Additional Commissioner is a proper officer to issue a show-cause notice under Section 74(1) of the CGST Act: High court of Telangana

 .. PETITIONER THE HON’BLE SRI JUSTICE UJJAL BHUYAN THE HON’BLE DR. JUSTICE CHILLAKUR SUMALATHA W.P.NO.28893 OF 2021 16.11.2021 M s AMBIKA FOOD INDUSTRIES PVT. LTD. REP. BY ITS DIRECTOR ALOK AGARWAL $ UNION OF INDIA REP. BY ITS SECRETARY MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL SECRETARIAT NEW DELHI AND FOUR OTHERS. Counsel for the petitioner : Mr. Srinivas Chaturveduala Counsel for respondents : Mr. B.Narasimha Sharma Senior Standing Counsel for Central Goods and Services Taxes. < Gist Head Note : : Citations: 1. AIR 2021 SC 1699 DATE OF JUDGMENT PRONOUNCED SUBMITTED FOR APPROVAL: 16—11—2021 THE HON’BLE SRI JUSTICE UJJAL BHUYAN THE HON’BLE DR. JUSTICE CHILLAKUR SUMALATHA 1. Whether Reporters of Local Newspapers : Yes No may be allowed to see the Judgments 2. Whether the copies of judgment may be : Yes No marked to Law Reporters Journals 3. Whether Their Lordship wish to see the fair copy of the Judgment : Yes No THE HON’BLE SRI JUSTICE UJJAL BHUYAN THE HON’BLE DR. JUSTICE CHILLAKUR SUMALATHA W.P.NO.28893 OF 2021 O R D E RHeard Mr. Srinivas Chaturveduala learned counsel for the petitioner and Mr. B.Narasimha Sarma learned Senior Standing Counsel for Central Goods and Services Taxes. 2. By filing this petition under Article 226 of the Constitution of India petitioner has challenged legality and validity of the show cause notice dated 12.04.2021 issued by Additional Commissioner of Central Taxes and Customs Hyderabad Audit I Commissionerate Hyderabad. 3. By the impugned show cause notice Additional Commissioner i.e. the respondent No.4 has called upon the petitioner to show cause as to why the product manufactured and supplied to various customers during the period from July 2017 to March 2019 should not be classified under the tariff heading 21069099 of Customs Tariff Act 1975 made applicable to the Central Goods and Services Tax Act 2017 being the CGST not paid should not be demanded under Section 74(1) of the CGST Act. 3.2. That apart petitioner has also been called upon to show cause as to why an amount of Rs.3 08 73 057.00 being the Integrated Goods and Services Taxnot paid should not be demanded and recovered from the petitioner under Section 74(1) of the CGST Act read with Section 20 of the Integrated Goods and Services Tax Act 2017of the CGST Act. 4. Basic contention of learned counsel for the petitioner is that it is the sine qua non that the officer who issues the show cause notice under Section 74(1) of CGST Act has to be perforce a ‘proper officer’. He has referred to various provisions of the CGST Act and the documents annexed to the writ petition to contend that Additional Commissioner is not a ‘proper officer’ having jurisdiction to issue the impugned show cause notice. In support of his submissions learned counsel for the petitioner has also placed reliance on a recent decision of the Supreme Court in CANON INDIA PRIVATE LIMITED vs. COMMISSIOENR OF CUSTOMS1 which was in the context of the Customs Act 1962. 5. On the other hand Mr. B. Narasimha Sarma learned Senior Standing Counsel for respondents has also referred to various provisions of the CGST Act as well as circular dated 05.07.2017 of the Central Board of Excise and Customs and circular dated 09.02.2018 of the said Board to contend that Additional Commissioner i.e. the respondent No.4 is indeed the ‘proper officer’ in the present case and therefore there should be no interference with the impugned show cause notice on the ground that the notice issuing authority is not the ‘proper made at the Bar. 6. We have given our due consideration to the respective submissions 7. As already pointed out earlier the impugned show cause notice has been issued by respondent No.4 alleging contravention of various provisions of the CGST Act as well as the IGST Act where after petitioner has been called upon to show cause as to why the quantified amount of CGST as well as Telangana Goods and Services Tax besides IGST should not be 1 AIR 2021 SC 1699 5 recovered from the petitioner in addition as to why interest and penalty should not be levied and imposed on the petitioner. 8. Section 74 of the CGST Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts. 8.1. As per sub section thereof where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed of or utilized by reason of fraud or any willful misstatement or suppression of facts to evade tax he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made or who has wrongly availed or utilized input tax credit requiring him to show cause as to why he should not pay the amount specified in the notice along with interest and penalty. 8.2. Section 2(91) of the CGST Act defines the expression ‘proper officer’. As per this definition ‘proper officer’ means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board. 6 9. Though learned counsel for the respondents had referred to Sections 3 to 5 of the CGST Act it would not be necessary for us to delve deep into the aforesaid provisions because those provisions deal with appointment of class of officers and not specifically with the appointment of ‘proper officer’. Nonetheless we may mention that as per sub sectionof Section 5 of CGST Act the officer of central tax may exercise the powers and discharge the duties conferred or imposed under the CGST Act on any other officer of central tax who is subordinate to him. 10. As per Circular No.3 3 2017 GST dated 05.07.2017 of the Board which has been issued in exercise of powers conferred by clauseof Section 2 of the CGST Act read with Section 20 of the IGST Act and subject to sub section of Section 5 of the CGST Act the Board has assigned the officers mentioned in column No.2 of the appended table the functions of ‘proper officer’ in relation to various sections of the CGST Act. We find that at Sr.No.3 Deputy or Assistant Commissioner of Central Tax have been designated as ‘proper officer’ for discharging functions under sub sections(2) (5) (7) andof Section 74. 10.1. Admittedly Deputy or Assistant Commissioner of Central Tax are officers subordinate to Additional Commissioner. In terms of Board’s Circular No.31 05 2018 GST dated 09.02.2018 more particularly in paragraph No.4 thereof it is clarified that all officers up to the rank of Additional Joint Commissioner of Central Tax are assigned as the ‘proper officer’ for issuance of show cause notices and orders under sub sections (2) (5) (7) and of Sections 73 and 74 of the CGST Act corresponding to Section 3 read with Section 20 of the IGST Act. As per the table appended thereto Additional or Joint Commissioner of Central Tax have been assigned functions as the ‘proper officer’ and the monetary limit of the said officers for issuance of show cause notice and orders under Sections 73 and 74 of the CGST Act and Section 20 of the IGST Act in the case of central tax and integrated tax not paid or short paid or erroneously refunded or input tax credit of central tax and integrated tax wrongly availed of or utilized is above Rs.2 00 00 000.00 Rupees two crores). 12. Admittedly the monitory limit in the present case is above Rs.2 00 00 000 is concerned the main issue confronting the Supreme Court was whether after clearance of the cameras on the basis that they were exempted from levy of basic customs duty the proceedings initiated by the Directorate of Revenue Intelligence for recovery of duty not paid under Section 28(4) of the Customs Act 1962 are valid in law It was in that context that the question which arose for consideration was whether the Directorate of Revenue Intelligence had the authority in law to issue a show cause notice under Section 28(4) of the Customs Act 1962 for recovery of duties allegedly not levied nor paid when the goods had been cleared for import by a Deputy Commissioner of Customs who had decided that the goods were exempted. Thus the question was as to whether in the context of Section 28(4) of the Customs Act 1962 the Directorate of Revenue Intelligence could be construed as the ‘proper officer’. 13.1. Therefore the issue before the Supreme Court in Canon India Private Limited was completely different and distinct from what is being canvassed by learned counsel for the petitioner to support his that respondent No.4 is not the ‘proper officer’ under Section 74(1) of the CGST Act. 14. Thus in the light of the above we are not inclined to entertain the writ petition. However for the ends of justice we grant further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021. 9 If any such reply is filed within the aforesaid period of three weeks the same shall be considered by the authority in accordance with law. 15. All discussions made in the present order is only in response to the contention of the petitioner that respondent No.4 is not the ‘proper officer’. We have not expressed any opinion on merits and all contentions 16. Subject to the above observations writ petition is dismissed. 17. Interlocutory applications pending if any shall stand closed. No are kept open. order as to costs. UJJAL BHUYAN J DR. CHILLAKUR SUMALATHA J DATE:16—11—2021 L.R. copy to be marked. B O 

Summary: 
The monitory limit in the present case is above Rs.2,00,00,000/- (Rupees two crores). In such circumstances, and having regard to the above, it cannot be said with any degree of certainty that respondent No.4 is not the ‘proper officer’ competent to issue the impugned show cause notice. Such an observation was made by the Hon’ble Telangana High Court before Hon’ble Justice UJJAL BHUYAN &amp; Hon’ble Justice DR. CHILLAKUR SUMALATHA in the matter of  M/s AMBIKA FOOD INDUSTRIES PVT. LTD vs UNION OF INDIA, REP. BY ITS SECRETARY &amp; ors [W.P.NO.28893 OF 2021]

The facts of the case were that a Show cause notice was issued against the petitioner by respondent no. 4 under section 74(1) of the CGST Act. The said Show Cause notice was assailed by the petitioner on the basis that respondent no. 4 was not a proper officer having jurisdiction to issue the impugned show cause notice. On the other hand, it was the contention of the respondents that respondent No.4 is indeed the ‘proper officer’ in the present case, and therefore, there should be no interference with the impugned show-cause notice on the ground that the notice issuing authority is not the proper officer.

The Hon’ble High Court held that “As per this definition, ‘proper officer’ means the Commissioner or the officer of the central tax, who is assigned that function by the Commissioner in the Board. ”

Additionally, the Hon’ble High Court observed that “As per Circular No.3/3/2017 – GST dated 05.07.2017 of the Board, which has been issued in exercise of powers conferred by clause (91) of Section 2 of the CGST Act, read with Section 20 of the IGST Act, and subject to sub-section (2) of Section 5 of the CGST Act, the Board has assigned the officers mentioned in column No.2 of the appended table, the functions of ‘proper officer’ in relation to various sections of the CGST Act. We find that at Sr.No.3 Deputy or Assistant Commissioner of Central Tax have been designated as ‘proper officer’ for discharging functions under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Section 74..” Further, it was observed by the Hon’ble High Court “Board’s Circular No.31/05/2018-GST dated 09.02.2018, more particularly in paragraph No.4 thereof, it is clarified that all officers up to the rank of Additional / Joint Commissioner of Central Tax are assigned as the ‘proper officer’ for issuance of show cause notices and orders under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Sections 73 and 74 of the CGST Act”

Finally, the Hon’ble High Court dismissed the appeal on the aforesaid grounds but to meet the ends of justice granted a further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021.
Click Here To Read The Judgment
Judgment Reviewed by: Rohan Kumar Thakur
 The monitory limit in the present case is above Rs.2,00,00,000/- (Rupees two crores). In such circumstances, and having regard to the above, it cannot be said with any degree of certainty that respondent No.4 is not the ‘proper officer’ competent to issue the impugned show cause notice. Such an observation was made by the Hon’ble Telangana High Court before Hon’ble Justice UJJAL BHUYAN &amp; Hon’ble Justice DR. CHILLAKUR SUMALATHA in the matter of  M/s AMBIKA FOOD INDUSTRIES PVT. LTD vs UNION OF INDIA, REP. BY ITS SECRETARY &amp; ors [W.P.NO.28893 OF 2021] 
The facts of the case were that a Show cause notice was issued against the petitioner by respondent no. 4 under section 74(1) of the CGST Act. The said Show Cause notice was assailed by the petitioner on the basis that respondent no. 4 was not a proper officer having jurisdiction to issue the impugned show cause notice. On the other hand, it was the contention of the respondents that respondent No.4 is indeed the ‘proper officer’ in the present case, and therefore, there should be no interference with the impugned show-cause notice on the ground that the notice issuing authority is not the proper officer.

The Hon’ble High Court held that “As per this definition, ‘proper officer’ means the Commissioner or the officer of the central tax, who is assigned that function by the Commissioner in the Board. ”

Additionally, the Hon’ble High Court observed that “As per Circular No.3/3/2017 – GST dated 05.07.2017 of the Board, which has been issued in exercise of powers conferred by clause (91) of Section 2 of the CGST Act, read with Section 20 of the IGST Act, and subject to sub-section (2) of Section 5 of the CGST Act, the Board has assigned the officers mentioned in column No.2 of the appended table, the functions of ‘proper officer’ in relation to various sections of the CGST Act. We find that at Sr.No.3 Deputy or Assistant Commissioner of Central Tax have been designated as ‘proper officer’ for discharging functions under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Section 74..” Further, it was observed by the Hon’ble High Court “Board’s Circular No.31/05/2018-GST dated 09.02.2018, more particularly in paragraph No.4 thereof, it is clarified that all officers up to the rank of Additional / Joint Commissioner of Central Tax are assigned as the ‘proper officer’ for issuance of show cause notices and orders under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Sections 73 and 74 of the CGST Act”

Finally, the Hon’ble High Court dismissed the appeal on the aforesaid grounds but to meet the ends of justice granted a further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021.
Click Here To Read The Judgment
Judgment Reviewed by: Rohan Kumar Thakur
 The facts of the case were that a Show cause notice was issued against the petitioner by respondent no. 4 under section 74(1) of the CGST Act. The said Show Cause notice was assailed by the petitioner on the basis that respondent no. 4 was not a proper officer having jurisdiction to issue the impugned show cause notice. On the other hand, it was the contention of the respondents that respondent No.4 is indeed the ‘proper officer’ in the present case, and therefore, there should be no interference with the impugned show-cause notice on the ground that the notice issuing authority is not the proper officer. 
The Hon’ble High Court held that “As per this definition, ‘proper officer’ means the Commissioner or the officer of the central tax, who is assigned that function by the Commissioner in the Board. ”

Additionally, the Hon’ble High Court observed that “As per Circular No.3/3/2017 – GST dated 05.07.2017 of the Board, which has been issued in exercise of powers conferred by clause (91) of Section 2 of the CGST Act, read with Section 20 of the IGST Act, and subject to sub-section (2) of Section 5 of the CGST Act, the Board has assigned the officers mentioned in column No.2 of the appended table, the functions of ‘proper officer’ in relation to various sections of the CGST Act. We find that at Sr.No.3 Deputy or Assistant Commissioner of Central Tax have been designated as ‘proper officer’ for discharging functions under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Section 74..” Further, it was observed by the Hon’ble High Court “Board’s Circular No.31/05/2018-GST dated 09.02.2018, more particularly in paragraph No.4 thereof, it is clarified that all officers up to the rank of Additional / Joint Commissioner of Central Tax are assigned as the ‘proper officer’ for issuance of show cause notices and orders under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Sections 73 and 74 of the CGST Act”

Finally, the Hon’ble High Court dismissed the appeal on the aforesaid grounds but to meet the ends of justice granted a further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021.
Click Here To Read The Judgment
Judgment Reviewed by: Rohan Kumar Thakur
 The Hon’ble High Court held that “As per this definition, ‘proper officer’ means the Commissioner or the officer of the central tax, who is assigned that function by the Commissioner in the Board. ” 
Additionally, the Hon’ble High Court observed that “As per Circular No.3/3/2017 – GST dated 05.07.2017 of the Board, which has been issued in exercise of powers conferred by clause (91) of Section 2 of the CGST Act, read with Section 20 of the IGST Act, and subject to sub-section (2) of Section 5 of the CGST Act, the Board has assigned the officers mentioned in column No.2 of the appended table, the functions of ‘proper officer’ in relation to various sections of the CGST Act. We find that at Sr.No.3 Deputy or Assistant Commissioner of Central Tax have been designated as ‘proper officer’ for discharging functions under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Section 74..” Further, it was observed by the Hon’ble High Court “Board’s Circular No.31/05/2018-GST dated 09.02.2018, more particularly in paragraph No.4 thereof, it is clarified that all officers up to the rank of Additional / Joint Commissioner of Central Tax are assigned as the ‘proper officer’ for issuance of show cause notices and orders under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Sections 73 and 74 of the CGST Act”

Finally, the Hon’ble High Court dismissed the appeal on the aforesaid grounds but to meet the ends of justice granted a further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021.
Click Here To Read The Judgment
Judgment Reviewed by: Rohan Kumar Thakur
 Additionally, the Hon’ble High Court observed that “As per Circular No.3/3/2017 – GST dated 05.07.2017 of the Board, which has been issued in exercise of powers conferred by clause (91) of Section 2 of the CGST Act, read with Section 20 of the IGST Act, and subject to sub-section (2) of Section 5 of the CGST Act, the Board has assigned the officers mentioned in column No.2 of the appended table, the functions of ‘proper officer’ in relation to various sections of the CGST Act. We find that at Sr.No.3 Deputy or Assistant Commissioner of Central Tax have been designated as ‘proper officer’ for discharging functions under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Section 74..” Further, it was observed by the Hon’ble High Court “Board’s Circular No.31/05/2018-GST dated 09.02.2018, more particularly in paragraph No.4 thereof, it is clarified that all officers up to the rank of Additional / Joint Commissioner of Central Tax are assigned as the ‘proper officer’ for issuance of show cause notices and orders under sub-sections (1), (2), (3), (5), (6), (7), (9) and (10) of Sections 73 and 74 of the CGST Act” 
Finally, the Hon’ble High Court dismissed the appeal on the aforesaid grounds but to meet the ends of justice granted a further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021.
Click Here To Read The Judgment
Judgment Reviewed by: Rohan Kumar Thakur
 Finally, the Hon’ble High Court dismissed the appeal on the aforesaid grounds but to meet the ends of justice granted a further three weeks time to the petitioner to file reply to the show cause notice dated 12.04.2021.