Section 74A CGST: Proper Officer & Jurisdiction Validity

Proper Officer and Jurisdiction under Section 74A of CGST Act: Legal Framework and Validity of Proceedings

Section 74A of the CGST Act, effective from FY 2024–25, establishes a uniform mechanism for demand and recovery of unpaid, short-paid, or wrongly availed tax/ITC. It abolishes the distinction between fraud and non-fraud cases for notice timelines and prescribes a common limitation period of 42 months from the due date of the annual return for issuance of show cause notices. The section also introduces a monetary threshold, providing that no notice shall be issued where the total amount of tax discrepancy is less than ₹1,000.

It is noted that before Sections 73 and 74 of the CGST Act are valid for demand notices pertaining to financial years up to 2023-24. Following amendments in the Union Budget 2024, these sections are effectively replaced by the new Section 74A for demands starting from FY 2024-25 onwards.

It has been observed in practice that, in several cases, the proper officer, either inadvertently or otherwise, issues show cause notices under Section 74 of the CGST Act even where there is no allegation or material indicating fraud, wilful misstatement, or suppression of facts with intent to evade tax. In such notices, the ingredients necessary to invoke Section 74 are absent, and the provision is merely cited mechanically without recording any specific findings or reasons to justify its applicability. This approach defeats the statutory scheme, as invocation of Section 74 requires the existence and clear allegation of mens rea. In the absence of such elements, proceedings ought to be initiated under the appropriate non-fraud provisions, and mere quoting of Section 74 without substantiating facts renders the notice legally unsustainable and vulnerable to challenge.

With the introduction of Section 74A of the CGST Act, this practical difficulty has largely been addressed. The new provision streamlines and standardizes the demand and recovery mechanism by removing the earlier distinction between fraud and non-fraud cases for the purpose of limitation and issuance of show cause notices. Consequently, the need for officers to classify cases at the notice stage itself has been eliminated, thereby reducing procedural disputes and arbitrary invocation of harsher provisions. However, Section 74A continues to preserve the distinction between fraud and non-fraud cases for determining the quantum of penalty, ensuring that while timelines remain uniform, the penal consequences still depend upon the presence or absence of mens rea. This strikes a balanced approach between administrative efficiency and fairness to the taxpayer.

Proper office under Section 74A

It is pertinent to note that the power to issue a show cause notice under Section 74A can be exercised only by the “proper officer”. The term “proper officer” has been specifically defined under Section 2(91) of the CGST Act to mean an officer who has been duly assigned such functions by the Commissioner. Therefore, the authority to initiate proceedings under Section 74A is not inherent or automatic but must flow from a valid statutory or administrative assignment of jurisdiction. In the absence of such assignment, any notice or action undertaken by an officer would be without jurisdiction and liable to be challenged in law.

It is further noteworthy that, for several other provisions of the Act, the Board has issued specific circulars assigning jurisdiction to proper officers. Reference may be made to Circular No. 1/1/2017-GST dated 26.06.2017 assigning officers for matters relating to registration and composition levy. Further, Circular No. 3/3/2017-GST dated 05.07.2017 and Circular No. 31/05/2018-GST dated 09.02.2018 (as amended from time to time, including Circular No. 169/01/2022-GST dated 12.03.2022 and Circular No. 239/33/2024-GST dated 04.12.2024) also designate proper officers for discharge of functions under various provisions of the CGST Act and the Integrated Goods and Services Tax Act, 2017. These assignments demonstrate that jurisdiction must be specifically conferred and cannot be presumed.

Assignment of Proper Officer vide Circular No. 254/11/2025-GST dated 27.10.2025

Vide Circular No. 254/11/2025-GST dated 27.10.2025, the Board categorically observed that no proper officer had earlier been assigned in respect of proceedings under Section 74A, Section 75(2), Section 122 of the CGST Act and Rule 142(1A) of the CGST Rules. In order to remove this jurisdictional vacuum, the said Circular specifically designated and assigned proper officers for the exercise of powers and discharge of functions under the aforesaid provisions.

Accordingly, prior to the issuance of the said Circular, there existed neither any statutory provision nor any administrative assignment conferring jurisdiction upon any officer to initiate or adjudicate proceedings under Section 74A. In the absence of such lawful conferment of authority, assumption of jurisdiction by any officer was without sanction of law. Consequently, any show cause notice issued or proceedings initiated before such assignment are inherently without jurisdiction, non est in law, and liable to be declared void ab initio.

Prospective Operation of the Circular

It is further submitted that the aforesaid Circular No. 254/11/2025-GST dated 27.10.2025 issued by the Central Board of Indirect Taxes and Customs, assigning proper officers under Section 74A (for Sub-sections (1), (2), (3), (6), (7), (8), (9) and (10) of Section 74A) of the Central Goods and Services Tax Act, 2017, can operate only prospectively and not retrospectively.

The conferment of jurisdiction upon an officer is a substantive requirement of law and cannot be presumed to have retrospective effect in the absence of an express statutory mandate. Therefore, proceedings initiated prior to the issuance of the said Circular cannot be validated by subsequent administrative assignment of authority and remain void ab initio for want of jurisdiction.

Designation of Proper Officers under Section 74A by Subsequent Circular

It is submitted that only thereafter, vide Circular No. 254/11/2025-GST dated 27.10.2025 issued by the Central Board of Indirect Taxes and Customs, the Board, in exercise of the powers conferred under clause (91) of Section 2 read with Section 5 of the Central Goods and Services Tax Act, 2017 and Section 20 of the Integrated Goods and Services Tax Act, 2017, for the first time assigned specific officers as “proper officers” for discharge of functions under Section 74A.

By the said Circular, the following officers have been designated as proper officers for the purpose of initiation and adjudication of demand of tax proceedings under Section 74A:

• Additional or Joint Commissioner of Central Tax
• Deputy or Assistant Commissioner of Central Tax
• Superintendent of Central Tax

The very fact that such assignment has been made subsequently establishes that no proper officer had earlier been vested with jurisdiction under Section 74A. Consequently, any proceedings initiated prior to the issuance of the said Circular suffer from inherent lack of jurisdiction and are liable to be declared void ab initio.

Prescription of Monetary Limits for Jurisdiction under Section 74A

It is further submitted that the Central Board of Indirect Taxes and Customs, vide Circular No. 254/11/2025-GST dated 27.10.2025 issued under the Central Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017, has not only assigned specific officers as “proper officers” for the purposes of Section 74A, but has also prescribed monetary limits for different levels of officers for optimal distribution of work relating to issuance of show cause notices and adjudication of proceedings.

Monetary limit for issuance of show cause notices and passing of orders under section 74A of CGST Act.

Jurisdiction is determined only by the tax amount and penalties are not counted.

Determination of Jurisdiction Where demand involves Both Central Tax and Integrated Tax

It is further clarified vide Circular No. 254/11/2025-GST dated 27.10.2025 issued by the Central Board of Indirect Taxes and Customs under the Central Goods and Services Tax Act, 2017 read with Section 20 of the Integrated Goods and Services Tax Act, 2017 that where a show cause notice under Section 74A involves demand of tax in respect of both Central Tax and Integrated Tax (including cess), the jurisdiction of the proper officer shall be determined on the basis of the combined amount of tax.

In such cases, the competent officer shall be identified with reference to the consolidated monetary limits prescribed in the combined column of the jurisdiction table, irrespective of the individual amounts of tax under Central Tax or Integrated Tax, even if either amount separately exceeds the limits specified for those categories.

Example 1: Central Tax of ₹12 lakh and Integrated Tax of ₹15 lakh aggregate to a combined of ₹27 lakh. Since the combined amount exceeds ₹20 lakh but does not exceed ₹2 crore, the jurisdiction vests with the Deputy/Assistant Commissioner of Central Tax.= ₹27 lakh. Jurisdiction → Deputy/Assistant Commissioner.

Determination of Proper Officer in Case of Subsequent Statement

When a show cause notice under Section 74A of the CGST Act, 2017 is followed by a statement under sub-sections (3) or (4) for later tax periods showing additional tax not paid or short paid, the proper officer is determined based on the highest tax amount across all periods, including the original notice and the statement. The officer corresponding to this maximum tax demand, as per the prescribed monetary limits, will have jurisdiction.

If the additional tax in the subsequent statement exceeds the limit of the officer who issued the original notice and falls within the limit of a higher-ranked officer, jurisdiction shifts to the higher officer. The original officer must issue a corrigendum, making the earlier proceedings answerable to the higher officer. This ensures consistency, avoids duplication of proceedings, and follows the monetary jurisdiction framework set by the Central Board of Indirect Taxes and Customs.

If the tax in the subsequent statement stays within the original officer’s limit, the same officer continues to have jurisdiction, and the proceedings remain answerable to the same adjudicating authority.

Situation 1 – Amount Remains Within Same Officer’s Limit

For example, where the initial show cause notice for FY 2024-25 involves a Central Tax demand of ₹18 lakh, and a subsequent statement for FY 2025-26 adds a further ₹5 lakh, the highest amount across all periods is ₹18 lakh. Since this falls within the prescribed monetary limit of ₹10 lakh to ₹1 crore, jurisdiction continues to vest with the Deputy/Assistant Commissioner, and no change of officer is required.

Situation 2 – Subsequent Statement Exceeds Higher Monetary Limit

Consider a case where the initial show cause notice involves a Central Tax demand of ₹60 lakh, which falls within the monetary limit of the Deputy/Assistant Commissioner. If a subsequent statement raises the demand to ₹1.40 crore, the highest amount across all periods becomes ₹1.40 crore. Since this exceeds the ₹1 crore threshold, jurisdiction shifts to the Additional/Joint Commissioner. In such a scenario, the officer who issued the earlier show cause notice must make the earlier proceedings answerable to the higher officer, and an appropriate corrigendum should be issued to reflect this change.

Situation 3 – Combined Central Tax and IGST Case

For instance, where the initial show cause notice specifies a Central Tax demand of ₹12 lakh and an IGST demand of ₹15 lakh, the combined demand totals ₹27 lakh. If a subsequent statement increases the Central Tax to ₹30 lakh and IGST to ₹25 lakh, the highest combined demand becomes ₹55 lakh. Since this falls within the prescribed combined monetary limit of ₹20 lakh to ₹2 crore, jurisdiction continues to vest with the Deputy/Assistant Commissioner.

Rule of Thumb – Determination of Proper Officer

In practice, the proper officer should always be determined by considering the highest tax demand across all show cause notices, subsequent statements, and combined taxes. This maximum amount must then be matched against the prescribed monetary limits for each category of officer. Jurisdiction to initiate or adjudicate proceedings rests solely with the officer corresponding to that highest tax amount.

Audit Commissionerate Notices – Follow-Up Statements

Where a show cause notice is issued by officers of the Audit Commissionerate of Central Tax, any subsequent statement under sub-sections (3) or (4) of Section 74A of the CGST Act, 2017 must be issued by the proper officer of the jurisdictional Central Tax Commissionerate of the noticee. Such statements shall remain answerable to the same adjudicating authority that was specified in the original show cause notice issued under sub-section (1) of the respective section.

Example – Audit Commissionerate Notice

Suppose the Audit Commissionerate of Central Tax issues a show cause notice to a taxpayer in Lucknow for FY 2024-25. Later, a statement under sub-sections (3) or (4) is required for subsequent periods. In this case:

• The statement must be issued by the proper officer of the Lucknow jurisdictional Central Tax Commissionerate (where the taxpayer is located).
• The statement will remain answerable to the same adjudicating authority that was mentioned in the original SCN issued by the Audit Commissionerate.

This ensures that even though the original SCN came from the Audit wing, the follow-up statement is handled by the proper local officer while keeping the original adjudicating authority intact.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.