ADJUDICATING AUTHORITY AND PROPER OFFICER IN GST

[Dr. Sanjiv Agarwal]

Adjudicating Authority [Section 2(4)]

As per section 2(4) of the CGST Act, 2017, ‘adjudicating authority’ means any authority, appointed or authorized to pass any order or decision under this Act, but does not include the Central Board of Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the National Appellate Authority for Advance Ruling, the Appellate Authority, the Appellate Tribunal and the Authority referred to in sub-section (22) of section 71.

It may be noted that ‘Adjudication’ is the process of deciding an issue relating to tax matters through departmental authorities empowered to determine issues relating to classification, valuation, refund claim, tax or duty payable etc. The department raises demands by way of Show Cause Notices (SCNs) to the assessees when irregularities are observed or suspected.

Adjudication pre-supposes issuance of a show cause notice (SCN) - an intimation to show cause, explain or defend the proposed action as mentioned in the SCN. Infact, SCN is the first limb of principle of natural justice i.e., no one should be condemned unheard. SCN should be clear, precise and unambiguous.

Adjudication proceedings in any assessment or penal proceedings is a very important aspect of tax administration. It provides an opportunity to the assessee to be heard and show cause before any action is taken in proceedings relating to him. Issue of show cause notice is a pre-condition to a proper adjudication which is an intimation to assessee of the proposed action by the department. The adjudicating officer adjudicates the show cause notice by considering the reply to show cause notice and other available or produced evidences by the Noticee. A SCN should follow certain principles to be legally sustainable.

Adjudication has not been defined in the GST laws but according to www. wikipedia. org, “Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligation between the parties involved. Three types of dispute are resolved through adjudication:

• Disputes between private parties, such as individuals or corporations.
• Disputes between private parties and public officials.
• Disputes between public officials or public bodies.”

To adjudicate means to decide, determine or to settle. Literally, it means the act of adjudicating, the process of trying and determining a case judicially. The application of the law to the facts and an authoritative declaration of the result.

‘An adjudication in favour of natural rights’. A solemn or deliberate determination by the judicial power: the act of giving judgment.

Black’s Law Dictionary defines the term ‘adjudicate’ so as to mean ‘to settle in the exercise of judicial authority; to determine finally’.

In GST, generally it is the ‘proper officer’ who is adjudicating authority but delegation of powers for the purpose of adjudication can be notified in terms of section 167 of CGST Act, 2017. Accordingly, the Commissioner may delegate any power exercisable by any authority or officer which may be exercisable by another authority or officer subject to conditions as per notifications. There may be different adjudicating authorities based upon jurisdiction as also the monetary limits. (Refer to Chapter 5 also)

Proper Officer [Section 2(91)]

As per section 2(91) of the CGST Act, 2017, in relation to any functions to be performed under this Act means -

●     Commissioner or the officer of Central tax

●     Who is assigned that function by the Commissioner in the Board.

According to section 2(91) of the CGST Act, 2017, ‘proper officer’ in relation to any function to be performed under this Act, means the Commissioner or the officer of goods and services tax who is assigned that function by the Commissioner in the Board.

It may be noted that in relation to CGST or IGST, an officer shall be the proper officer who has been assigned any function, to be performed, by the Board/Commissioner of CGST or IGST.

Such person shall be considered as proper officer for the function (s) assigned to him under the Act by the Commissioner in the Board. For example, an officer may be assigned adjudication of a particular show cause notice.

As per section 4 of the IGST Act 2017, the officers appointed under SGST or UTGST are authorised to be proper officers for IGST Act subject to exceptions and conditions as Government may specify by way of a notification. This shall be on the recommendations of GST Council. A similar provision exists in CGST Act, 2017 in section 6 that officers of SGST or UTGST can be appointed as proper officers under CGST Act. Also, in case of UTGST, the Administrator may, by order, authorize any officer to appoint officers of Union Territory tax below the rank of Assistant Commissioner of Union Territory tax for the administration of the Act.

It may be noted that the latest clarification vide Circular No. 169/01/2022-GST is based on Notification No. 02/2022-Central Tax dated 11.03.2022 which notified the powers of Additional Commissioner or Joint Commissioner of Central Tax for passing an order or decision in respect of notices issued by the officers of Directorate General of Goods and Services Tax Intelligence.

In YASHO INDUSTRIES LIMITED VERSUS UNION OF INDIA - 2021 (6) TMI 918 - GUJARAT HIGH COURT , where petitioner was facing two parallel investigating proceedings, namely the proceedings initiated pursuant to the communication dated 11-11-2020 by the DRI, Kolkata Zonal Unit and the proceedings instituted by the DGGI officer vide summons, invoking section 70 and the petitioner preferred a writ petition seeking directions to the GST Department to issue refund/allow recredit of Rs. 3 crore paid by the petitioners vide Form No. GST DRC-03 and to quash and set aside the Notification No. 14 of 2017-CT, dated 01.07.2017 , in connection with the assignment of functions to the officers as the 'proper officers' in relation to the various functions of the CGST Act and the Rules made thereunder, it was held that under section 70, the power to summon any person whose attendance he considers necessary either to give evidence or to produce the documents in any inquiry in the same manner in the case of a Civil Court under the CPC.  As per the definition of 'proper officer' as contained in section 2(91), a 'proper officer' in relation to any function to be performed under the CGST Act means the Commissioner or the officer of the Central Tax, who is assigned that function by the Commissioner in the Board.

It was observed that the respondent officer is an officer of Directorate General of Goods and Services Tax Intelligence (DGGI) holding the designation of Senior Intelligence Officer, who was appointed as the Central Tax Officer with all the powers under the CGST Act and IGST Act and the Rules made thereunder, as are exercisable by the Central Tax Officers of the corresponding rank of Superintendent as specified in the Notification No. 14 of 2017-CT, dated 01.07.2017 issued by the Central Board of Excise and Customs. The respondent being the officer of the Central Tax and the Superintendent under the CGST Act by virtue of the said Notification dated 1-7-2017, he was also assigned the powers of proper officer by the Board vide Circular dated 5-7-2017 issued in exercise of the powers conferred by clause (91) of section 2 of the CGST Act read with section 20 of the IGST Act. Therefore, the respondent was a proper officer in relation to the function to be performed under the CGST Act as contemplated under section 2(91) of the CGST Act, 2017 and as such, was entitled to issue summons under section 70 of the CGST Act in connection with the inquiry initiated against the petitioner.

Further, the said Board, namely the Central Board of Excise and Customs in exercise of powers conferred by section 2(91) of the CGST Act read with section 20 of the IGST Act and subject to section 5(2) of the CGST Act has assigned the officers the functions as that of proper officers in relation to the various sections of the CGST Act and the Rules made thereunder, and as such the Superintendent of Central Tax has been assigned the function of section 70(1) of the CGST Act. Thus, there being no delegation of powers by the Commissioner, the provisions contained in section 167 could not be said to have been attracted, nor was there any necessity to issue notification as sought to be submitted by the petitioner.

Thus, it was held that 'Proper officer' in relation to any function to be performed under CGST Act means Commissioner or Officer of Central Tax, who is assigned that function by Commissioner in Central Board of Excise and Customs. Hence, respondent being officer of Central Tax and Superintendent under CGST Act having been assigned powers of proper officer by Board vide Circular dated 05.07.2017, was proper officer in relation to function to be performed under CGST Act as contemplated under section 2(91) of the CGST Act, 2017, and as such, was entitled to issue summons under section 70 of the CGST Act, 2017, in connection with inquiry initiated against petitioner for having incorrectly availed benefit of EOU Scheme.