Inspecting Officer could not be treated as Proper Officer, therefore does not have power to issue Show Cause Notice.

Case Title: Famina Shopping Mall (P.) Ltd. v. Assistant Commissioner of GST & Central Excise

Court: High Court of Madras

Petition Number: W.P. (MD) No. 19284 of 2021 with W.M.P. (MD) Nos. 16032 of 2021 and 5247 of 2023

Category of Dispute: Jurisdiction of Proper Officer & Validity of Pre-SCN

Date of Judgment: 14 March 2024

Relevant Sections: Section 74(1) and 74(5) of the CGST Act, 2017

Relevant Rules/Notifications/Circulars:

Notification No. 27/2017–Central Tax (Rate) dated 22.09.2017

CBIC Circular No. 31/05/2018-GST dated 09.02.2018

State Circular No. 23/2021 dated 04.10.2021

Facts of the Case

1. The petitioner, Famina Shopping Mall (P.) Ltd., is a departmental store operator. A search was conducted by GST officers on 06.06.2019 and 20.08.2019. Based on findings, proceedings dated 12.10.2021 were initiated demanding ₹47,41,748 along with interest and penalty under Section 74(5) CGST ActFaminaShoppingMallPLtdv….
2. The petitioner contended that the notice was invalid as it was issued by an officer lacking jurisdiction, contrary to Circular No. 23/2021 issued by the Tamil Nadu Commissioner of Commercial Tax which requires only jurisdictional proper officers to issue SCNsFaminaShoppingMallPLtdv….
3. The respondent argued that the circular cited applies only to State GST officers and not to Central GST officers, who act under CBIC Circular No. 31/05/2018-GST. Moreover, the impugned communication was merely a pre-SCN (Form GST DRC-01A)FaminaShoppingMallPLtdv….

Questions in Consideration

1. Whether the proceedings initiated by the second respondent (central GST officer) are without jurisdiction in light of the petitioner’s reliance on State Circular No. 23/2021.
2. Whether a pre-show cause notice (Form GST DRC-01A) is legally sustainable and can be challenged under writ jurisdictionFaminaShoppingMallPLtdv….

Observations of the Court

1. The Court noted that during the inspection, it was found that the petitioner made outward taxable supplies under an unregistered brand name without paying appropriate GST, not qualifying for exemption under Notification No. 27/2017FaminaShoppingMallPLtdv….
2. It was clarified that as per CBIC Circular dated 09.02.2018, officers of the Directorate General of GST Intelligence (DGGI) are empowered to issue SCNs. Hence, the second respondent was competent to issue the noticeFaminaShoppingMallPLtdv….
3. The Court emphasized that the impugned notice was merely a pre-show cause notice issued under Form GST DRC-01A to provide an opportunity for voluntary compliance, and not an adjudication orderFaminaShoppingMallPLtdv….

Judgment of the Court

The writ petition was dismissed. The Court held that:

• The proceedings were initiated by a competent officer.
• The impugned communication was only a pre-SCN, not attracting judicial interference at this stage.
• The petitioner is at liberty to respond to the notice before the proper authority. No costs were awarded and miscellaneous petitions were closedFaminaShoppingMallPLtdv….

Between Fine Lines

• A pre-show cause notice under Form GST DRC-01A is not adjudication and thus not open to writ challenge.
• CBIC circulars prevail over State GST circulars for Central officers.
• Jurisdictional objections must be assessed with reference to the specific taxing authority’s administrative setup.
• Procedural opportunity under Section 74(5) is meant to minimize litigation.
• Taxpayers must avail statutory remedies instead of prematurely invoking writ jurisdiction.

Summary of Referred Cases