Issuance of SCN by State GST Officer – Whether Proper or Not? Kerala High Court Clarifies

Introduction

In the present case[i], a writ petition was filed before the Kerala High Court, challenging the jurisdiction of the State Goods and Services Tax Department (‘State GST Department’) in initiating proceedings under the Central Goods and Services Tax Act, 2017 (‘CGST Act’). The Petitioner argued that, in the absence of a government notification issued in consultation with the GST Council under s. 6(1) of the CGST Act, State GST officers could not be considered ‘proper officers’ under the Act.

Brief Facts

• The Petitioner, Director of Pinnacle Vehicles and Services Pvt. Ltd., Mr. Gabi Gafoor, received authorization and a show cause notice (‘SCN’) under s. 74 of the CGST Act. The SCN was issued by the State GST authorities, alleging tax violations.

• Aggrieved by the issuance of the SCN, the Petitioner filed this writ petition, contending that State GST officers could not act as ‘proper officers’ under the CGST Act without a notification being issued by the government, based on the GST Council’s recommendation under s. 6 of the CGST Act.

• A Single Judge of the High Court initially took a prima facie view that the officers of the State GST Department were already empowered under the CGST Act and that no separate notification was required unless specific restrictions were imposed. However, noting a conflicting view by the Madras High Court in Tvl. Vardhan Infrastructure[ii], the Single Judge, referred the matter to a Division Bench for an authoritative ruling.

Held

• The Kerala High Court Division Bench affirmed the prima facie view of the Single Judge that the officers of the State GST Department/Union Territory GST Department are ‘proper officers’ under the CGST Act by virtue of s. 6(1). Accordingly, the writ petition was dismissed, but the Court clarified that the Petitioner remains free to contest the SCN on merits before the appropriate authority.

• The High Court, while rejecting the Petitioner’s reliance on Tvl. Vardhan Infrastructure (supra), observed that s. 6(1) of the CGST Act itself provides for cross-empowerment, and a notification is necessary only if restrictions or conditions are to be imposed. Therefore, it was held that a separate notification is not needed to grant such authority.

• Such observation was made in alignment with the decision of the Delhi High Court in Indo International Tobacco Ltd[iii]., wherein it was held that GST officers of one jurisdiction – whether State or  Central – cannot interfere in matters specifically assigned to the other. However, by default, they are empowered to issue SCNs unless expressly restricted by a notification issued under s. 6 of the CGST Act. The Division Bench also noted that the Supreme Court had dismissed the Special Leave Petition (SLP) filed against the Indo International Tobacco Ltd. (supra) decision, reinforcing its validity.

Our Analysis

Amidst several judicial pronouncements safeguarding taxpayer’s rights, this decision stands out for reaffirming the principle that jurisdictional objections should not be misused to escape scrutiny, especially in cases involving tax evasion allegations. Unlike prior cases where courts have favoured taxpayers on procedural grounds, this judgment emphasizes that technical jurisdictional objections alone will not be enough to nullify an SCN, especially in matters concerning government revenue.

The judgment clarifies the scope of cross-empowerment under GST law, reinforcing that State GST officers have the authority to issue SCNs under the CGST Act unless there is an explicit restriction imposed through a notification. Until an appeal is filed before the Hon’ble Supreme Court, it appears unlikely that High Courts will entertain such jurisdictional challenges aimed at avoiding financial scrutiny. The ruling expands the enforcement capabilities of tax authorities, leaving room for businesses to argue that dual jurisdiction creates uncertainty and increases compliance burdens.

End Notes

[i] WP(C) No. 25724 of 2024 Pinnacle Vehicles and Services Pvt. Ltd. v. Joint Commissioner (Intelligence & Enforcement).

[ii] MANU/TN/2310/2024.

[iii] [(2022) 97 GSTR 414 (Delhi)].

Authored by Anshi Bhatia, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.