The Allahabad High Court has sought a detailed clarification from the State GST Department in a case where initiation of penalty proceedings under the Section 129 of Goods and Services Tax ( GST ) for alleged violation of Rule 86B of the GST Rule is challenged.
The petitioner, Hundal Traders was aggrieved by the action of the State Tax Officer (Mobile Squad)-3, Saharanpur, who initiated proceedings 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), and imposed a penalty of ₹92,452 via an order dated 08.10.2024.
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Counsel for the petitioner raised two core legal issues: firstly, whether the STO was competent to initiate proceedings under Section 129 of the CGST Act based on an alleged violation of Rule 86B of the CGST Rules, 2017; and secondly, whether the STO had the jurisdiction to pass such an order in light of CBEC Circular No. 3/3/2017-GST dated 05.07.2017, which restricts the powers under Section 129(3) to Deputy or Assistant Commissioners of Central Tax.
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It was argued that the STO, being a lower-level officer, lacked the authority under the CGST framework, especially since the Office Order dated 01.07.2017 relied upon by the respondents related only to the GST Act.
Additionally, the petitioner questioned the applicability of Rule 86B to their case, asserting that their situation fell within the exemption provided under proviso (d) to the said rule, as amended by Notification No. 94/2020 dated 22.12.2020.
The Court noted that the counter affidavit filed by the respondents merely provided a superficial response to this point and failed to address the factual and legal contentions raised by the petitioner.
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The court observed the gaps in the counter affidavit. The Division Bench of Justices Kshitij Shailendra and Arun Bansali directed the respondents to file a supplementary counter affidavit specifically addressing the concerns raised, particularly regarding the STO’s jurisdiction under the CGST/IGST framework and the applicability of Rule 86B to the case at hand.
The matter has been listed for further hearing on May 14, 2025, by which time the State authorities are expected to file a detailed and precise response.
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