Delhi HC Upholds Validity of "Highest Demand" Criterion for Appointing Common Adjudicating Authority in Multi-Jurisdictional GST Frauds

5-Second Takeaway

The Delhi High Court validated the CBIC circulars that permit the assignment of composite Show Cause Notices to a single Adjudicating Authority based on the "highest demand" criterion, confirming that this is a mere administrative allocation rather than an ultra vires conferment of new jurisdiction.

Facts of the Case: Following an intelligence operation by the DGGI, a multi-layered IGST fraud involving goods-less invoices to claim fraudulent Input Tax Credit (ITC) and export refunds was unearthed. The Revenue issued a composite show-cause notice to numerous entities spread across different territorial jurisdictions. The resulting Order-in-Original was passed by a single Common Adjudicating Authority based in Delhi. The assessees filed writ petitions challenging the jurisdiction of this Delhi-based authority, arguing that the CBIC circulars—which allocated adjudication to the officer overseeing the noticee with the highest tax demand—impermissibly bypassed statutory delegation rules and violated Article 14 of the Constitution by effectively conferring jurisdiction through a mere administrative circular rather than a statutory notification.

Issue: Whether the CBIC can validly issue administrative circulars to consolidate and allocate a multi-jurisdictional show-cause notice to a single Common Adjudicating Authority based on the "highest amount of demand" criterion, without issuing a specific statutory notification for each assessee.

Held:

The Court dismissed the writ petitions, clarifying that the actual pan-India jurisdiction of the officers was already validly conferred by prior statutory notifications (NN 2/2017 and NN 2/2022).

The impugned circulars merely functioned as an administrative allocation-of-business mechanism to select one officer from a pool of already competent officers, ensuring consistent adjudication and preventing conflicting findings across jurisdictions [Available in Full Commentary].

The "highest demand" parameter was upheld as an objective, quantifiable, and uniform criterion that bears a rational nexus to the goal of streamlined adjudication, thereby surviving the Article 14 challenge regarding arbitrariness.