Since the launch of India’s Goods and Services Tax (GST) in July 2017, the Central Board of Indirect Taxes and Customs (CBIC) and state authorities have consistently issued a steady stream of notifications, circulars and further guidelines under Sections 168 and 168A of the CGST Act, aiming to provide clarity on the legislative position and process of the Act.
While these instruments aim to clarify processes or amend implementation details, their legal force and proper scope have been a point of contention in jurisdictional High Courts and the Supreme Court of India.
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Over the past two years in particular, a series of challenges has shaped the contours of delegated GST legislation, prompting courts to evaluate when such circulars and notifications are binding on the department, taxpayers and even the judiciary itself.
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Notifications under GST are a form of delegated legislation, typically issued to give effect to provisions within the statute. These provisions often pertain to e-way bill rules or time limits for adjudication, while circulars offer explanatory or clarificatory guidance on ambiguous aspects of the law.
Section 168 of the CGST Act provides that CBIC “may…issue such orders, instructions or directions…for the purpose of uniformity in the implementation of this Act,” and all officers “shall observe and follow such…directions”. The intent of such legislation has been buttressed by the Supreme Court many a time, with a key ruling coming in the case of Collector of Central Excise v. Ratan Melting & Wire Industries (2008), where it was held that such circulars bind the Revenue and its officers, even if they depart from judicial precedents.
Meanwhile, the legal position of circulars were discussed by the Supreme Court in Bengal Iron Corporation v. Commercial Tax Officer (1993) where it was held that circulars do not legally bind taxpayers, who may choose to follow or challenge them as they see fit, nor do they supersede a court’s independent interpretation of the statute.
Thus, it can be inferred that the operative value of a GST circular lies chiefly in its binding effect on departmental officers, primarily to ensure consistency, while its authoritative bearance on taxpayers and courts remain subject to judicial scrutiny.
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Section 168 of the CGST Act empowers the CBIC and state Commissioners to issue notifications and circulars without separate parliamentary approval, provided that they later lay the notifications before Parliament under Section 166 of the CGST Act.
In 2023, Section 168A was introduced, granting the government power to extend time limits for adjudication “on the recommendation of the Council.”
Challenges have arisen over whether mere “ratification” by the GST Council is sufficient or whether a “prior recommendation” is mandatory, raising questions under Article 14 of the Constitution against arbitrary delegation.
Judicial review of these delegated powers thus rests on determining legislative intent in Sections 168 and 168A, as well as ensuring that extensions or clarifications that have are provided by adjudicatory bodies are not in contravention of fundamental principles of equality or procedural fairness.
One of the earliest disputes post-implementation of the GST regime concerned the use of the electronic credit ledger (ECL) for tax payment in the case of Ajay Kishore Routray vs. Additional CT & GST Officer, Jajpur Circle and Another (2023 TAXSCAN (HC) 445). The Orissa High Court adopted directed acceded to the relevance of the GST circulars and directed the department to honor ECL payments in light of CBIC Circular No. 17/17/2022-GST.
Presided over by Chief Justice Dr. S. Muralidhar and Justice M.S. Raman, the bench found that the CT & GST officers refusal to accept ECL payments for the period July 2017–March 2018 was contrary to the circular’s clear mandate, proceeding to quash the impugned order and remanding the matter for fresh consideration.
The ruling was indicative of how binding departmental circulars could correct administrative missteps.
As the GST regime continued to expand, courts were faced with broader challenges to notifications and circulars. In the case of Shree Shyam Steel vs. Union of India and Others (2024 TAXSCAN (HC) 1702), granted the Petitioner interim relief against Notification No. 56/2023-CE (extension of limitation under Section 73, CGST Act, 2017) observing that the notification lacked mandatory GST Council recommendation, thus deeming it prima facie ultra vires the CGST Act.
In light of the issues faced due to lack of clarity on the mode of GST adjudication, the Tamil Nadu GST Department on September 3, 2024 issued Circular No. 08/2024. The circular prescribes a uniform template for GST adjudication to enhance clarity, consistency, and fairness.
It mandated that show-cause notices should begin with precise identification of the taxpayer, disputed period, legal provisions, and supporting evidence, and directed officers to grant adequate hearing notices before summarizing the taxpayer’s submissions in the draft order.
By standardizing notice drafting, hearing procedures, and order structure, the circular aimed to reduce GST litigation, prevent inadvertent omissions, and cut down on unnecessary appeals.
Come 2025, the GST Appellate Tribunal (GSTAT) is yet to begin functioning, however certain rules regarding the functioning of the tribunal in recent months indicate that the GSTAT may soon start entertaining GST appellate matters.
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There is no doubt that GST is here to stay, so it is best that the key adjudicatory mediums are deployed as soon as possible. The growing trend of judicial interventions in GST notifications and circulars have exposed systemic strains and strategic misalignments.
Revenue authorities, who were once able to utilize the circulars to ensure uniform compliance, now face a paradox: strict adherence to every departmental instruction is essential to secure their orders from judicial scrutiny, but then again, such a rigid mechanism often hinders effective recovery and deters policy flexibility.
Perhaps most critically, the prolonged absence of the GST Appellate Tribunal has forced High Courts into an unintended role as second-tier GST adjudicators, Burdened with technical disputes ranging from valuation issues to nuanced questions of circular interpretation, High Courts have added to their already heavy caseload of constitutional and civil caseloads
Many a time, High Courts have opined that they are ill-equipped to deliver the specialized, consistent expertise that a dedicated tribunal would provide while meting out temporary solutions until the formation of the GSTAT.
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Over time, the Indian judiciary has carefully realigned its role to adeptly policing the boundary between legislative delegation and executive overreach under GST. Notifications and circulars remain key tenets of administrative functions and shall continue to operate within the scope of the text enshrined within the statute without constitutional overreach.
For legal practitioners, their duty is clear: maintain meticulous awareness of every CBIC and state circular, understand its binding effect on the department, and be prepared to invoke judicial review when circulars conflict with statutory provisions or fundamental rights.
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