The Allahabad High Court is currently hearing a significant case involving Hundal Traders, who have challenged a penalty order issued by the State Tax Officer (STO), Mobile Squad-3, Saharanpur. The case, registered as WRIT TAX No. 67 of 2025, raises key questions about the jurisdiction and authority of GST officers under the CGST Act and the applicability of Rule 86B of the CGST Rules, 2017.
Background of the Case
The penalty proceedings were initiated under Section 20 of the Integrated Goods and Services Tax Act, 2017 (IGST Act), read with Section 129 of the Central Goods and Services Tax Act, 2017 (CGST Act). A penalty amounting to ₹92,452 was imposed on Hundal Traders under Section 129(1)(a) of the CGST Act.
Legal Issues Raised by the Petitioner
The counsel for Hundal Traders has presented two pivotal legal contentions:
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Authority under Section 129 for Rule 86B Violation: The primary concern is whether proceedings under Section 129 of the CGST Act can be initiated for an alleged breach of Rule 86B of the CGST Rules.
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Jurisdiction of the State Tax Officer (STO): The second issue relates to whether the STO has the jurisdiction to initiate such proceedings and pass the impugned order. The petitioner referred to Central Government Circular No. 3/3/2017-GST dated July 5, 2017, which confers the authority to act under Section 129(3) only to a Deputy or Assistant Commissioner of Central Tax.
Court’s Observations and Proceedings
The respondent’s counter-affidavit, based on an office order dated July 1, 2017, cited authority under the Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act). However, the court noted that this response failed to address the core legal questions based on the CGST Act and the central circular raised by the petitioner.
Further complexity arises as the impugned penalty order was passed under Section 20 of the IGST Act, read with Section 129 of the CGST Act, raising jurisdictional concerns.
Rule 86B Applicability Disputed
The petitioner also contested the applicability of Rule 86B to their case, citing proviso (d) as amended by Notification No. 94/2020 dated December 22, 2020. However, the court observed that the respondent’s affidavit failed to adequately address this argument, offering only a superficial and factually incorrect response.
Court’s Directive and Next Hearing
In light of the unresolved legal and factual issues, the Allahabad High Court has directed the respondents to file a supplementary counter-affidavit. This affidavit must clearly outline:
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The authority of the STO under the CGST and IGST Acts,
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The relevance of the central circular quoted by the petitioner, and
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The proper applicability of Rule 86B in the context of the petitioner’s case.
The matter is now scheduled for the next hearing on May 14, 2025, by which date the supplementary counter-affidavit is expected to be filed.
Case Title: Hundal Traders vs. State of U.P. and Another
Case Number: WRIT TAX No. 67 of 2025
Next Hearing Date: May 14, 2025
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