Concept of ‘Proper Officer’ under GST Law
“The biggest tax reform GST, launched about 3 year ago, replaced the old indirect tax structure with aim to provide a simplified, transparent and technology-driven single tax regime. Presently we see that there is some dispute under GST regime related to questioning and challenging power, jurisdiction, authorization, competency or appointment of ‘Proper Officer’. Therefore, it is highly imperative to understand the concept of proper officer under the GST law. In this article an attempt has been made to understand certain provisions and distinct features of the ‘Proper Officer’ under the CGST Act and SGST Act. Read on…”
Meaning of ‘Proper Officer’ under Central Goods and Services Tax Act, 2017
(i) Definition
As per Section 2(91) of Central Goods and Services Tax Act, 2017 (for short the ‘CGST Act’):
“‘proper officer’ in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board.”
(ii) Analysis
Section 2(91) of the CGST Act which define proper officer, used both word ‘Commissioner’ and ‘Commissioner in the board’. Section 2(24) says “Commissioner” means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under section 3 and the Commissioner of integrated tax appointed under the Integrated Goods and Services Tax Act (for short ‘Commissioner of Central tax’). Section 2(25) defined “Commissioner in the Board” means the Commissioner referred to in section 168.
Section 168(2) says that the Commissioner specified inter-alia in section 2(91) mean a Commissioner or Joint Secretary posted in the Board. By reading of the aforesaid provisions if it is interpreted that the meaning of the expression “Commissioner in the Board” means Commissioner or Joint Secretary posted in the Board then question is arises that why legislature used both the term being “Commissioner” and “Commissioner in the board” in the definition of ‘Proper Officer’ under section 2(91) of the CGST Act. If this interpretation is supposed to be correct then legislature must use the expression “Commissioner” in place of the expression “Commissioner in the board”. But it seems that is not the situation as the expression “Commissioner in the Board” defined in Section 2(25) means only the Commissioner posted in the Board and it does not include the Joint Secretary.
(iii) Combined Reading and Restated Definition
On the basis of above analysis and combing reading of Section 2(25), Section 2(91) and Section 168(2) of the CGST Act, definition of ‘Proper Officer’ can be read as follows:
As per ‘Rule of last antecedent’ here is no need to say that the qualifying phrase “who is assigned that function by the Commissioner in the Board” ought to be referred to the next antecedent being “the officer of the central tax”. In other words it does not qualify the words “Joint Secretary posted in the Board”.1
Position under State Goods and Services Tax Act, 2017
When we read the State Goods and Services Tax Act, 2017 (for short the ‘SGST Act’) and compare with the CGST Act we find that there is some significant difference between both the Acts as discussed in following paragraphs.
Some relevant definitions and provisions of the SGST Act for example Rajasthan Goods and Services Tax Act, 2017 (for short the ‘RGST Act’) are as follows:
- (i) Section 2(24): ‘Commissioner’ means the Commissioner of State tax appointed under section 3 and includes the Principal Commissioner or Chief Commissioner of State tax appointed under section 3 (for short ‘Commissioner of State tax’).
- (ii) Section 2(25): ‘Commissioner in the Board’ means the Commissioner referred to in section 168 of the Central Goods and Services Tax Act.
- (iii) Section 2(91): ‘proper officer’ in relation to any function to be performed under this Act, means the Commissioner or the officer of the State tax who is assigned that function by the Commissioner.
Comparison of the Provisions of Both Acts
(i) Disparity in Powers and Section 168(2) Specifications
On analysis of above provisions and comparison with the provisions CGST Act, it appears that there is significant disparity between them. Section 168(2) of the CGST Act clarifies that the Commissioner specified in certain sections/sub-sections/clauses as mentioned therein shall mean a Commissioner or Joint Secretary posted in the Board and such Commissioner or Joint Secretary shall exercise the powers specified in the said section with the approval of the Board. However there is no such provision in the RGST Act or any other SGST Act.
Thus, the distinguishing points are that so far as the CGST Act is concerned, certain powers like power of delegation under section 5(3)/167, power to notifying any person or class of persons/taxable persons under section 25(9)(b)/35(3), power to notifying any goods as referred to in clause (ii) of 1st Proviso to Section 143(1), power to extension of time limit under 2nd proviso to Section 143(1), power to determination of expenses of audit under section 66(5), power to direction for collecting statistics under section 151(1) and power to give opinion that publishing the information is desirable in the public interest under Clause (l) of Section 158(3) of the CGST Act are lying with the Commissioner or Joint Secretary posted in the Board and not with the Commissioner of Central tax. Whereas such powers under the RGST or any other SGST Act are lying with the Commissioner of State tax.
It is also considerable point that the word “Commissioner” is also used in sub-section (2) of Section 151 of the CGST Act, but this sub-section has not been referred in section 168(2) of the CGST Act. Thus it appears that for the purpose of this sub-section ‘Commissioner’ means ‘Commissioner of Central tax’ i.e. ‘Commissioner’ as defined in sub-section (24) of Section 2 of the CGST Act. Further use of the article “the” before the word “Commissioner” in sub-section (2) of Section 151 also have no relevance as the word “Commissioner” in sub-section (1) of Section 151 is also prefixed by the article “the”. If legislature intention was meant ‘Commissioner’ as ‘Commissioner or Joint Secretary posted in the Board’ in both the sub-sections (1) and (2) of Section 151, then he must used the phrase ‘Section 151’ or ‘sub-sections (1) and (2) of Section 151’ like in case of Section 35 in the Section 168(2) of the CGST Act.
However there is no such issue or disparity in case of RGST Act or any other SGST Act as the word “Commissioner” exist in both the sub-sections (1) and (2) of Section 151 means only the ‘Commissioner of State tax’.
(ii) Amendments Introduced by the Finance Act, 2020
It may be noted that reference of Section 66(5) in Section 168 of the CGST Act has been omitted by the Finance Act, 2020 (No. 12 of 2020 dt. 27th March, 2020) w.e.f. from the date yet to be notified. Similarly the phrase “sub-section (1) of Section 143” in Section 168 of the CGST Act has been substituted by the phrase “sub-section (1) of Section 143, except the second proviso thereof” by the aforesaid Finance Act w.e.f. from the date yet to be notified.
(iii) Board Powers vs. Commissioner of State Tax ‘Delegatus Non Potest Delegare’
Section 168 of the CGST Act empowers the Board to issue necessary orders, instructions or directions in certain circumstances whereas Section 168 of the RGST Act or respective SGST Act gives such powers to Commissioner of State tax. Commissioner of State tax by exercising power given under section 5(3) or Section 167 of the SGST Act can delegate his power of issuing instructions or directions etc. under section 168 to any officer subordinate to him or any other authority or officer of State tax or Central tax, as the case may be.
But this privilege is not available to Commissioner of Central tax. Though power of issuing instructions or directions etc. under section 168 can be delegated to the Commissioner of Central tax but said power further cannot be sub-delegated by Commissioner of Central tax in view of the maxim ‘Delegatus Non Potest Delegare’ and non-availability of power under section 5(3) and Section 167 of the CGST Act.
Deeming Fiction
It is pertinent to note that in Sections 25(9)(b), 35(3), 35(4), 66(5), 143(1), 151(1) and 158(3)(l) of the CGST Act, no such deeming fiction are created to provide that any such person or class of persons/taxable persons as notified/ permitted or determination of expenses of audit or notifying any goods or extension of time limit or direction for collecting statistics or opinion regarding publishing any information desirable in the public interest by the Commissioner of State tax or Union territory tax shall be deemed to be notified/ permitted/determined/ extended/directed or opinioned, as the case may be, by the Commissioner unlike Sections 37(1), 38(2), 39(6), 44(1), 52(4) and 52(5).
Thus where any notification is issued under section 25(9)(b), 35(3), 35(4), 143(1) or 151(1), as the case may be, a parallel notification is required to be issued under the respective SGST Act too.
It is also worthwhile to mention here that by virtue of Section 26 of the CGST Act, Unique Identity Number (UIN) granted under the respective SGST Act or Union Territory Goods and Services Tax Act (for short the ‘UTGST Act’) would be deemed to be a grant of the UIN under CGST Act. But without notifying any person or class of persons by the Commissioner under section 25(9)(b) of the respective SGST Act, no such UIN can be granted under the said Acts. Further it can be said that if such person or class of persons is notified by the Commissioner under section 25(9)(b) of either of the Act and granted UIN under the said Act then further such person or class of persons is not required to be notified under the other Act due to effect of Section 26 of that Act.
Disparity Related to Auditor Appointment and Audit Expense under Section 66 of the CGST Act
Section 66(1) of the CGST Act provide that for the purpose of the examination and audit under the said section the chartered accountant or the cost accountant is nominated by the ‘Commissioner’ i.e. Commissioner of Central tax. Section 66(5) r/w Section 168(2) of the CGST Act provide that the expenses of the examination and audit of the records including the remuneration of the auditor shall be determined and paid by the ‘Commissioner or Joint Secretary posted in the Board’ and such determination shall be final.
Thus there is disparity in both the provisions so far as the expenses of the audit including remuneration of the auditor is determined by the officer other than who nominate the auditor. However there is no such disparity under the respective SGST Act.
Authorisation of Proper Officer under Section 6(1) of the CGST Act
Section 6(1) read as follows:
By reading of aforesaid provision a question is arises whether officers appointed under the respective SGST/UTGST Act are automatically become competent to perform the functions as “Proper Officers” for the purposes of CGST Act by virtue of this provision. If answer is affirmative then further question arises what is significance of the definition of ‘Proper Officer’ given under section 2(91).
Section 2(91) for defining “proper officer” specifically talks of the assigning functions by the Commissioner in the Board to the Commissioner or the officer of the central tax. Further it uses the definite article ‘the’ as opposed to ‘an’ or ‘any’ which is also significant.2 This means only the Commissioner or the officers who have been assigned the functions of the ‘proper officer’ can be considered as the “proper officer” for the purposes of section 2(91) of the CGST Act.
One may argue that Section 6(1) also uses the definite article ‘the’ and confers authorization on ‘the officers’ (instead of ‘a officer’ or ‘any officer’) to be ‘the proper officers’ (instead of ‘a proper officer’ or ‘any proper officer’).
If it is interpreted that all the officers appointed under the SGST/UTGST Act are deemed to be ‘proper officers’ for the purposes of CGST Act, then it would lead to a situation of utter chaos and confusion, inasmuch as all officers appointed under the SGST/ UTGST Act, in a particular Commissionerate or Division or Range, would be ‘proper officers’. This interpretation would make this provision overbroad in as much as it confers jurisdiction on a plurality of officers on the same subject matter and grant wide powers to a wide range of officers. This interpretation is also against the principal laid down in Section 6(2)(b) and the theory of “committy of courts”. Further in such case the provision might be vulnerable to be declared unconstitutional or violative of article 14 of the Constitution.3
The mere authorizing of any officers as ‘proper officers’ can’t tantamount to assigning them any specific function. Such authorization must be in relation to a territorial or any other jurisdictional limit. It is also significant that the section 6(1) authorized the “officers” instead of the “proper officers” to be the ‘proper officers’. Further it start with the expression “without prejudice to the provisions of this Act”.
Careful reading of the Section 6(1) show that it does not ipso facto confer jurisdiction on the officers appointed under the SGST/ UTGST Act to exercise power entrusted to the ‘proper officers’ for the purpose of the CGST Act.
Connotation of the Expression “Subject to such conditions as the Government shall by notification specify”
On various occasion Supreme Court held that the expression “subject to such conditions as may be prescribed” means a particular power can be exercised only if a specific enacting law or statutory rules have been framed or the conditions is prescribed for that purpose. Court also held that when expression “if any” attached therewith then there is no obligation or mandatory requirement to follow any, except whatever the provision itself provides.
The Supreme Court observed the expression ‘such manner as may be prescribed” and distinguished the said expression from the expressions ‘in the manner prescribed’ or ‘in the prescribed manner’. It was held that “as may be prescribed” means “if any”. In another judgment it was held that when power is made available, conditional upon prescription, the phrase ‘subject to’ in the context means only conditional upon, the exercise of power in the absence of such prescription is illegal.4
In nutshell the meaning of such expression takes color in context with which it is used and the manners of its use as prefix or suffix etc. It depends on the language of the particular provision that whether exercise of the power is dependent on the framing of the Rules or prescribing the manner or conditions. There is no rigidity about it.
After the aforesaid discussion and considering the facts that Section 6(1) uses the word ‘shall’ instead of ‘may’ and the expression ‘subject to’ without using the expression ‘if any’, it can be concluded that issue of notification is obligatory. Thus for the operability of the provision of Section 6(1) there has to be a specific order or notification. Further notification must be published in the Official Gazette as required by the Section 2(80). It is clarified that there is no need for publication of the notification in the name of the person who is assigned the function or holding the post as it is not the assignment or appointment as persona designata. Power can be vested upon a post. Provision of Section 15 of the General Clauses Act, 1897 also supports this view.
It is point out that Govt. has also in exercise of the power conferred by Section 6(1) issued Notification No. 39/2017-Central Tax, dated 13-10-2017 authorising Officer of State Tax/ Union Territory Tax to act as proper officer under CGST Act for the purposes of Section 54 & 55.
On the basis of above analysis it can be safely adduced that only such Officer who has been assigned the specific function and duty in relation to the specific jurisdiction through issue of notification by the Government in term of powers conferred by section 6(1) is competent to perform such function as “proper officer”. Any other interpretation of Section 6(1) would make the Section 2(91) senseless.
Significance of Section 6(1) of the CGST Act
After the aforesaid discussion a question is arises why legislature felt need for providing the said provision of Section 6(1). It seems that this is the additional power expressly provided in the statute to the Government in addition to the ‘Commissioner in the Board’.
Further this provision makes the officers appointed under the SGST/UTGST Act as “the officers for the purposes of this Act (CGST Act)” or “the officers under this Act (CGST Act)”. Thus this provision enable the ‘Commissioner in the board’ to assign the function under section 2(91) or delegate the powers under section 167 to the officers appointed under the SGST/UTGST Act.
It was held that the words ‘Under the Act’ means an act sanctified by provisions and done for the purpose of the Act.5 In another case it was held that the words ‘under the Act’ means what is not directly to be found in the statute itself but is conferred or imposed by virtue of powers enabling this to be done or by virtue of rules or byelaws which are framed by a subordinate law making authority which is empowered by the Parent Act. Similarly the expression ‘By an Act’ means by a provision directly enacted in the statute itself.6
Analysis of Other Provisions of Section 6 of the CGST Act
- (i) Dual Proceedings Restriction: Clause (b) to Section 6(2) prohibits the proper officer under the CGST to initiate any proceedings on the subject matter on which proceedings already initiated by the proper officer under the SGST/UTGST Act. However it seems restriction is on initiation of proceeding on same subject matter by the two officers but not on initiation of proceeding on same subject matter separately under both the Act by the same officer provided he is competent to do so.
- (ii) Rectification, Appeal and Revision: Any rectification, appeal or revision against any order passed by an officer appointed under CGST Act shall not lie before an officer appointed under the SGST Act/UTGST. The language of the Sub-section (3) to Section 6 is in negative sense. In other way we can say that any rectification, appeal or revision against any order passed by an officer appointed under the CGST Act shall lie before any officer (except officers appointed under the SGST/UTGST Act), authority, court etc. in accordance with the provisions of CGST Act. Further restriction is only against officer “appointed”.
- (iii) Simultaneous Orders to Avoid Dual Control: Where a proper officer issues an order under CGST Act, he simultaneously required to issue an order under the SGST/UTGST Act by virtue of Section 6(2)(a) of the CGST Act thus this provision make enable the same proper officer to issue both order under respective Act. Accordingly any rectification, appeal or revision against both the said order can be made before an officer appointed under CGST Act. Such provision has been provided under the GST law to avoid dual control over a taxable person.
Other Relevant Points
(1) Mutatis Mutandis Applicability: It may be noted that all the aforesaid discussions are, mutatis mutandis, apply so far as may be, in case of the SGST Act and the IGST Act as there are parallel provisions.
(2) Delegation under Section 83 & Subjective Satisfaction: In the case of Valerius Industries v. Union of India [2019] 109 taxmann.com 218 (Gujarat), the Gujarat High Court observed that under section 83 of the Gujarat GST Act, 2017 it is the Commissioner’s opinion which is relevant, so such power cannot be delegated to the subordinate officers. However later on in the case of Nathalal Maganlal Chauhan v. State of Gujarat [2020] 114 taxmann.com 425 (Gujarat), Gujarat High Court taken a view that the observations made by this Court in the above referred case could be termed as per incuriam. Accordingly, once the powers are delegated validly under the Act, the subjective satisfaction, or rather, the reasonable belief should be that of the delegated authority. Here it is notable point that Commissioner of State Tax is empowered under SGST Act to delegate his power of Section 83 to the subordinate officers but Commissioner of Central tax is not empowered for the same under CGST Act.
(3) Statutory Role of General Clauses Act, 1897: In the case of State of Punjab vs. Harnek Singh reported in 2002(3) SCC 481, the Hon’ble Supreme Court dealt with the General Clauses Act, 1897 and observed as under:
Thus the provisions of the General Clauses Act can be called in aid if the particular enactment to which it is applied for the purposes of interpretation does not impliedly or expressly exclude the operation of the General Clauses Act [Section 4 of the General Clauses Act]. Section 21 of the General Clauses Act, 1897 provides that power to issue would include power to add, amend, vary or rescind any rule, order or notification already issued. Similarly section 14, 15, 16, 20 etc. of the General Clauses Act are also relevant to this article.
Conclusion
The foremost reasons for litigation between tax payers and tax authorities are the lack of knowledge and clear understanding of the relevant laws which results interpretational problems.
For example Section 167 of the CGST Act, which empowers the Commissioner to notify that any power exercisable by “any authority or officer” under this Act may be exercisable also by another authority or officer, as may be specified. The word ‘any’ and ‘authority’ are not defined in the Act. So the expression can be interpreted as “authority or officer inferior to the Commissioner” or “authority or officer inferior as well as equal in rank to the Commissioner” or “any authority or officer whether superior or inferior to the Commissioner”. Here confusion is also arises that whether the Commissioner himself included in the said expression.
One more example is in the case of Special Audit under section 66. Wherein confusion is arises that whether audit under section 66 is a ‘proceeding’ within the meaning of Section 6(2)(b). If answer is affirmative then provision of clause (b) of Section 6(2) will attract. The expression ‘proceeding’ is not a technical term with a definite meaning but would depend upon the scope of relevant enactment and the context in which it used and may be influenced by subjective factors. Similarly whether intimation of findings of the audit under section 66 in Form GST ADT-04 is an ‘order’ within the meaning of Section 6(2)(a)!
The business man and tax authorities should made efforts to understand GST law clearly and objectively. Authorities should follow a practical approach in implementation of the provisions of the Act which is new one.
As time will goes by the business community as well as common man get familiar with the GST law. New tax regimes always pose certain difficulties but this way it can be minimised.
References
- Case of Mangibai Hariram vs. State of Maharashtra AIR 1966 SC 882.
- Case of Consolidated Coffee Ltd. vs. Coffee Board 1980 taxmann.com 235 (SC) and Shri Ishar Alloys Steels Ltd. vs. Jayaswals Neco Ltd. [2001] 3 SCC 609.
- Case of Pushpit Steels Pvt. Ltd. vs Commissioner of Custom (2000 taxmann.com 126) (CEGAT- Chennai)/ [2001] 130 ELT 520 (CEGAT- Chennai); Commissioner of Customs v. Sayed Ali 2011 (265) E.L.T. 17 (SC).
- Case of Dr. Subramanian Swamy v. State of Tamil Nadu [2014] 5 SCC 75; Hindustan Ideal Insurance Co. Ltd. v. LIC AIR 1963 SC 1083; BSNL v. BPL Mobile Cellular Ltd. (2008) 13 SCC 597; Telecom Employees Co-operative Housing Society Ltd. v. Scheduled Castes, Scheduled Tribes, Minority Communities & Backward Classes Improvement Centre ILR 1990 Kar. 3320; Orissa State (Prevention & Control of Pollution) Board v. Orient Paper Mills [2003] 10 SCC 421.
- Case of Stock Exchange v. Vinay Bubna [2001] 103 Company Cases 584 (Bom).
- Case of Dr. Indramani Pyarelal Gupta v. W.R. Natu AIR 1963 SC 274.