Adjudication by Audit Officer, Goods and Services Tax - GST

[SOWMYA CA]

Can Adjudication be done by the same audit officer who initiated and conducted the audit, assessee under central jurisdiction

Posts / Replies

[Alkesh Jani]

Shri

I am of the view that, power to adjudicate the case is given on post basis i.e. Superintendent, Assistant Commissioner, Deputy Commissioner etc. appointed under the Act and not by administrative section i.e., Audit, Technical etc., therefore, if the post is within the jurisdiction, adjudication can be done.

Thanks

[Padmanathan Kollengode]

No in my opinion. The Audit officer can only issue a Notice. The actual adjudication and passing of order has to be done by jurisdictional Proper Officer.

[KASTURI SETHI]

If we talk of principles of natural justice, SCN issuing authority and Adjudicating Authority should be different but as per GST Laws there is no such restriction. Law is silent on the issue. There is a practice in all the Commissionerates to the effect that SCN issuing authority and Adjudicating Authority both are the same. CBIC has fixed monetary limits vide circular no.31/05/2018-GST dated 9.2.18 as substituted vide Circular No.169/01/2022-GST dated 12.3.22. So the Adjudicating Authority is competency-wise. SCN can be issued by lower authority answerable to higher authority (as per competency)

Such practice has been in force since Central Excise era. It has taken legal shape.

[Padmanathan Kollengode]

In Kerala, there is an internal circular for State GST department stating that adjudication of notice issued by Intelligence/Audit Branch is to be transferred to the Adjudicating Officer.

[Padmanathan Kollengode]

Notification 2/2022 empowers PO to adjudicate notice issued by DGGI. I am not sure if there is any Notification/circular for Audit wing.

But even SCN from Central GST Audit Department, I have seen that it is adjudicated by Proper Officer.

[SOWMYA CA]

I concur with the views of Kasturi Sethi sir. However department circular NO. F. No. 349/75/2017-GST dated 9.2.2018 is only amended wherein it only reiterates the point that adjudication will be with executive and not by audit in para 6 of the circular. What is your view on para 6

[KASTURI SETHI]

Madam,

Is Board's circular no. correct ? I could not trace out on EXCUS CD.

[Padmanathan Kollengode]

Kasturi sir,

Ma'am is referring to Circular No. 31/05/2018 - GST

[KASTURI SETHI]

Madam,

Circular No.31/5/2018 dated 9.2.18 has been amended vide following circulars:-

2/2022-GST (Instruction) dated 22-03-2022 : Registered person - Scrutiny of returns for FYs 2017-18 and 2018-19 - Standard Operating Procedure (SOP) notified

169/01/2022-GST dated 12-03-2022 : Proper Officer under Sections 73 and 74 of CGST Act and Section 20 of IGST Act - Power to Additional Commissioners/Joint Commissioner of Central Tax of specified Central Tax Commissionerate with All India Jurisdiction for Adjudication of SCNs issued by DGGI - Circular No. 31/05/2018-GST amended.

Pl. read all circular together.

Moreover, this para no.6 relates to the adjudication of SCNs which have common issues and Noticees are located in different jurisdictions. In such cases special circular or notification iis issued.

Just for your information

I have filed appeal in the case of one of my clients in which Form GST ADT-01, Form GST- ADT-2, SCN and Adjudication Order was issued by the same officer of Audit (same name and same designation).

I think this practice is not beyond Adjudication Manual.

Can we expect impartiality, unprejudiced and unbiased mind while adjudicating the case by the same officer of Audit ?

[SOWMYA CA]

Definitely not sir!! That's why want to bring this as one of the grounds in appeal

[Alkesh Jani]

Dear All,

In continuation of this healthy discussion, I wish to reproduce relevant portion of circular of erstwhile law:-

“A SCN should ideally be issued by the authority empowered to adjudicate the case as this ensures accountability as well as rigour of examination as demands of higher amounts are adjudicated by the officers of higher rank.

Though, issue of SCN by an officer of the rank empowered to adjudicate the case is the accepted norm, a SCN issued by a Central Excise officer of rank other than the one prescribed in the circular would not ipso facto be an invalid SCN.”

“Officers of Central Excise have been vested with powers under Section 33A of Central Excise Act, 1944 to adjudicate the Show cause notice issued to the noticees and answerable to the officers. They, in their capacity as adjudicating officers act as quasi-judicial officers. Further as per Section 2(a) “Adjudicating authority” means any authority competent to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963), Commissioner of Central Excise (Appeals) or Appellate Tribunal.”

“Officers of Central Excise within the jurisdiction of a Commissionerate normally issue a SCN for demands of duty pertaining to assessees or units falling within the jurisdiction of the Commissionerate and such cases are adjudicated by the Officers of the Executive Commissionerate. Officers of Executive Commissionerate also adjudicate SCNs issued by the Audit Commissionerates under normal circumstances.”

“Central Excise Officers of all ranks in the Audit Commissionerate shall also have powers to adjudicate Show Cause Notice in Zones where the pendency position warrants adjudication by Audit Commissionerates Officers. Power has been accorded to the Chief Commissioners to distribute the cases for adjudication within the Zone, including to the officers of various ranks of the Audit Commissionerate”.

“The function of review, appeal etc even for cases adjudicated by the officers of the Audit Commissionerate shall continue with the Executive Commissionerate as adjudication by officers of Audit Commissionerate shall continue be an exception rather than as a rule.”

Of course, the above is for Central Excise and Service Tax, but lays important foundation for GST purpose also.

Jurisdiction plays important role for adjudication purpose and the post, circulars are binding in nature for department, and is for the purpose to maintain uniformity among the field formation.

Thanks

[KASTURI SETHI]

Madam,

I have already taken it as one of the grounds of appeal incorporating all the events from A to Z and also attached copies of the Audit records which indicated name and designation of the same Audit Officer.

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

I appreciate your understanding on the issue inasmuch as such practice has been going in the department since the inception of the Central Excise Act. This issue was discussed in some case laws also.

On the other hand, practically, logically and rationally an assessee cannot expect natural justice i.e. fairness, reasonableness, equity, equality, unbiased and unprejudiced mind, .if SCN issuing authority and adjudicating authority is the same. The possibility of preconceived notion bias cannot be ruled out. Ultimate purpose of any adjudication is to accord actual justice (fairness in justice) to the tax payer in letter and spirit of GST Laws. Moreover, this issue has not been raised by the assessees or Industry and Trade Association vehemently.

Regarding the binding nature of circulars, "it is well settled law that departmental circulars contrary to the provisions of law have no existence."--- Kerala High Court in the case of RUCHI INFRASTRUCTURE LTD. Versus UNION OF INDIA - 2015 (10) TMI 1774 - KERALA HIGH COURT

 

[Amit Agrawal]

Dear CA Sowmya Mam,

My views are as under under:

A. CGST Audit officer is indeed officer of Central Tax.

B. Notified 'proper officers' include such CGST Audit officers as per Notification No.2/2017-Central Tax.

C. Para 6 of Circular No. 31/05/2018 - GST is NOT issued using powers using clause (91) of section 2 of the CGST Act read with section 20 of the IGST Act.

D. It is worth noting that Circular No. 3/3/2017 - GST as well as Para 2 & Para 5 (but NOT Para 6) of Circular No. 31/05/2018 - GST are issued using powers using clause (91) of section 2 of the CGST Act read with section 20 of the IGST Act and are subject to sub-section (2) of section 5 of the CGST Act.

E. Most importantly, one needs to take note of Notification No.2/2017-Central Tax, where 'proper officers' which is notified using the powers under section 3 read with section 5 of the CGST Act and section 3 of the IGST Act. Please note Para 1 of said notification where there is no distinction between officers working in "Principal Commissionerate" and "Audit Commissionerate" and vests 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 in said notification.

E1. Here, distinction between cases made by DGCI & audit-wing also needs to be noted in view of the followings:

E2. Specific Table V (i.e. Powers of Additional Commissioner or Joint Commissioner of Central Tax for passing an order or decision in respect of notices issued by the officers of Directorate General of Goods and Services Tax Intelligence) needs to be noted with Para 3A of said notification which reads as follows:

Notwithstanding anything contained in paragraph 3, the Additional Commissioners or the Joint Commissioners of Central Tax, as the case may be, subordinate to the Principal Commissioners of Central Tax or the Commissioners of Central Tax, as specified in column (2) of Table V, are hereby vested with the powers as specified in the corresponding entry in Column (3) of the said Table.

E3. However, no such distinction (i.e .special arrangement) is made for audit-wing of CGST. This has be seen from Table - IV under said notification (i.e. Jurisdiction of Commissioner of Central Tax (Audit)) read with Para 5 of said notification which reads as follows:

The Commissioners of Central Tax (Audit) specified in column (2) of Table IV and the central tax officers subordinate to them are hereby vested with the territorial jurisdiction of the Principal Commissioners of Central Tax or the Commissioners of Central Tax, as the case may be, specified in the corresponding entry in column (3) of the said Table.

F. In view of above, Para 6 of Circular No. 31/05/2018 - GST - as far as its audit-wing is concerned - is more in nature of guidelines / desire / internal instruction of the Board and same has NOT conferred "any legal right" to the person facing SCN and its adjudication.

F1. Hence, said Para 6 cannot be used by a tax-payer to claim "undeniable legal right" to challenge the validity of issuance of SCN as well as adjudication of such SCN by Dept's audit-wing officer.

G. Summarising above, in my humble view, such audit-wing officer is indeed notified as "proper office" to issue SCN and adjudicate the same as per Notification No.2/2017-Central Tax.

H. Lastly, as far as I know, there is no legal bar - currently present - which prevents CGST officer, who has conducted audit, to issue SCN (against audit objections) and adjudicate such SCN.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion. And I respect contrary views.

[Padmanathan Kollengode]

Though there may not be any express bar, adjudication by same authority who did the audit will make him prejudicial. Courts will generally remand for fresh adjudication.

[KASTURI SETHI]

Articles 14 and 21 of the Constitution of India provide the strong basis of the principles of Natural Justice. Natural Justice stands for fairness, reasonableness, equity and equality

Two main principles of Natural Justice are (i) No one should be the Judge in his/her own case and (ii) each party should be given the opportunity to be heard.

Thus if SCN issuing authority and adjudicating authority is the same, it is in violation of the principles of natural justice.

[KASTURI SETHI]

In case the detecting agency, SCN issuing authority and adjudicating authority are same, the tax payer/noticee can be prone to the following kinds of bias :-

(i) ‘Pecuniary Bias’

(ii) ‘Subject-matter Bias’

(iii) ‘Departmental Bias’

(iv) Pre-conceived bias

It is pertinent to peruse an extract from an article on 'The Principles of Natural Justice"

“no man be judge in his/her own cause” but also “justice should not only be done but should manifestly and undoubtedly be seen to be done”