Delhi HC to Decide if State GST Officers are Bound by CBIC Monetary Limits for Central Tax Demands

The Delhi High Court has taken up a critical jurisdictional issue in the case of Hindustan Construction Company Limited vs. Union of India and Others. The court is examining whether a State GST (DGST) officer adjudicating a Central tax (IGST) demand under cross-empowerment is bound by the monetary limits prescribed for Central Tax officers by the CBIC.

1. The Core Dispute

The petitioner, Hindustan Construction Company (HCC), has challenged a Show Cause Notice (SCN) issued by a Delhi State GST (DGST) officer demanding over ₹40 Crore in IGST.

The Conflict: Under CBIC Circular No. 31/05/2018-GST (dated 09.02.2018), Central Tax officers below the rank of Additional/Joint Commissioner are not authorized to adjudicate demands involving IGST exceeding ₹2 Crore.
The Anomaly: The SCN in this case was issued by a State GST officer who, according to the petitioner, is equivalent in rank to a Deputy/Assistant Commissioner—an officer who would be legally incompetent to issue such a notice had they been a Central officer.

2. Legal Arguments

Party	Key Arguments
Assessee (HCC)	• Uniformity Principle: When a State officer adjudicates Central laws (CGST/IGST) under cross-empowerment (Section 6), they act as a “Proper Officer” for Central Tax. Therefore, the procedural safeguards (like monetary limits) applicable to Central officers must apply to them to ensure uniformity. • Lack of Jurisdiction: The SCN is invalid because it was issued by an officer lower in rank than what is mandated by the CBIC Circular for high-value cases (above ₹2 Cr). • Arbitrariness: It is arbitrary for a taxpayer under State administration to face adjudication by a junior officer for a ₹40 Cr demand, while a taxpayer under Central administration would have the same case decided by a senior Joint/Additional Commissioner.
Revenue (State)	• Separate Hierarchies: State GST departments function under their own administrative structure and delegation of powers enacted by the State Legislature. • Circular Not Binding: The CBIC Circular is an administrative instruction meant for Central Tax officers. It cannot dictate the jurisdiction of State Tax officers, who derive their powers from the State GST Act and corresponding notifications.

Party

Key Arguments

Assessee (HCC)

• Uniformity Principle: When a State officer adjudicates Central laws (CGST/IGST) under cross-empowerment (Section 6), they act as a “Proper Officer” for Central Tax. Therefore, the procedural safeguards (like monetary limits) applicable to Central officers must apply to them to ensure uniformity.

• Lack of Jurisdiction: The SCN is invalid because it was issued by an officer lower in rank than what is mandated by the CBIC Circular for high-value cases (above ₹2 Cr).

• Arbitrariness: It is arbitrary for a taxpayer under State administration to face adjudication by a junior officer for a ₹40 Cr demand, while a taxpayer under Central administration would have the same case decided by a senior Joint/Additional Commissioner.

Revenue (State)

• Separate Hierarchies: State GST departments function under their own administrative structure and delegation of powers enacted by the State Legislature.

• Circular Not Binding: The CBIC Circular is an administrative instruction meant for Central Tax officers. It cannot dictate the jurisdiction of State Tax officers, who derive their powers from the State GST Act and corresponding notifications.

3. The CBIC Circular No. 31/05/2018-GST

This circular defines the monetary limits for adjudication by Central Tax officers to ensure that higher-stakes cases are handled by more experienced officers:

Officer Rank	Monetary Limit (IGST)	Monetary Limit (CGST)
Superintendent	Up to ₹20 Lakhs	Up to ₹10 Lakhs
Deputy / Asst. Commissioner	₹20 Lakhs – ₹2 Crores	₹10 Lakhs – ₹1 Crore
Additional / Joint Commissioner	Above ₹2 Crores	Above ₹1 Crore

4. Why This Case is Significant

The High Court has recognized a legal vacuum. While Section 6 of the CGST Act allows State officers to adjudicate Central Tax, it does not explicitly clarify if they must adopt the Central Board’s administrative guidelines regarding monetary thresholds.

If the Court rules for the Assessee:
- It would establish that cross-empowerment includes cross-application of safeguards.
- Thousands of SCNs issued by lower-ranked State officers for high-value IGST/CGST demands could be challenged for lack of jurisdiction.
- State GST departments would be forced to realign their adjudication thresholds with the Centre.
If the Court rules for the Revenue:
- It would affirm that State and Central administrations can operate with divergent standards even when enforcing the same law.
- Taxpayers assigned to the State jurisdiction might face adjudication by junior officers for massive demands, unlike their counterparts under Central jurisdiction.

5. Court’s Interim Direction

Recognizing the need for a unified approach, the High Court has:

Impleaded the CBIC: The Central Board has been made a party to clarify its stance on whether its circulars bind State officers acting under cross-empowerment.
Scheduled Hearing: The matter is set for 9 December 2025 to resolve whether the monetary thresholds apply uniformly across both administrations.