Deputy Commissioner Authority Invalid for Prohibition Order | Mahendra Kumar Indermal vs. DAC (2020)

⚖️ Mahendra Kumar Indermal vs. Deputy Assistant Commissioner (2020)

Andhra Pradesh High Court on Jurisdiction of Officers under Section 67(2) of the CGST Act

📌 Background

The case of Mahendra Kumar Indermal vs. Deputy Assistant Commissioner [(2020) 122 Taxmann.com 254 (Andhra Pradesh High Court)] dealt with the jurisdictional validity of an order of prohibition passed by a Deputy Assistant Commissioner under Section 67(2) of the CGST Act.

• The assessee was aggrieved by an order of prohibition in Form GST INS-03, issued by GST authorities.
• The assessee filed a writ petition before the Andhra Pradesh High Court, challenging the order as being without jurisdiction.

This case is significant because it clarified who is competent to pass orders under Section 67(2) relating to inspection, search, seizure, and prohibition.

❓ Point of Dispute

The central issue was:

• Whether a Deputy Assistant Commissioner was competent to pass the order of prohibition under Section 67(2) of the CGST Act?

📑 Submissions by the Assessee

• The assessee argued that Section 67(2) clearly specifies that the officer competent to authorize search, seizure, and prohibition must be not below the rank of Joint Commissioner.
• In the present case, the order of prohibition in Form GST INS-03 was issued by a Deputy Assistant Commissioner (ST), who did not have the legal jurisdiction to exercise such power.
• The order of prohibition was therefore illegal, arbitrary, and without authority of law.

📑 Submissions by the Revenue

• The Revenue contended that the matter should be adjudicated on merits and that the petition challenging jurisdiction should not derail the confiscation proceedings.
• The emphasis was placed on the fact that the action was part of ongoing inspection and seizure proceedings, which should be evaluated in substance rather than being quashed for technical lapses.

⚖️ Legal Principles and Scope of Decision

The Andhra Pradesh High Court carefully examined Section 67 of the CGST Act and highlighted important legal principles:

🔹 Competence of Officer under Section 67(1)

• Section 67(1) grants power of inspection to an officer not below the rank of Joint Commissioner.
• Such an officer may, in writing, authorize any other officer of Central Tax to conduct inspection of business premises, transporters, warehouses, or godowns.

🔹 Competence under Section 67(2)

• Section 67(2) deals with search and seizure. If the authorized officer has reason to believe that confiscation proceedings are required, he may order seizure of goods or documents.
• Importantly, such seizure must be supported by a written authorization by the competent officer.

🔹 Requirement of Written Authorization

• The Court noted that Form GST INS-03 (Order of Prohibition) was issued by a Deputy Assistant Commissioner.
• However, the form did not specify which written order or authorization empowered him to act under Section 67(2).
• For validity, written authorization from an officer not below the rank of Joint Commissioner is mandatory under Section 67. The absence of such authorization makes the action illegal and without jurisdiction.

🔹 Judicial Scrutiny of Administrative Powers

• The Court emphasized that provisions under Section 67 involve drastic powers of search, seizure, and confiscation, which must be exercised strictly in accordance with law.
• Any deviation, especially by officers lacking jurisdiction, renders the proceedings unsustainable.

🏛️ Court’s Conclusion

The Andhra Pradesh High Court delivered a clear ruling:

• The Deputy Assistant Commissioner was not competent to pass the order of prohibition under Section 67(2) of the CGST Act.
• The competent authority must not be below the rank of Joint Commissioner, and any exercise of such power by a lower-ranking officer is illegal and without jurisdiction.
• Since written authorization was conspicuously absent, the order of prohibition in Form GST INS-03 was set aside.

✅ Practical Impact

1. Jurisdictional Clarity
   • This case establishes that only officers of rank Joint Commissioner or above can authorize or pass orders under Section 67(2).
2. Checks on Arbitrary Actions
   • Lower-ranking officers like Deputy Assistant Commissioners cannot independently pass orders of prohibition, protecting taxpayers from overreach of authority.
3. Mandatory Written Authorization
   • Every action under Section 67(2) must be backed by specific written authorization; absence of such authorization renders the action void.
4. Strengthening Natural Justice
   • The judgment reinforces the principle that draconian powers must be exercised cautiously, only by duly empowered officers.

🔑 Key Takeaways

• Section 67(2) powers are reserved for officers not below the rank of Joint Commissioner.
• Written authorization is mandatory for any prohibition, search, or seizure action.
• Orders issued by Deputy Assistant Commissioners without authorization are illegal.
• The judgment safeguards taxpayers against jurisdictional overreach and arbitrary prohibition orders.

📢 Why This Case Matters

The ruling in Mahendra Kumar Indermal vs. Deputy Assistant Commissioner is crucial for businesses facing GST inspections and seizures.

It ensures that:

• Only senior officers can authorize prohibitions or confiscations under Section 67.
• Deputy Assistant Commissioners and lower officers cannot misuse powers to pass orders beyond their jurisdiction.
• Taxpayers gain a legal safeguard against unlawful prohibitions lacking due authorization.

This case reaffirms the principle that GST enforcement must strictly comply with statutory safeguards, thereby protecting businesses from arbitrary and excessive use of power.

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