The Delhi High Court has upheld the validity of the GST mechanism that permits common adjudication of composite Show Cause Notices (SCNs) involving multiple noticees falling under different jurisdictions. The Court has also upheld the criterion under which the officer having jurisdiction over the noticee facing the highest amount of demand is selected as the Common Adjudicating Authority.
The judgment is significant for GST investigations conducted by the Directorate General of Goods and Services Tax Intelligence (DGGI), particularly where a single investigation covers multiple entities, registrations and Commissionerates.
Background of the Case
The Delhi High Court was dealing with a batch of eight petitions challenging GST circulars concerning the appointment of a Common Adjudicating Authority for composite SCNs.
The dispute arose from a DGGI investigation into an alleged large-scale fraudulent Integrated Goods and Services Tax (IGST) arrangement. According to the investigation, the alleged transactions involved a three-layer chain of invoicing without corresponding movement of goods.
Based on the investigation, a composite SCN was issued to as many as 146 noticees. The GST authorities subsequently confirmed demands and imposed penalties. Some of the affected noticees approached the Delhi High Court, principally questioning the jurisdiction of the officer who adjudicated the common SCN.
The petitioners specifically challenged the mechanism under which the officer having jurisdiction over the noticee against whom the highest demand had been proposed was chosen to adjudicate the entire composite SCN.
They argued that using the highest-demand criterion was arbitrary and violated Article 14 of the Constitution, particularly because the noticees were otherwise situated in different territorial jurisdictions.
Core Legal Issue Before the Court
The central question before the Delhi High Court was whether the impugned GST circular effectively created or expanded the jurisdiction of a particular adjudicating officer.
The petitioners contended that an administrative circular could not confer jurisdiction where the statute or notifications had not already provided it.
The Revenue, on the other hand, argued that the circular did not create any new jurisdiction. It merely established an administrative mechanism for selecting one officer from among officers who already possessed the requisite pan-India jurisdiction to adjudicate DGGI-related notices.
The distinction between conferring jurisdiction and administratively selecting an officer who already possesses jurisdiction became central to the Court’s reasoning.
Delhi High Court’s Interpretation of the GST Framework
The Division Bench comprising Justice Anil Kshetarpal and Justice Shail Jain examined the relevant provisions of the Central Goods and Services Tax Act, 2017.
The Court considered Section 2(91) of the CGST Act, which defines a “proper officer”. It also examined Sections 3 and 5, dealing with classes of GST officers and their powers, along with Section 167, which enables statutory functions to be assigned to specified officers through notification.
According to the Court, these provisions collectively provide the statutory framework for creating classes of officers, assigning functions to them and transferring functions from one class of officer to another.
The Court also examined the relevant notifications assigning territorial jurisdiction to Central Tax officers and conferring pan-India jurisdiction on specified Additional or Joint Commissioners for adjudication of DGGI notices.
However, those notifications did not specifically identify which particular officer should adjudicate a composite SCN where the noticees belonged to different Commissionerates.
The High Court therefore treated the circular as addressing an administrative gap in the selection of the adjudicating officer, rather than creating jurisdiction where none existed.
Validity of the Highest-Demand Criterion
Another important issue was whether selecting the adjudicating authority based on the highest amount of demand was arbitrary.
The Court rejected this challenge.
It found the criterion to be objective, quantifiable and uniformly applicable. The Court further held that the criterion had a rational connection with the objective of ensuring consistent adjudication of what essentially constitutes a common cause of action arising from a single investigation.
Where several noticees are connected to the same investigation and the allegations arise from substantially interconnected transactions, requiring different officers to separately adjudicate the matter could potentially result in inconsistent findings.
The common adjudication mechanism, therefore, serves the administrative objective of maintaining consistency and avoiding conflicting conclusions on substantially identical facts and evidence.
Importance for GST Investigations
The judgment has considerable significance for businesses facing DGGI investigations and composite GST show-cause notices.
Modern GST investigations can involve several entities, suppliers, recipients, branches and GST registrations spread across different States and Commissionerates. In such situations, determining which officer should adjudicate a composite SCN can become a significant jurisdictional issue.
The Delhi High Court’s ruling provides judicial support for the proposition that where the concerned adjudicating officers already possess the requisite pan-India jurisdiction, an administrative mechanism can determine which officer should handle the common proceedings.
The decision also indicates that a taxpayer cannot necessarily challenge the jurisdiction of the Common Adjudicating Authority merely because its own registration or principal place of business falls within another Commissionerate.
A related Delhi High Court decision has similarly observed that administrative assignment of a taxpayer to State tax authorities does not, by itself, prevent DGGI from exercising pan-India intelligence-based enforcement jurisdiction.
What the Judgment Does Not Decide
Importantly, the Court’s decision was concerned with the jurisdictional challenge to the Common Adjudicating Authority.
The dismissal of the petitions on this issue does not mean that the underlying GST demands, allegations of tax evasion or penalties have been conclusively upheld on merits.
The Court specifically permitted the petitioners to pursue the statutory remedies available to them in relation to the merits of the adjudication.
Therefore, taxpayers facing composite SCNs should distinguish between a challenge to the competence or jurisdiction of the adjudicating authority and a substantive challenge to the tax demand itself.
Conclusion
The Delhi High Court’s decision in Ajay Singh Gautam v. Union of India & Ors., W.P.(C) 10607/2025 provides important clarity on the administration of composite GST proceedings.
The Court has upheld the mechanism under which the officer having jurisdiction over the noticee facing the highest demand can adjudicate a composite SCN involving multiple noticees from different jurisdictions, provided the selected officer already possesses the necessary jurisdiction.
The ruling reinforces the distinction between jurisdiction and administrative allocation of adjudication responsibility. It also recognizes the practical importance of common adjudication in complex DGGI investigations, where multiple entities may be linked to a single alleged transaction chain.
For taxpayers and GST professionals, the judgment highlights the importance of carefully examining the source of an officer’s jurisdiction, the applicable notifications and circulars, the structure of the composite SCN, and the appropriate statutory remedy before raising a jurisdictional challenge.
Case: Ajay Singh Gautam v. Union of India & Ors.
Court: Delhi High Court
Case No.: W.P.(C) 10607/2025
Key Issue: Common adjudication of composite GST SCNs based on the highest-demand criterion.