Facts of the Case

  • The Petitioner is a Special Class Civil Contractor executing substantial civil engineering and infrastructure works contracts for various State and Central Government entities across the States of Andhra Pradesh and Telangana.
  • The Petitioner was duly registered under the legacy Value Added Tax (VAT) regimes of both states and, upon the implementation of the Goods and Services Tax (GST) framework, migrated to the new system, obtaining separate Goods and Services Tax Identification Numbers (GSTIN) for its operations in Andhra Pradesh and Telangana.
  • Based on an authorization issued in Form GST INS-01 by the Joint Commissioner (ST), Kurnool, the first Respondent (Deputy Assistant Commissioner (ST)-I, Circle II, Kurnool) conducted a detailed inspection and search of the Petitioner’s business premises.
  • Following a scrutiny of the records, books of accounts, and E-way bills, the first Respondent issued an Assessment Order dated May 5, 2022, covering the tax periods from June 2017 to September 2019.
  • The impugned Assessment Order levied Integrated Goods and Services Tax (IGST), Central Goods and Services Tax (CGST), and State Goods and Services Tax (SGST) collectively via a single consolidated order.
  • The levy was fastened primarily on certain works contracts executed for Tirumala Tirupati Devasthanams (TTD) in the State of Telangana, because one of the invoices carried the Andhra Pradesh GSTIN and the contractee had deducted 2% TDS under the IGST head, leading the authority to conclude that the works were executed by the Andhra Pradesh registered firm rather than its Telangana sister concern.
  • Additionally, the Assessing Officer brought to tax certain turnovers claimed by the Petitioner to be executed under the legacy VAT regime due to a lack of documentary evidence, disallowed excess Input Tax Credit (ITC) claimed under IGST instead of CGST/SGST, and rejected claims regarding lower tax rates applicable to sub-contractors and government concerns.

Issues Involved

  • Issue 1: Whether the first Respondent (Deputy Assistant Commissioner) qualified as a "Proper Officer" under Section 2(91) of the CGST Act to pass the assessment order, or if the jurisdiction was exclusively vested with the territorial Assessing Authority (the second Respondent).
  • Issue 2: Whether an authorization issued strictly for inspection, search, and seizure in Form GST INS-01 under Rule 139(1) of the CGST Rules legally empowers an officer to independently initiate and finalize assessment proceedings under Section 73 without a separate, distinct assessment authorization.
  • Issue 3: Whether the tax administration is legally permitted to issue a single, consolidated Assessment Officer combining liabilities under the CGST, SGST, and IGST Acts.
  • Issue 4: Whether the mandatory pre-notice consultation and intimation procedure via Form GST DRC-01A under Rule 142(1A) was validly complied with given the transitional timeline of the dispute and the October 15, 2020 amendment substituting "shall" with "may".
  • Issue 5: Whether the works executed in the State of Telangana constituted local intra-state supplies under Section 8 of the IGST Act, thereby divesting the tax authorities of the State of Andhra Pradesh of any structural jurisdiction to levy tax under Section 5 of the IGST Act read with Article 286 of the Constitution of India.

Petitioner’s Arguments

  • The Petitioner argued that the first Respondent lacked territorial and functional jurisdiction, asserting that only the Assistant Commissioner (ST), Kurnool II Circle (the second Respondent), was the competent territorial assessing authority.
  • It was contended that the Joint Commissioner's authorization in Form GST INS-01 was strictly confined to conducting searches and inspections under Rule 139, and did not grant any auxiliary power to adjudicate or pass an assessment order.
  • The Petitioner argued that the works contracts were executed exclusively within the geographical territory of Telangana by its local branch registered in Telangana, making them intra-state supplies under Section 8 of the IGST Act, meaning the State of Telangana held exclusive levy jurisdiction.
  • They asserted that the cross-border tax levy by Andhra Pradesh violated Article 286(1) of the Constitution of India, which explicitly bars states from imposing tax where supply happens outside the state.
  • The Petitioner claimed that the department failed to strictly comply with the mandatory provisions of Section 73(5) read with Rule 142(1A) concerning pre-adjudication intimations via Form GST DRC-01A.
  • Finally, they contended that passing a single, unified assessment order for separate taxing statutes (CGST, SGST, and IGST) was a procedural illegality that invalidated the entire demand.

Respondent’s Arguments

  • The Revenue argued that the Chief Commissioner of State Tax had issued Notification No. 37 dated June 30, 2017, under Section 2(91) and Section 5(1) of the APGST Act, explicitly designating Deputy Assistant Commissioners, Assistant Commissioners, and Deputy Commissioners within a circle as "Proper Officers" for functions under Sections 73 and 74.
  • They claimed that since the first Respondent held concurrent circle jurisdiction, he was legally competent to assess the dealer, and no prejudice was caused to the taxpayer since appeals from all three categories of officers lie uniformly before the Joint Commissioner.
  • The statutory framework does not mandate any additional, independent authorization from a higher authority to execute assessments for dealers falling within an officer's territorial jurisdiction.
  • The Revenue emphasized that the mandatory pre-notice communication under Form GST DRC-01A was fully satisfied on October 5, 2021, and that the taxpayer was granted multiple extensions over several months to submit documentary evidence (such as Form VAT 250, returns, and RA bills) but failed to discharge its burden of proof.
  • They concluded that the nature of the operations, the use of the Andhra Pradesh GSTIN on invoicing, and the deduction of IGST TDS required an evaluation of complex factual elements like moving goods and performance locales, which cannot be adjudicated in a writ petition.

Court Findings & Order

  • The High Court analyzed Section 2(91) and Section 3 of the CGST Act alongside the State Tax Notification dated June 30, 2017, and ruled that the first Respondent was explicitly designated as a "Proper Officer" for executing demands and recovery under Section 73. Concurrent circle jurisdiction cured any perceived lack of narrow territorial authority.
  • The Court clarified that while Form GST INS-01 is restricted to search and inspection, the Act nowhere requires a secondary, external authorization for a Proper Officer to initiate an assessment against a dealer within his sphere of authority.
  • On the issue of the consolidated order, the Court observed that neither the CGST Act nor the IGST Act prohibits an officer from issuing a single assessment order, provided the officer is empowered to act under both statutes. Section 4 of the IGST Act explicitly validates State Tax officers as Proper Officers for the IGST Act. No material prejudice to the assessee was demonstrated.
  • The Court reviewed the case timeline and verified that Form GST DRC-01A was issued on October 5, 2021, a formal reply in Part-B was submitted, and a summary of the notice in Form GST DRC-01 followed on January 27, 2022. Thus, the statutory procedural mandate was fully satisfied.
  • On the issue of multi-state cross-border claims and Article 286, the Court ruled that determining whether a transaction is an intra-state or inter-state supply depends directly on factual verification of agreements, E-way bills, balance sheets, and actual performance locales.
  • Consequently, the Court held that it could not investigate these deeply disputed factual elements under the extraordinary jurisdiction of Article 226 of the Constitution of India when an alternative statutory remedy of appeal before the Joint Commissioner was available. The Writ Petition was dismissed with no order as to costs.

Important Clarifications

  • Cross-Statute Jurisdiction: Under Section 4 of the IGST Act, 2017, state tax officials are statutory delegates and proper officers authorized to execute and enforce provisions of the IGST Act alongside their home state components (SGST/CGST), removing any requirement for double separate assignments.
  • Consolidated Assessments: A unified assessment order issued simultaneously for CGST, SGST, and IGST liabilities is fully valid under the law, unless an inherent structural prejudice can be demonstrated by the taxpayer.
  • Form GST INS-01 vs. Assessment Powers: An inspection authorization under Form GST INS-01 does not restrict an officer if that officer otherwise holds the independent status of a "Proper Officer" under Notification mandates for Sections 73 or 74.
  • Article 226 Limits on Evidentiary Questions: Determining the place of supply and distinguishing between intra-state or inter-state operations are heavily fact-dependent issues that cannot be resolved in a writ court, making use of the statutory appellate authority mandatory.

Sections Involved

  • Section 2(91), CGST Act, 2017: Definition of "Proper Officer".
  • Section 3, CGST Act, 2017: Classes of Officers for administration.
  • Section 5, CGST Act, 2017: Powers and delegation of jurisdiction of Officers.
  • Section 73, CGST Act, 2017: Determination of tax short paid, unpaid, or ITC wrongly availed for reasons other than fraud.
  • Section 4, IGST Act, 2017: Authorization of State Tax / Union Territory Tax officers as Proper Officers under the IGST framework.
  • Section 7 & Section 8, IGST Act, 2017: Statutory parameters defining Inter-State and Intra-State supplies.
  • Rule 142 & Rule 142(1A), CGST Rules, 2017: Mechanism for notice issuance and pre-notice communication forms (DRC-01A / DRC-01).
  • Article 226, Constitution of India: Jurisdiction of High Courts to issue writs.
  • Article 286, Constitution of India: Restrictions as to imposition of tax on the sale or purchase of goods regarding out-of-state transactions.

Link to download the order - https://mytaxexpert.co.in/uploads/1783151214_805compressed.pdf

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