Allahabad High Court on Section 122 Proceedings: Deputy Commissioner’s Jurisdiction and Need to Prefer Statutory Appeal

Background of the Dispute

The Allahabad High Court, in Nageen Traders and Molding India Pvt. Ltd Vs State of U.P. (Allahabad High Court), examined whether a Deputy Commissioner of State Tax had jurisdiction to initiate penalty proceedings under Section 122 of the UPGST Act and whether a writ petition under Article 226 of the Constitution of India was maintainable where a statutory appeal remedy was available.

The assessee approached the High Court by filing Writ Tax No. - 989 of 2026, assailing a sequence of actions taken by the State tax authorities for the financial year 2024-2025, including:

  • A show-cause notice dated 19.11.2025 under Section 122(1)(ii) along with **DRC-01 dated 19.11.2025`; and
  • A penalty order dated 24.06.2026 under Sections 122(1)(ii) and 122(1)(vii) accompanied by **DRC-07 dated 24.06.2026`.

The key challenge raised was that the proceedings had allegedly been initiated by an officer who was not the “proper officer” in law, resulting in an alleged absence of jurisdiction.

Reliefs Sought in the Writ Petition

The assessee invoked Article 226 and requested the Court to:

  • Quash the show-cause notice dated 19.11.2025 issued under Section 122(1)(ii) together with **DRC-01 dated 19.11.2025, on the ground that they were issued without jurisdiction and contrary to Section 161` of the GST Act, 2017.
  • Set aside the penalty order dated 24.06.2026 passed under Sections 122(1)(ii) and 122(1)(vii) along with **DRC-07 dated 24.06.2026`, again alleging a complete absence of jurisdiction in the officer issuing the order.

The essence of the plea was that all subsequent proceedings were vitiated once the underlying show-cause notice was claimed to be without authority.

Assessee’s Core Arguments

1. Alleged lack of jurisdiction of the issuing officer

Counsel for the assessee contended that:

  • The show-cause notice dated 19.11.2025 for FY 2024-2025 had been issued by an officer who, according to the assessee, did not qualify as the “proper officer” competent to initiate action under Section 122.
  • As a result, not only the notice but also the final penalty order dated 24.06.2026 under Sections 122(1)(ii) and 122(1)(vii) was said to be void and without authority.

2. Absence of definition of “proper officer” under UPGST Act

The assessee highlighted that:

  • The term “proper officer” is not specifically defined in the UPGST Act, 2017.
  • In such a situation, the jurisdiction to issue show-cause notices and impose penalties, particularly under Section 122, must be clearly conferred either by the statute or by a valid delegation through notification or circular.
  • In the assessee’s view, the officer who issued the notice did not have such valid conferment of authority.

3. Reliance on Central Government Circular No. 254/11/2025-GST

A significant plank of the assessee’s argument was Circular No. 254/11/2025-GST dated 27.10.2025, issued by the Central Government, which:

  • Clarified the designation and jurisdiction of the “proper officer” for the purposes of different provisions of the Central Goods and Services Tax (CGST) Act, 2017 and Integrated Goods and Services Tax (IGST) Act, 2017.
  • Specifically addressed the authority competent to issue show-cause notices under Section 74A and Section 122 of the CGST and IGST Acts.

The assessee argued that:

  • Similar circulars ought to have been issued by all State Governments, including Uttar Pradesh, to validly identify the “proper officer” under the UPGST Act.
  • In the absence of a corresponding State circular in line with Circular No. 254/11/2025-GST, the notice issued under Section 122 of the CGST/UPGST framework would suffer from inherent jurisdictional defect.

4. Monetary limits and officer competence

On the strength of the said Central Circular, counsel further submitted that: