Kerala High Court bars GST Intelligence officers from adjudicating their own show cause notices

The lead petitioner, Dhanlaxmi Bank Limited, along with other taxpayers including CSB Bank Ltd and certain service providers, approached the High Court of Kerala challenging Show Cause Notices issued by officers of the Intelligence and Enforcement wings under the State and Central GST regimes. The grievance was not merely against the notices themselves, but against the proposal that the very Intelligence officers who initiated the proceedings would also adjudicate them.

The petitioners contended that under the GST framework, adjudication is required to be undertaken by the jurisdictional or “proper” officers assigned to the concerned taxpayers.

Main Issue: Whether officers attached to the Intelligence and Enforcement wings of the GST Department are legally empowered to adjudicate Show Cause Notices issued by them, or whether such adjudication must be carried out by the respective jurisdictional/proper officers.

HC’s Order: The Hon’ble Court examined the statutory scheme governing investigation and adjudication under the GST laws. The Court observed that while Intelligence units are vested with powers to detect evasion, conduct investigation, and issue show cause notices, the adjudicatory function stands on a different footing and must be exercised by the competent jurisdictional officers entrusted with assessment and taxpayer services.

The Court further noted that allowing the same authority to investigate, frame allegations, and then adjudicate the matter could give rise to reasonable apprehensions of bias. It restrained the Intelligence wings from proceeding with adjudication of the impugned notices and directed that the matters be placed before the appropriate jurisdictional Taxpayer Services Division officers for adjudication in accordance with law.

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