SCN under Section 122 quashed; Notification 2/2017 defined territory, not penalty jurisdiction

Issue

Whether the Additional Commissioner of Central Tax, Guntur, was competent to issue a Show Cause Notice (SCN) for penalties under Section 122 of the CGST Act to an assessee located in Krishna District, relying on Notification No. 2/2017-Central Tax, or if specific authorization was required.

Facts

Assessee’s Location: The petitioner had their principal place of business in Krishna District.
Source of Action: The Central Intelligence Unit (CIU), Visakhapatnam, gathered information revealing instances of “circular trading” by the assessee.
Issuance of SCN: Based on this intelligence, the Additional Commissioner of Central Tax, Guntur District, issued a Show Cause Notice proposing penalties under Section 122 of the CGST Act.
Petitioner’s Challenge: The assessee challenged the SCN, arguing that the issuing officer (Additional Commissioner, Guntur) lacked the competency to initiate proceedings under Section 122. They contended that Notification No. 2/2017-Central Tax (dated 19-06-2017), which the officer relied upon, only defined territorial boundaries and did not confer the specific power to impose penalties under Section 122.

Decision

Distinction between Territory and Power: The Court held that Notification No. 2/2017-Central Tax merely fixed the territorial jurisdiction of officers. It did not automatically grant every officer listed therein the power to enforce every section of the Act, including Section 122.
Specific Empowerment Required: The Court noted that a subsequent Circular dated 27.10.2025 specifically empowered the Assistant Commissioner of Central Tax to exercise powers under Section 122.
Lack of Jurisdiction: Since Notification 2/2017 did not confer the specific substantive power to adjudicate penalties under Section 122, the Additional Commissioner, Guntur, acted without proper authorization in this specific context.
Outcome: The impugned SCN was quashed.
Liberty to Department: The Revenue Department was granted liberty to issue a fresh SCN through the competent authority authorized to exercise powers under Section 122.

Key Takeaways

Territory ≠ Competency: Just because an officer has territorial jurisdiction over an area does not mean they are authorized to adjudicate every type of dispute (e.g., penalties, audits, arrests) unless specifically empowered by the Act or Board Circulars.
Notification 2/2017 Limits: This notification is a “map” of jurisdiction, not a “menu” of powers. It cannot be used as a blanket authorization for all actions.
Proper Officer: Proceedings initiated by an officer other than the “Proper Officer” designated for that specific function are voidable and can be challenged in court.

HIGH COURT OF ANDHRA PRADESH

Ganapati Ispat

Union of India^*

R RAGHUNANDAN RAO and T.C.D. Sekhar, JJ.

WRIT PETITION NO. 31263 OF 2025

DECEMBER 17, 2025

Vadlapatla Sai Mallik for the Petitioner. D Nagaraja Kumari for the Respondent.

ORDER

1. Heard Sri V. Sai Mallik, learned counsel appearing for the petitioner and Smt. D. Naga raja Kumari, learned counsel appearing for the respondents.

2. The petitioner was served with a show cause notice on 01.09.22025, by the 3^rd respondent, under Section 122 of the GSGST Act, calling upon the petitioner to show cause why certain penalties under Section 122 of the CGST Act should not be levied on the petitioner. This show cause notice is said to have been issued on the ground that the information gathered by the Central Intelligence Unit, CCO, Visakhapatnam had revealed that there were various instances of circular trading etc., which would attract penalties under Section 122 of the GST Act.

3. The petitioner being aggrieved by the said notice, has approached this Court, by way of the present Writ Petition.

4. The contention of the petitioner is that Section 122 of the CGST Act does not confer power on any authority or officer to initiate or conduct proceedings under the Section. Apart from this, it is contended that no proceedings can be initiated under the provisions as there is no provision, for hearing to be given, to the registered person against whom such proceedings are sought to be initiated and that there is no period of limitation set out in the said provision.

5. Smt. D. Naga Raja Kumari, the learned Standing Counsel, on the other hand, would contend that the Notification, dated 19.06.2017, bearing Notification No.2/2017-Central Tax, issued by the Government of India as well as the subsequent notification of the Central Government, dated 27.10.2025, in Circular No.254/11/2025-GST would squarely answer the contention raised by the petitioner. The learned Standing Counsel would contend that Notification No.2 of 2017 issued in exercise of powers under Section 3 read with Section 5 of the GST Act and Section 3 of the IGST Act had empowered various officers, enumerated in the notification, with all the powers under the Act and the rules made thereunder and set out the territorial jurisdiction of each of the said officers. She would further submit that the subsequent circular of 27.10.2025 clearly empowers the concerned Deputy Commissioner or Assistant Commissioner to exercise functions under Section 122 of the CGST Act. Section 5 further states that a superior officer is empowered to exercise any jurisdiction which is vested in a subordinate officer.

6. The circular of 27.10.2025 clearly empowers the Assistant Commissioner of Central tax to exercise powers under Section 122 of the CGST Act. The only issue left before this Court is whether the initial notification 2 of 2017 confers such power on any authority. The said notification reads as follows:

“and the Central Tax Officers subordinate to them as Central Tax Officers and authorized them with all the powers under both the said acts and the rules made thereunder with respect to the jurisdiction specified in the tables given below”.

7. To the mind of this Court, this conferment of power can be taken to mean that the notification was not conferring any further power, but was only fixing the territorial jurisdiction of the officers in respect of the powers which are conferred on them by virtue of the act itself. In such circumstances, it may not be permissible to hold that authority had been granted, to all the officers enumerated in the list, in the said notification, with all the powers under the entire act including Section 122 of the CGST Act.

8. This Court does not propose to go into the question, of whether jurisdiction was conferred on all officers under the notification No.2/2017, as the simplest way of resolving this dispute would be to set aside the show cause notice, dated 01.09.2025, and leaving it open to the 3^rd respondent to initiate fresh action under Section 122 of the CGST Act by issuing a fresh show cause notice.

9. As far as the question of whether Section 122 of the CGST Act can be enforced and whether necessary safeguards are available is concerned, the same falls outside the scope of the present Writ Petition inasmuch as the question before this Court was only on the jurisdiction of the 3^rd respondent in issuing the notice under Section 122 of the CGST Act. These issues are left open.

10. Accordingly, this Writ Petition is disposed of by setting aside the show cause notice, dated 01.09.2025,with liberty to the 3^rd respondent to issue a fresh show cause notice under Section 122 of the CGST Act. There shall be no order as to costs.

As a sequel, pending miscellaneous petitions, if any, shall stand closed.