investigations and issue show cause notices across India.
The Court also ruled that pre-consultation under the departmental Master Circular is not mandatory and cannot be relied upon to invalidate show cause notices.
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