GST Proceedings in Karnataka: Jurisdiction, Proper Officer, Audit-Adjudication Overlap and the Right to Personal Hearing

Introduction: Why Procedural Compliance in GST Adjudication Cannot Be Overlooked

A GST demand does not acquire legal validity simply because a summary was uploaded on the portal or because hearing dates appeared in a dashboard. Every stage of a GST proceeding — from initiation and notice to adjudication and final order — must independently satisfy the requirements of the Central Goods and Services Tax Act, 2017 (CGST Act), the Karnataka Goods and Services Tax Act, 2017 (KGST Act), and the constitutional principles of natural justice.

At the same time, the legal position must be stated with care. A State Tax officer is not automatically disqualified from passing an order involving Central tax liability. Section 6 of the CGST Act permits cross-empowerment between State and Central authorities. The critical inquiry is not whether the officer belongs to a particular formation, but whether that officer was lawfully assigned the specific statutory function — investigation, notice issuance, audit, or adjudication — for the particular assessee, tax period, subject matter, and monetary threshold.

What the law does not permit is vague notice, silent transfers between formations, portal-only communication substituting genuine hearings, and orders that pre-empt or ignore the assessee's reply. The following analysis examines these issues comprehensively, with specific reference to the Karnataka context and the applicable provisions of the CGST Act.

The Pattern of Proceedings in Karnataka: What Assessees Are Facing

In Karnataka, a recurring procedural pattern has drawn significant legal attention. In several reported instances, an Enforcement Officer initiates proceedings and uploads a summary in FORM GST DRC-01. The matter is then placed before an Audit Officer or another State Tax authority for final adjudication — without disclosing any statutory basis for such a transition.

The concerns most commonly raised by assessees in such proceedings include:

• The alleged discrepancy is not accompanied by relied-upon documents, reconciliation workings, third-party material, or any evidentiary foundation.
• The "notice" consists of nothing more than a vague demand summary or an unsubstantiated allegation.
• The movement of the case from Enforcement to Audit takes place without any disclosed assignment or transfer order.
• The officer deciding the matter does not appear to have independently applied mind to the assessee's reply.
• Hearing dates are visible on the GST portal, but no effective communication, personal hearing notice, or intimation reaches the registered person through the prescribed channels.
• The final order is passed ex parte, often reproducing the allegation from the notice without engaging with the defence.
• Section 74A is invoked without establishing the statutory ingredients of fraud, wilful misstatement, or suppression — even for tax periods to which that provision does not apply.
• Proceedings encompass CGST, KGST, and IGST liability simultaneously, without any consideration of whether parallel proceedings by the counterpart authority exist on the same issue.

These are not merely technical complaints about form. Each of the above concerns directly affects the validity of the proceedings. The GST portal is a technological facilitation tool — it cannot substitute statutory compliance, override natural justice, or transform an otherwise unlawful proceeding into a valid adjudication.

The Concept of "Proper Officer" Under the CGST Act

Meaning and Significance Under Section 2(91)

Section 2(91) of the CGST Act defines a "proper officer" as the Commissioner or the officer to whom that function has been assigned by the Commissioner. This is a term of legal precision — not an administrative label that can be applied loosely.

To establish that an officer is the proper officer for a given proceeding, the following elements must be ascertained:

• Designation of the officer
• Source of authority: statute, notification, order, or assignment
• Territorial jurisdiction
• Subject-matter jurisdiction
• Tax period for which jurisdiction is claimed
• Monetary limit, where applicable
• Specific function assigned: investigation, audit, notice issuance, adjudication, recovery, etc.

An internal administrative instruction may organise departmental workflow, but it cannot substitute a statutory assignment or cure the absence of proper jurisdiction. When an assessee challenges jurisdiction, the department must produce the notification, circular, or assignment order under which the officer purported to act.

Circular No. 31/05/2018-GST, as amended, provides a structured framework for assignment of proper officer functions under Section 73 and Section 74 of the CGST Act. In the Central Tax structure, officers of Audit Commissionerates and intelligence formations may be authorised to issue show-cause notices, while adjudication is placed with the competent executive officer. This reflects a foundational administrative principle: the officer who detects or investigates an issue is not automatically the officer empowered to adjudicate it.

An assessee is fully entitled to demand the specific assignment order — not a general assertion that "the Commissioner has assigned the case." The assignment must establish authority over the exact adjudicatory function exercised in that specific proceeding.

Cross-Empowerment Under Section 6: Scope and Limits

What Section 6(1) Permits

Section 6(1) of the CGST Act authorises officers appointed under the SGST Act to act as proper officers for CGST purposes, subject to government-prescribed conditions. This cross-empowerment provision enables the dual GST structure to function cohesively across Central and State formations.

However, cross-empowerment is not a blanket licence. It does not mean that any State Tax officer can pass any CGST order at any time. The officer must still be the duly assigned proper officer, and the assignment must predate — not follow — the exercise of power.

The Anti-Duplication Safeguard Under Section 6(2)(b)

Section 6(2)(b) contains a critical restriction. Once proceedings on a particular subject matter have been initiated by a proper officer under one enactment, proceedings on the same subject matter cannot be initiated by an officer under the other enactment. This prevents an assessee from being subjected to parallel proceedings by both Central and State authorities on the same issue for the same tax period.

The table below summarises the legal position across different scenarios:

FORM GST DRC-01: A Summary, Not a Substitute for a Lawful Notice

FORM GST DRC-01 is a statutory summary of the demand under Rule 142 of the CGST Rules, 2017. It is a procedural instrument — it is not designed to replace the show-cause notice, the factual matrix, the relied-upon documents, or the evidentiary basis that must underpin effective adjudication.

A legally valid notice must enable the assessee to understand and respond to the following: