CBIC circulars validly assign proper-officer functions to appointed Central Tax officers.

The petitioner, a pharmaceutical company registered under the CGST/BGST Acts, challenged proceedings concerning the financial year 2017–18.

The Department alleged that the petitioner had suppressed taxable turnover and thereby short-paid GST of ₹5,10,00,146, comprising equal CGST and SGST components, invoking Section 74(1) of the CGST/BGST Acts.

The proceedings originated from data received from the Assistant Audit Officer, DGA (Central), Lucknow.

A show-cause notice dated 12 July 2024 was issued, followed by a demand order dated 13 November 2024 under Section 74(9), confirming tax, interest and penalty of ₹5,82,78,320.

The petitioner had submitted a reply and participated in the adjudication proceedings.

1. Whether the CBIC Circulars dated 5 July 2017, 9 February 2018 and 12 March 2022 validly assigned functions of the “proper officer” to Central Tax officers for proceedings under Sections 73 and 74 of the CGST Act.

2. Whether the show-cause notice and demand order were invalid for want of proper authority, digital signature, compliance with the statutory preconditions under Section 74, or adherence to the relevant departmental instructions.

3. Whether the proceedings were barred by limitation because the extended period under Section 74 was unavailable.

4. Whether the demand order was vitiated by breach of natural justice on account of denial of personal hearing or failure to issue an ASMT-10 notice.

5. Whether the writ petition should be entertained despite the statutory appellate remedy under Section 107 of the CGST/BGST Acts.

The Court applied Section 2(91) of the CGST Act, which defines “proper officer” as the Commissioner or an officer of Central Tax assigned the relevant function by the Commissioner in the Board; Sections 3 and 5, under which Central Tax officers are appointed and vested with statutory powers; and Section 4, which authorises the Board to appoint officers under the CGST Act.

The Court distinguished Canon India Pvt. Ltd. v. Commissioner of Customs, 2021 SCC OnLine SC 200, holding that its reasoning concerning officers who were not “officers of customs” under the Customs Act did not invalidate assignment of functions to undisputed Central Tax officers under the CGST Act.

It relied on Fomento Resorts & Hotels Ltd. v. Union of India, (2024) 159 taxmann.com 577 (Bom.), and Yasho Industries Ltd., which upheld assignment of functions through circulars and distinguished delegation under Section 167 from assignment of functions under Section 2(91).

Sections 74(1), 74(9), 75(4), 107(4), and Rule 26(3) of the CGST/BGST framework were also relevant.

Applying CIT v. Chhabil Dass Agarwal, (2014) 1 SCC 603, together with the principles in Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433, the Court held that a writ petition ordinarily should not be entertained where an effective statutory appeal exists, subject to recognised exceptions such as lack of jurisdiction, violation of natural justice, or action contrary to the statute.

The Court rejected the challenge to the CBIC circulars.

It held that the officers concerned were Central Tax officers appointed under the statutory framework and that the circulars merely assigned functions of the proper officer; they did not constitute impermissible delegation under Section 167.

The Court accepted the reasoning of the Bombay High Court that Canon India was distinguishable because it concerned assignment of customs functions to persons who were not “officers of customs,” whereas no such dispute existed regarding the officers in the present case.

As to the demand order, the Court found that the adjudicating authority had considered the petitioner’s response, examined the documentary material, recorded findings regarding unreported consignment sales and suppressed turnover, and granted a personal hearing.

The authority had invoked Section 74 on the basis of alleged suppression, wilful misstatement and failure to furnish information sought by the Department.

Since the impugned order was appealable and the petitioner’s objections required examination of the factual record and reappreciation of documents, the High Court declined to undertake that exercise under Article 226.

It found that none of the recognised exceptions to the alternative-remedy rule was established.

However, without finally adjudicating every challenge to the tax demand on merits, it declined to entertain the writ petition because the demand order was appealable and the petitioner had an effective statutory remedy under Section 107.

The petitioner was granted liberty to file an appeal within 30 days from the judgment.

The Court directed that the appellate authority should not reject the appeal on limitation, since the writ petition had remained pending and had been filed within 30 days after expiry of the statutory three-month appeal period.

The writ petition was accordingly disposed of.