Audit Report Issued by Unauthorized Officer Found Invalid, Proceedings Stayed
In a significant ruling, the Orissa High Court has stayed the proceedings of a Demand-cum-Show Cause Notice issued under Section 73 of the Central Goods and Services Tax Act, 2017. The decision came after M/s. Ayushi Galvano challenged the validity of the audit report and subsequent notice on the grounds that they were issued by an officer not authorized as a "proper officer" under the GST framework.
The petitioner, M/s. Ayushi Galvano, contended that the audit report dated 11th August 2025, prepared by the Superintendent, GST and Central Excise, was invalid as the Superintendent is not designated as a "proper officer" under Section 2(91) of the GST Act for the purposes of Rule 101(4) of the GST Rules. The company argued that this jurisdictional error rendered the proceeding for adjudication under Section 73 of the GST Act vitiated.
The court, presided by Chief Justice Harish Tandon and Justice Murahari Sri Raman, acknowledged the jurisdictional error and noted that such a proceeding would lead to serious prejudice against the petitioner. The court observed that the power to inform the findings of the audit and issue notices rests with the Deputy or Assistant Commissioner, as per a notification dated 5th July 2017. The current audit report and demand notice, being issued by the Superintendent, were thus deemed unauthorized.
Counsel for the GST, Central Excise, and Customs, Mr. Sujan Kumar Roy Choudhury, conceded to the jurisdictional argument but maintained that the competent authorities had issued the notice under Section 65 of the GST Act. He argued that no prejudice would be caused to the petitioner due to the procedural lapse. However, the court found the petitioner's arguments compelling and directed that the proceedings under the Demand-cum-Show Cause Notice be halted until further notice.
The court has scheduled the next hearing for 15th January 2026, allowing time for the respondents to file a counter-affidavit. The decision underscores the importance of adherence to procedural norms in the GST framework and highlights the judiciary's role in safeguarding against administrative overreach.
Bottom Line:
GST Law - Jurisdictional error in issuance of audit report and Demand-cum-Show Cause Notice under Section 73 of the GST Act by an officer not authorized as "proper officer" - Proceedings vitiated due to lack of competence.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Sections 2(91), 65, 73, Rule 101 of GST Rules
