In what could be a major challenge for the Directorate General of GST Intelligence (DGGI) to pursue several show cause notices issued in the past and recoveries under these cases, the Gujarat High Court has asked the central government and DGGI to come forward and answer whether DGGI has the power to issue such notices outside its territorial jurisdiction.
The Gujarat High Court on June 22 issued a notice to North Block in a plea filed by pen manufacturer Flair Writing Industries challenging the Directorate General of GST Intelligence's (DGGI) powers with respect to territorial jurisdictions.
In its plea filed by Flair Writing Industries, the Gujarat High Court has asked for a reply from the Union of India by July 13 after the company challenged the Surat unit's Directorate General of GST Intelligence notice for transactions in other states.
The company has filed in its plea that the Directorate General of GST Intelligence can't issue a show cause notice for transactions done in Maharashtra and Uttarakhand. This comes after the DGGI issued several show cause notices (SCNs) outside its territorial jurisdictions.
A quorum of Justice Vipul M. Pancholi and Justice Deven M. Desai issued notices to address the issue of an SCN issued by DGGI Surat to tax transactions in Maharashtra and Uttarakhand on the grounds that it is not permissible in the eyes of the law.
The judgment comes in favour of Flair, and will be a setback for the apex intelligence and investigative agency of the Goods & Services Tax- (GST) as in many cases the DGGI has issued notices.
"With the robust federal structure which we have, it is imperative that the powers are used as per the defined parameters by the Parliament. Accordingly, the essence of the definition of ‘the proper officer’ is very important while determining the territorial jurisdiction of the executive action such as that of DRI and DGGI," said Abhishek A. Rastogi, who is arguing various writ petitions on the powers to issue show cause notices by DGGI and DRI.
Also Read: RailTel ends higher on receiving work order worth Rs 294 crore from Tamil Nadu government
"The territorial jurisdiction is very well defined under the governing GST laws and any jurisdictional overreach is subject to judicial review,” added Rastogi.
The company's flagship brand, Flair, was introduced in 1976. Its products are sold under principal brands Flair, Hauser and Pierre Cardin, Rudi Kellner, and Landmark. It has the capacity to produce 63 lakh pieces per day.
Meanwhile, top sources at DGGI told CNBC-TV18 that it will file the response as the agency has powers to issue show cause notices pan India. "Since the matter involves the taxpayer having GSTIN in multiple states, therefore the matter proceeded as per Notification No. 14/2017 – Central Tax, as amended, wherein the officers of the DGGI are vested with jurisdiction throughout the territory of India.
Further, the CBIC (Central Board of Indirect Taxes & Customs) has said in Circular No.169/01/2022-GST that the additional/joint commissioner of central tax of some specified central jurisdictions has been appointed as a proper officer for adjudication of DGGI cases.
Further, if the location of the principal place of business of the noticee having the highest amount of demand of tax in the SCN falls under the jurisdiction of the Central Tax Zone, the SCN may be adjudicated by the additional/joint commissioner holding charge of adjudication of DGGI cases. Since the SCN was to be adjudicated by the additional/joint commissioner, Ahmedabad South, the SCN was made answerable to them, it said.
