Court Rules That Impugned Circular Providing Administrative Mechanism for Allocation of Composite Show Cause Notices Does Not Confer Fresh Jurisdiction; Directs Petitioners to Avail Statutory Appeal
In a significant judgment dated 16th September 2026, the Delhi High Court dismissed a batch of eight writ petitions filed by exporters and suppliers challenging the jurisdiction of the Common Adjudicating Authority (CAA) under the Central Goods and Services Tax Act, 2017 (CGST Act) and Integrated Goods and Services Tax Act, 2017 (IGST Act). The petitions primarily contested the validity of certain circulars issued by the GST authorities, which prescribed the manner of determining the CAA for adjudication of composite Show Cause Notices (SCNs) involving multiple noticees.
The petitions arose from investigations by the Directorate General of GST Intelligence (DGGI) uncovering a large-scale IGST fraud involving a chain of fake invoicing without actual movement of goods. The scam consisted of three layers - "L-2 suppliers" issuing fictitious invoices to "L-1 suppliers," who in turn issued fake invoices to exporters/end-users. The Petitioners were implicated as either L-1 suppliers or end-users availing fraudulent Input Tax Credit (ITC), leading to SCNs and consequential Orders-in-Original demanding recovery with interest and penalties.
The legal controversy centered around Circular No. 31/05/2018-GST dated 9th February 2018, as amended by Circulars 169/01/2022-GST and 239/33/2024-GST (collectively, the Impugned Circulars), which laid down the administrative mechanism for allocating adjudication of composite SCNs among officers already authorized to adjudicate under the CGST Act. The Petitioners argued that these circulars conferred fresh jurisdiction by applying a "highest demand" criterion to select the adjudicating officer, which they contended was beyond the statutory powers, arbitrary, violative of Article 14 of the Constitution, and lacked approval by the GST Board as required under the law.
The Delhi High Court undertook a detailed examination of the statutory provisions under the CGST Act, specifically Sections 2(4), 2(91), 3, 5(3), 166, 167, and 168, and the relevant notifications - Notification No. 2/2017-CT (NN 2/2017) and Notification No. 2/2022-CT (NN 2/2022) - which confer jurisdiction and powers on GST officers.
The Court distinguished between the nature and effect of notifications and circulars, holding that:
- Notifications under Sections 3 and 5(3) are the statutory instruments to appoint classes of officers and vest jurisdiction, subject to parliamentary oversight under Section 166.
- Circulars under Section 168 serve an administrative purpose to ensure uniformity and provide operational instructions but cannot confer or transfer jurisdiction independently.
- The Impugned Circular merely provides an administrative mechanism to allocate composite SCNs to one among several officers who already have jurisdiction by virtue of valid notifications. It does not create or expand jurisdiction.
Addressing the Petitioners' argument about the "highest demand" criterion, the Court found the criterion to be objective, quantifiable, and rationally connected to the legitimate aim of efficient and consistent adjudication of related notices. It rejected claims of arbitrariness and violation of Article 14, clarifying that the circular does not allow discretionary choice but applies a fixed rule.
The Court also noted the availability of an alternative statutory remedy of appeal under Section 107 of the CGST Act and held that writ jurisdiction under Article 226 should not ordinarily be exercised where an efficacious alternative remedy exists, unless jurisdiction itself is challenged. Since the Court found no jurisdictional defect, it directed the Petitioners to pursue their grievances on merits before the Appellate Authority.
In conclusion, the Delhi High Court upheld the jurisdiction of the Common Adjudicating Authority and the validity of the Impugned Circular, dismissing the writ petitions. The Petitioners were granted liberty to file appeals under Section 107 and to seek exclusion of limitation periods where applicable.
This judgment clarifies the interplay between statutory notifications and administrative circulars in conferring jurisdiction under the GST framework and reinforces the procedural discipline in adjudicating complex multi-party tax fraud cases involving composite SCNs.
Bottom Line:
Goods and Services Tax (GST) - Validity of jurisdiction and circulars under GST Act - Impugned circular merely provides an administrative mechanism for allocating adjudication of composite show-cause notices among already authorized officers and does not confer fresh jurisdiction - Challenge to jurisdiction of Common Adjudicating Authority fails.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Sections 2(4), 2(91), 3, 5(3), 74, 107, 166, 167, 168; Integrated Goods and Services Tax Act, 2017 Sections relevant to investigation; Haryana GST Act, 2017 Sections 6(1), 107, 109, 112; Limitation Act, 1963 Section 14
Katyani Exports v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2979770
