Patna High Court Upholds CBIC Circulars Assigning 'Proper Officer' Functions Under GST Act To Central Tax Officers

The Patna High Court has rejected a challenge to three CBIC circulars assigning “proper officer” functions to Central Tax officers under the GST law, agreeing with the Bombay High Court's reasoning on the issue.

“An analysis of the Notification dated 19.06.2017 and the other two Circulars would lead this Court to agree with the views expressed by the Hon'ble Bombay High Court,” a Division Bench of Justice Rajeev Ranjan Prasad and Justice Sunil Dutta Mishra observed.

“Now, in our considered opinion, the pleas questioning three circulars have no basis to stand,” the court ruled.

The ruling came in a challenge by Moral Pharmaceuticals to GST proceedings in which the adjudicating authority confirmed a tax liability of ₹2.91 crore for July 2017 to March 2018, along with an equivalent penalty and applicable interest.

The company had challenged Circular No. 3/3/2017-GST dated July 5, 2017, Circular No. 31/05/2018-GST dated February 9, 2018, and Circular No. 169/01/2022-GST dated March 12, 2022. It argued that CBIC did not have the power to assign “proper officer” functions through circulars.

The first circular assigned functions under various provisions of the CGST Act and Rules to Central Tax officers. The other two circulars assigned functions under Section 74 to subordinate Central Tax officers based on specified monetary limits.

At the heart of the dispute was Section 2(91) of the CGST Act. It defines a “proper officer” for a particular function as the Commissioner or a Central Tax officer assigned that function by the Commissioner in the Board.

In simple terms, the provision determines which GST officer is authorised to perform a particular function under the law.

Moral Pharmaceuticals argued that two requirements had to be met. An officer first had to be validly appointed as a Central Tax officer, and the relevant functions then had to be validly assigned to that officer.

The company relied on the Supreme Court's ruling in Canon India Pvt. Ltd. v. Commissioner of Customs. The Bombay High Court, in Fomento Resorts & Hotels Ltd. v. Union of India, had distinguished that ruling on the ground that it concerned DRI officers who were not “officers of customs."

In Fomento Resorts, there was no dispute that the officers covered by the GST circulars were already Central Tax officers. The Bombay High Court therefore held that the assignment of functions by the Board to those officers could not be faulted on the basis of Canon India.

The Bombay High Court also distinguished between assignment of functions and delegation of powers.

Section 167 of the CGST Act deals with delegation of powers by the Commissioner to another authority or officer and contemplates a notification for such delegation. Section 2(91), on the other hand, identifies the “proper officer” for a function under the CGST Act.

The Bombay High Court held that the July 5, 2017 circular assigned functions to Central Tax officers under Section 2(91). It was not a delegation of the Commissioner's powers under Section 167, and therefore the requirement of a notification under Section 167 did not arise.

The Patna High court adopted this reasoning.

It noted that the Central government had already appointed Central Tax officers through a notification dated June 19, 2017, issued under Sections 3 and 5 of the CGST Act. The notification vested the appointed officers with powers under the CGST and IGST Acts and the Rules within their specified jurisdictions.

The court further noted that the two subsequent circulars assigned functions under Section 74 to subordinate Central Tax officers by specifying monetary limits. The show-cause notice issued to Moral Pharmaceuticals was based on those prescribed limits.

Section 74 allows the department to recover tax in cases involving alleged fraud, wilful misstatement or suppression of facts. It also provides for an extended limitation period and penalty in such cases.

The underlying GST proceedings related to July 2017 to March 2018. The adjudicating authority found that Moral Pharmaceuticals had suppressed part of its turnover, including turnover relating to consignment sales.

It found that the company had suppressed part of its turnover amounting to ₹10.40 crore and determined a tax liability of ₹2.91 crore, comprising ₹1.45 crore each in CGST and SGST.

An equivalent penalty of ₹2.91 crore was also imposed, along with applicable interest.

The original show-cause notice had proposed a total tax demand of ₹5.10 crore. The adjudicating authority dropped the balance ₹2.18 crore and confirmed the ₹2.91 crore tax liability.

The High Court declined to examine the demand order on merits, noting that it was appealable and that the company had an effective statutory remedy before the appellate authority.

The court also noted that it was not sitting as a fact-finding body to reappreciate the documents and findings considered by the adjudicating authority.

It therefore granted Moral Pharmaceuticals liberty to file a statutory appeal within 30 days from September 18, 2026.

The court further held that the appellate authority should not reject the appeal on limitation. It noted that the writ petition had remained pending before the High Court and had been filed within 30 days after expiry of the three-month period prescribed for filing the appeal under Section 107(4).

For Petitioner: Advocates Bijay Kumar Gupta and Manish Kumar, .

For Union of India: Dr. K.N. Singh, ASG and Anshuman Singh, Senior Standing Counsel, CGST & Central Excise.

For the State: Alok Kumar Agarwal, AAG-5.