Rajasthan High Court Examines Validity of Additional Director, DGGI's Powers as 'Proper Officer' for issuance of Show Cause Notice

The Hon'ble Rajasthan High Court in the case of M/s. ACME Cleantech Solution Pvt. Ltd. Versus Union of India & Ors. - 2025 (9) TMI 177 - RAJASTHAN HIGH COURT issued notice and stayed a show cause notice issued by Additional Director, DGGI, while examining the constitutional validity of Notification No. 14/2017-CT and Circular No. 3/3/2017 that vest Additional Director, DGGI with powers of 'Proper Officer' under Section 74 of the CGST Act.

Facts:

Acme Cleantech Solutions Pvt. Ltd., (“the Petitioner”) a company engaged in waste-to-energy plant operations.

The Petitioner challenged a show cause notice (SCN) issued by the Additional Director, DGGI under Section 74 of the CGST Act. The company received the SCN during ongoing proceedings and contested the jurisdiction of the Additional Director, DGGI to act as a 'proper officer.'

The Petitioner argued that under Section 2(91) of the CGST Act, the power to assign functions of a ‘Proper Officer’ vests solely in ‘the Commissioner’ and not the ‘Board’ itself.

The Petitioner challenged Notification No. 14/2017-CT read with Corrigendum dated July 29, 2019, and Circular No. 3/3/2017 as being ultra vires Sections 2(91), 3, and 5 of the CGST Act to the extent they vest Additional Director, DGGI with powers of ‘Proper Officer’.

Beyond jurisdictional issues, the Petitioner also challenged Para 11 of Circular No. 80/54/2018-GST on Applicability of GST on supply of Waste to Energy Plant, arguing it erroneously restricts the concessional 5% GST rate to goods under Chapters 84, 85, and 94 only, misreading Entry 234 and Entry 201A of Notification No. 1/2017-CT (Rate).

Issues:

• Whether Notification No. 14/2017-CT and Circular No. 3/3/2017, to the extent they vest Additional Director, DGGI with powers of 'Proper Officer' under Section 74, are ultra vires Section 2(91) read with Sections 3 and 5 of the CGST Act, 2017?
• Whether the power to assign functions of 'Proper Officer' under Section 2(91) vests solely in 'the Commissioner' as an individual and not 'the Board' as an institution?
• Whether Para 11 of Circular No. 80/54/2018-GST erroneously restricts the concessional 5% GST rate for waste-to-energy plants to goods under Chapters 84, 85, and 94 only, thereby misreading Entry 234 and Entry 201A of Notification No. 1/2017-CT (Rate)?

Held:

The Hon'ble Rajasthan High Court in M/s. ACME Cleantech Solution Pvt. Ltd. Versus Union of India & Ors. - 2025 (9) TMI 177 - RAJASTHAN HIGH COURTheld as under:

• Held that, the matter involves significant constitutional questions regarding the delegation of powers under GST law and the interpretation of 'proper officer' under the statutory framework.
• Observed that, the distinction drawn by the Petitioner between ‘the Commissioner in the Board’ and ‘the Board itself’ raises substantial questions of law regarding the scope of delegation under Section 2(91) of the CGST Act, warranting detailed examination.
• Observed that, since similar issues were pending in the M/s Mohit Kirana Store Versus Central Board of Indirect Taxes And Customs - 2022 (2) TMI 102 - RAJASTHAN HIGH COURT, judicial economy and consistency required tagging both matters for coordinated hearing.
• Held that, pending final adjudication of the constitutional validity of the impugned notifications and circulars, the operation of the show cause notice issued by the Additional Director, DGGI is stayed.
• Held that, notice be issued to all respondents to show cause why the writ petition should not be allowed and that the matter be tagged with the pending Mohit Kirana Store case for coordinated hearing before the same bench.
• Observed that, the challenge to Circular No. 80/54/2018-GST involves interpretation of notification entries and their scope, which requires detailed examination alongside the main constitutional challenge.

Our Comments:

This case raises fundamental questions about the constitutional validity of GST enforcement structure and the scope of Board's power to delegate 'proper officer' functions. The distinction drawn between 'Commissioner in the Board' versus 'the Board itself' is crucial for understanding the delegation hierarchy under GST law.

Relevant Provisions:

Section 2(91), the CGST Act, 2017

“Proper Officer in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board.”

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