Madhya Pradesh High Court Sets Aside ₹7.01 Crore GST Demand, Says Officer Lacked Proper Authorisation

The Madhya Pradesh High Court recently held that a GST demand of Rs. 7.01 crore could not be sustained as it was passed by the Assistant Commissioner of State Tax, Anti-Evasion Bureau, Indore, who lacked jurisdiction in the absence of a GST Council-backed authorisation.

A bench of Justice Vijay Kumar Shukla and Justice Alok Awasthi set aside the order passed against a firm, Subhash Chandra Narendra Kumar Nahar.

“The impugned order dated 30.12.2025 passed by the respondent No.4 is quashed, being an order by an incompetent authority.”

The court clarified that officers of the State tax department can act as “Proper Officers” under the GST framework only if they are authorised through a notification issued on the recommendation of the GST Council, as required under the law governing such authorisation. In the absence of such a recommendation, the officer cannot assume jurisdiction.

The case arose after an inspection at the premises of a supplier, Dakshraj Enterprises, where authorities found that it had claimed input tax credit without actually paying tax to the government and had passed on such credit to buyers, including the petitioner.

The department treated the credit as invalid on the ground that a buyer can claim such benefit only if the supplier has paid the tax, and issued a demand of Rs 7,01,61,092 by order dated December 30, 2025.

The petitioner challenged the order on the ground that it was passed by an officer who was not authorised to act as a “Proper Officer” under the law. It also relied on a departmental order that defined the pecuniary limits of such officers.

The state defended the order by relying on Section 6 of the Union Territory Goods and Services Tax Act, 2017, which permits State tax officers to act as Proper Officers subject to conditions, but accepted before the Court that no recommendation of the GST Council existed to support such authorisation.

“Counsel for the respondent / State fairly admitted that there is no such recommendation by the Council and the order on the ground of competence cannot be supported.”

Addressing this, the court held that such authorisation must strictly comply with the statutory requirement and is not automatic. It also rejected the objection that the petitioner should have filed an appeal, noting that when an order is passed without jurisdiction, a writ petition is maintainable.

The court set aside the demand and granted liberty to the competent authority to pass a fresh order in accordance with law.