Who holds the power to adjudicate under GST? Insights from Circular No. 254

When Authority Determines Legality

In tax administration, the validity of a proceeding depends not only on whether the tax has been accurately assessed but also on who has the authority to make that assessment. A show-cause notice issued by an unauthorised officer can render the entire proceeding vulnerable to challenge, regardless of its merits. Therefore, identifying the "proper officer" is not just an administrative formality; it is crucial to ensuring procedural legitimacy under tax law.

Recognising this important aspect of GST administration, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 254/11/2025-GST on 27 October 2025. It designates the officers responsible for issuing notices and adjudicating cases, and prescribes monetary limits governing such actions under specific provisions of the Central Goods and Services Tax Act, 2017.

The circular specifies which officers are authorised to act under sections 74A, 75(2), and 122 of the CGST Act, along with rule 142(1A) of the CGST Rules, 2017.This enhances the administrative structure of GST by clarifying that enforcement responsibilities are assigned to the correct authorities.

Statutory Foundation - Sections 2(91) and 5 of the CGST Act

The legal basis for the circular lies in the statutory scheme governing the powers of tax officers under the CGST Act.

Section 2(91) defines "proper officer" as the Commissioner or any central tax officer designated to that role by the Commissioner or the Board.

The authority to delegate these functions originates from section 5 of the CGST Act, which empowers central tax officers to exercise duties and powers as assigned by the Board or the Commissioner.Therefore, an officer's authority to issue notices, adjudicate cases, or impose penalties depends not just on their rank but on the formal assignment of functions under the Act. Circular 254 is specifically issued to implement this legal framework by explicitly assigning powers to various levels of officers.

Why This Circular Became Necessary

As GST law developed, certain provisions required clearer definitions of which officer had the authority under them. Notably, the introduction of section 74A, applicable from the financial year 2024–25 onwards for assessing unpaid or underpaid taxes, mandated that the Board officially appoint officers to initiate and resolve such cases. Similarly, clarification was needed regarding the procedures for penalty proceedings under section 122, how section 75(2) operates when fraud allegations are dismissed on appeal, and the issuance of pre-show cause notice communications under rule 142(1A).

Circular No. 254 brings much-needed clarity to this aspect by specifically identifying the categories of officers who are authorised to exercise adjudication powers under the GST framework. In addition, the Circular clearly prescribes monetary thresholds within which each such officer may issue adjudication orders , thereby removing uncertainty regarding jurisdiction and ensuring that proceedings are handled by the appropriate authority based on the value involved. This clarification promotes uniformity, administrative efficiency, and greater certainty for taxpayers and departmental authorities alike.

Assignment of Proper Officers under Section 74A

Section 74A provides a comprehensive framework for the determination and recovery of tax not paid, tax short paid, input tax credit wrongly availed or utilised, and refunds erroneously granted in respect of supplies pertaining to the financial year 2024–25 onwards. In essence, the provision covers situations where tax liability has not been properly discharged, where excess or ineligible input tax credit has been claimed or utilised, or where a refund has been granted by mistake. By consolidating these situations within a single statutory provision, Section 74A seeks to streamline adjudication and recovery proceedings under GST for future tax periods.

To guarantee proper implementation of this provision, the circular assigns specific roles to central tax officers such as Superintendents, Deputy or Assistant Commissioners, and Additional or Joint Commissioners. Their responsibilities are determined by the monetary value of each case to ensure it is handled at the appropriate administrative level.

This well-structured distribution prevents administrative bottlenecks and ensures that more complex or valuable issues are handled by senior staff officers.

Monetary Jurisdiction for Issuing SCNs and Adjudication

A key practical feature of the circular is the establishment of monetary limitson the issuance of show cause notices and adjudication orders under section 74A. For ease of understanding, the jurisdictional structure may be summarised as follows:

Where a case involves both Central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST), the determination of jurisdiction for adjudication is not made separately for each component of tax. Instead, the combined amount of CGST and IGST involved in the case is taken into account in deciding the competent adjudicating authority. In other words, the monetary limits prescribed for different officers are applied to the aggregate tax amount under both heads, ensuring that the case is assigned to the appropriate authority in accordance with the overall tax implication. This approach avoids fragmentation of proceedings and promotes administrative consistency by allowing a single authority to adjudicate the matter based on the total tax amount involved.

This hierarchy exemplifies a core administrative rule: issues with greater revenue impact should be decided by higher-ranking officers.

When Subsequent Statements Increase the Demand

Under the GST law, once a show cause notice has been issued under Section 73, Section 74, or Section 74A, the proceedings are not necessarily confined to the tax period mentioned in that notice. If similar issues arise in subsequent tax periods, the law permits the proper officer to issue statements for those later periods rather than issuing fresh show-cause notices each time.

The Circular further clarifies that when a show-cause notice is issued for one tax period,and statements are subsequently issued for additional tax periods, the determination of the proper adjudicating officer will not be made separately for each individual period. Instead, the jurisdiction will be decided with reference to the highest amount of tax demanded for any one of the tax periods covered by the original notice as well as the subsequentstatements.

In practical terms, the tax authorities will examine the maximum tax demand arising in any single period included in the proceedings, and the officer who is empowered to adjudicate cases involving that level of tax demand will be treated as the competent authority for the entire matter. This approach ensures that the entire set of proceedings- covering both the show cause notice and the related statements for later periods- can be adjudicated by a single officer, thereby maintaining consistency, avoiding multiple adjudications by different authorities, and promoting administrative efficiency under the GST framework.

If the tax demand arising from a subsequent statement exceeds the monetary jurisdiction of the officer who originally issued the show cause notice, the adjudication cannot continue before that officer. In such circumstances, the proceedings must be aligned with the authority that is legally empowered to adjudicate cases involving the higher amount of tax demand.

This means that the entire matter- including the original show cause notice as well as the subsequent statements- must be placed before the officer whose monetary jurisdiction covers the highest amount of tax involved. In practical terms, the earlier notice may need to be made answerable to the appropriate higher adjudicating authority, so that the proceedings can be conducted lawfully and in accordance with the prescribed jurisdictional limits.

Such an arrangement ensures that the adjudication is carried out by the correct authority under the law, prevents jurisdictional conflicts, and enables the entire case covering multiple tax periods to be decided in a single, consistent proceeding.

This clarification promotes procedural consistency and helps avoid jurisdictional disputes during adjudication.

Clarification under Section 75(2) - When Fraud Allegation Fails

Section 75(2) deals with a special situation that may arise during GST adjudication. Notices under the GST law may be issued either under Section 73 (where there is no allegation of fraud, suppression, or wilful misstatement) or under Section 74 (where such allegations are involved).

However, if an appellate authority, tribunal, or court later concludes that the allegations of fraud or suppression made in a notice issued under Section 74 are not sustainable, Section 75(2) provides that the tax liability shall be determined as if the notice had originally been issued under Section 73 .

Circular No. 254 provides an important procedural clarification. It explains that the same adjudicating authority thatoriginally handled the proceedings will continue to determine the tax liability, even when the case is treated as falling under Section 73 rather than Section 74. This means the matter need not be transferred to another officer merely because the legal character of the notice has changed.

This clarification is significant from an administrative and practical perspective. By allowing the same authority to continue the adjudication, the circular prevents unnecessary duplication of proceedings, avoids procedural delays, and ensures continuity in the decision-making process. As a result, both the tax administration and the taxpayer benefit from a more efficient and streamlined adjudication mechanism under GST.

Adjudication of Penalties under Section 122

Section 122 of the CGST Act prescribes penalties for various offences under the GST law. These offences may include situations such as issuing invoices without the actual supply of goods or services, wrongly availing or utilising input tax credit, failing to issue tax invoices, collecting tax but not paying it to the Government, or furnishing incorrect information in returns and documents. In such cases, the law empowers the tax authorities to impose monetary penalties in addition to recovering the tax due.

Circular No. 254 provides important procedural clarity in this regard by prescribing the monetary limits applicable for the issuance of show cause notices and for the passing of penalty orders under Section 122. In other words, the circular specifies which category of officers- based on their prescribed monetary jurisdiction- are authorised to initiate proceedings and adjudicate penalty cases depending on the amount of penalty involved. This clarification helps ensure that penalty proceedings are conducted by the appropriate adjudicating authority in accordance with the prescribed financial limits.

The circular further clarifies the position in situations where penalties relate to both Central Tax (CGST) and Integrated Tax (IGST). In such cases, the determination of jurisdiction is not made separately for each component of tax. Instead, the combined penalty under both CGST and IGST is considered for the purpose of determining the competent proper officer.

By adopting the aggregate penalty approach, the circular maintains consistency with the principle already applied to tax demands under the GST law, where the combined tax amount is used to determine jurisdiction. This approach promotes administrative uniformity, avoids fragmentation of proceedings, and ensures that penalty matters involving multiple tax components are handled by a single competent authority.

Pre-SCN Communication under Rule 142(1A)

Rule 142(1A) of the CGST Rules introduces an important pre-adjudication facilitative mechanism within the GST compliance framework. Under this rule, the proper officer may issue a pre-show cause notice communication in FORM GST DRC-01A to the taxpayer before issuing a formal show cause notice under Section 73, Section 74, or Section 74A of the CGST Act. The purpose of this communication is to inform the taxpayer of the tax, interest, or penalty that appears to be payable based on the officer's preliminary assessment, thereby giving the taxpayer an opportunity to review the proposed liability at an early stage.

This preliminary communication serves a constructive purpose. It allows the taxpayer to review the proposed liability and voluntarily discharge the dues, either fully or partially, before formal adjudication begins. By encouraging voluntary compliance, Rule 142(1A) reduces unnecessary litigation and promotes a cooperative approach to tax administration.

Circular No. 254 provides further procedural clarity by specifying the officers who are competent to issue such pre-show cause-notice communications. By clearly identifying the authorities empowered to issue FORM GST DRC-01A, the circular ensures that the process begins with the appropriate officer having the prescribed jurisdiction.

In this way, the circular effectively completes the procedural chain within the GST enforcement framework- starting with the initial pre-notice communication under Rule 142(1A), progressing to the issuance of a formal show-cause notice, and ultimately culminating in adjudication by the competent authority. This structured approach promotes procedural discipline, transparency, and consistency in the conduct of GST proceedings.

Practical Illustrations

The practical implications of the circular become clearer through the following illustrations:

Illustration 1 - Demand within Rs 10 Lakh

Suppose a taxpayer is alleged to have wrongly availed the input tax credit of Rs 8 lakh. Since the amount involved falls within the monetary limit of Rs 10 lakh, the proceedings may be initiated and adjudicated by a Superintendent of Central Tax, who is competent to handle cases within this threshold.

Illustration 2 - Demand between Rs 10 Lakh and Rs 1 Crore

Consider a situation where the tax demand in a case amounts to Rs 60 lakh. As the amount exceeds Rs 10 lakh but does not exceed Rs 1 crore, the jurisdiction for issuing the notice and adjudicating the matter would lie with a Deputy Commissioner or Assistant Commissioner of Central Tax.

Illustration 3 - Demand exceeding Rs 1 Crore

In a case involving a tax demand of Rs 2 crore, the matter falls beyond the monetary jurisdiction of officers below the rank of Deputy/Assistant Commissioner. Accordingly, the proceedings would fall within the jurisdiction of an Additional Commissioner or Joint Commissioner of Central Tax, who is empowered to adjudicate cases involving higher amounts.

Illustration 4 - Cases involving both CGST and IGST

Suppose a case involves Rs 40 lakh of CGST and Rs 40 lakh of IGST. For the purpose of determining jurisdiction, the combined tax amount of Rs 80 lakh will be treated as one. Since the total demand falls within the range of Rs 10 lakh to Rs 1 crore, the competent authority would be a Deputy Commissioner or Assistant Commissioner of Central Tax.

A Final Reflection

In the structure of any tax system, the law lays down what tax is payable and when it must be paid. However, the fair and orderly enforcement of that law depends largely on the institutions and officers who administer it. This is where the concept of the "proper officer " becomes important. Under GST, this expression is not merely a technical designation; it reflects the principle that statutory powers must be exercised only by the authority legally empowered to do so.

The idea serves an important purpose in maintaining the discipline of tax administration. When the law clearly identifies which officer can issue a notice, conduct adjudication, or impose a penalty, it ensures that powers are exercised within defined boundaries. This protects taxpayers from arbitrary action while ensuring that the administration functions in a structured and accountable manner.

Circular No. 254 strengthens this framework by clarifying the officers who are authorised to perform different functions and the monetary limits within which they can act. By doing so, the circular ensures that every step in the enforcement process- whether it is the issuance of a notice, the conduct of adjudication proceedings, or the imposition of penalties- is carried out by the appropriate authority. Such clarity helps reduce procedural disputes and promotes consistency in the application of the law.

Ultimately, the circular conveys an important institutional message. The strength of a tax system does not depend only on how much tax it collects, but also on how transparently and fairly it administers the law. Clear jurisdictional rules, well-defined authority, and orderly procedures create confidence among taxpayers and reinforce the legitimacy of the tax administration. In that sense, Circular No. 254 quietly contributes to strengthening the clarity, order, and credibility of GST administration.

कानूनकीशक्तिकेवलशब्दोंमेंनहींबसती,
सहीहाथोंमेंपहुँचेतोव्यवस्थाभीसंवरजातीहै।

The strength of law does not reside merely in its words;
when placed in the right hands, even the system itself finds harmony.

By CA Raj Jaggi & Adv Kirti Jaggi